defining target market business plan

• Business Planning

How to Define Your Target Market for a Business Plan

Written by Vinay Kevadiya

Published Oct. 8 2024 · 11 Min Read

A well-defined target market in a business plan can significantly enhance your chance of impressing your investors and stakeholders. Why? Well for starters, they know you're not trying to sell to everyone (which is practically no one).

But what exactly is target market? How do you define it and document the same to ensure the success of your business plan? Worry not! We have you covered.

By going through this blog, you'll gain insights into how to define your target markets and successfully grow your business.

Let’s dive in.

What is a target market?

According to the target market definition, it’s a group of customers that a business aims to reach with its products or services. This could be done through digital marketing, traditional advertising, or direct outreach.

By identifying the target markets, your business can tailor products and services to meet those groups' specific needs and preferences.

A prominent example of effective target market identification is Nike.

Initially, Nike primarily marketed to professional athletes (niche market), but they recognized an opportunity to broaden their appeal.

With the launch of its iconic " Just Do It " campaign, Nike shifted its focus to include a wider audience of fitness enthusiasts and aspiring athletes.

Hence, understanding your target market will help you uncover similar opportunities and gaps within your industry.

Importance of defining a specific target market for your business plan

Defining a target market is crucial for any business plan because it directly influences your marketing strategy, product development, and overall business success.

Here are several reasons why understanding and defining a target market is essential:

1) Helps you tailor products and services

By identifying a specific target market, businesses can develop products and services that meet that audience's unique needs and preferences.

This approach increases the effectiveness of your business plan and helps you reach your target quickly.

Moreover, tailoring your business product or services according to audience preference enhances customer satisfaction and the likelihood of sales.

2) Improves product development

Analyzing your niche market can help you develop products and services specifically for targeted audiences and improve your product development.

For example, you manufacture shirts in sizes ranging from M to XL.

Through target market analyses, you discover that XXL shirts are the most popular choice among customers, while XXXL shirts have minimal demand, and M-size shirts have no buyers.

With this information from target market segmentation, you can plan your product offerings more effectively. You can focus more on producing XXL shirts and pivot what’s wrong in other sizes to improve its demand in the market.

3) Allocates resources effectively

By identifying your target market, you can allocate resources more efficiently. You can focus your time, budget, and efforts on the specific segment or segments most likely to generate sales rather than spreading resources across a broader audience.

A practical resource allocation helps your business with the following:

• Maximum return on marketing and sales investments
• Create a more relevant and personalized marketing message
• Tailor your product and services to meet the specific needs of the target audience
• Position your brand as the preferred choice within a particular market segment

4) Aid your business with informed decision-making

A well-defined target market analysis provides valuable insights into production, marketing, and sales. It also clearly identifies your audience’s needs, preferences, and behaviors.

With this information, your business can make informed decisions on how to move forward in various areas, such as:

• Product development
• Market strategies
• Sales approaches
• Budget and resource allocation
• Growth opportunities

5) Enables customer engagement

Analyzing the target market helps your business understand your target audiences and fosters better communication and engagement.

It makes you understand your target customer's interests and behavior helping you create social media content that addresses their needs.

Further, knowing your audience's values can enhance their experience with customized offers and services.

Such practices keep your audience connected to your brand and foster engagement, which leads to the long-term success of your business.

How to identify your target market?

Here’s how you can determine your target market effectively and design your product according to your customer needs:

Analyze your product and service

Start by understanding your product or service's benefits and features. What problems does it solve, and who would most likely need it? This helps narrow down who would value your offerings.

Analyzing your product or service helps you identify potential pitfalls and mitigate the risk of failure before launching it into the market.

Once you understand what makes your offering unique, you can position your product more effectively.

Research your market

Gather information about potential customers and understand their needs, preferences, and behaviors. For target market research, focus on the key factors that include:

Segment your market

Segmenting your market is essential because it helps you clearly define your target market. It becomes more crucial for businesses that have multiple target markets.

For example, if you sell both casual and formal clothing, you would target younger customers for casual wear and professionals for formal attire. This allows you to tailor your marketing and products to each group effectively.

Here’s a table that helps you demonstrate key segmentation types and their purposes:

Analyze your competitors

Look at who your competitors are targeting and how they position their products or services. Understanding their strategies can provide insights into potential gaps in the market.

Further, identifying areas where you can differentiate yourself from competitors can reveal opportunities for targeting new or niche markets.

Here are a few aspects to consider when analyzing your competitors:

• Examine the range and quality of products or services they provide.
• Analyze their pricing models and how they compare to your offerings.
• Look at their promotional strategies, advertising channels, and messaging.
• Understand their primary target market and how they position themselves in the industry.
• Assess how they interact with customers through social media and customer service.

Test and validate

Once you identify your target customers, target markets, and competitors, it’s time to test your assumptions through small-scale campaigns, product launches, or focus groups.

Gather feedback and adjust your strategy as needed. Validation ensures you're not just guessing but making target market analysis and data-driven decisions.

To explore market analysis further, check out our blog on conducting a market analysis for a business plan .

How to write about your target market for a business plan?

Writing about your target market in a business plan is essential for clearly communicating who your primary customers are and how you intend to reach them.

Here’s a table that segments your target market for different stakeholders in your business plan:

However, to write about your target market, you should focus on the following common aspects:

Define your target market

Start with a clear definition of your target market. Describe the specific group of consumers that your business aims to serve. This could include details about:

• Market segments
• Right target market
• Geographic segments
• Demographic segments
• Unique value propositions
• Types of audiences and their age

Demonstrate market research

Incorporate findings from market research to support your definition. Include data from surveys, focus groups, or industry reports to support your conclusions.

Including these data in your business plan will make your stakeholders understand the customer needs, preferences, and pain points.

Understanding your target market research will improve your chances of securing successful deals with investors and may significantly persuade them about your project.

Segment the market

Divide your target market into distinct segments. Explain why these segments are relevant to your business and how they differ.

Moreover, if you have diverse products and services and want to focus on different target markets, tailor your marketing strategy for each segment.

By doing so, you can address each group's unique needs, preferences, and pain points more effectively.

Types of segmentation include:

• Demographic segmentation
• Geographic segmentation
• Psychographic segmentation
• Behavioral segmentation

Create customer profile

Develop detailed profiles for each segment. These profiles should outline your ideal customers' characteristics, motivations, and challenges.

For example, let’s explore a customer profile for SpeedyEats , a food delivery business that delivers within 30 minutes.

Name: Sarah Thompson

Challenge: Sarah is a busy working professional who struggles to find time to cook healthy meals for herself and her family. She often resorts to takeout or ready-made meals, which lack the nutrition and variety she desires.

How Our Product Helps: Our meal delivery service offers fresh, pre-portioned ingredients with easy-to-follow recipes, allowing Sarah to cook healthy meals in under 30 minutes. This solution saves her time and ensures her family enjoys nutritious, home-cooked meals without the hassle.

Here’s another customer profile for Movewell, a company that provides personalized fitness apps for health enthusiasts.

Name: Mark Johnson

Challenge: Mark is a fitness enthusiast but finds it challenging to stay motivated and track his progress toward his fitness goals. He’s overwhelmed by the abundance of fitness apps that don’t provide personalized workout plans or progress-tracking tools.

How Our Product Helps: Our fitness app offers customized workout plans tailored to Mark’s fitness level and goals, real-time progress tracking and motivational reminders. This helps him stay on track and feel more accountable, making it easier to achieve his fitness milestones.

These customer profiles clearly show what your target audience is, their pain points, and how your product solves their problems.

Outline marketing strategies

Discuss the marketing strategy and tactics you’ll use to reach your target market effectively. Which marketing campaigns will you prioritize, and which channels will you use to engage your audience?

Here are several marketing segments of a target market you can include in your business plan to effectively promote your products and services:

• Email marketing campaigns
• Social media ads
• Social media platforms (Instagram, Facebook, and Twitter)
• Hire marketing professionals to develop and execute strategies

Include conclusion

Summarizing the key points, adding target market examples, and including relevant data or statistics in the conclusion of your target market section will help your audience understand your project clearly.

By positioning your plan with a firm conclusion, you increase the likelihood of convincing your audience of its value and purpose.

The bottom line

That’s all! We hope this blog has provided valuable insights on the target market in a business plan.

In it, we explored the definition of the target market, how to identify it, and how to present it to your stakeholders effectively.

Additionally, if you want more assistance in creating a business plan that addresses your target market precisely, consider using our AI-powered business plan generator . By answering a few questions on this platform, you can generate your business plan within minutes.

Try it out today and craft your business plan with an effective target market section!

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Frequently Asked Questions

How detailed should a target market be?

A target market should be detailed enough to provide clear insights into your ideal customers' specific characteristics, needs, and preferences. This includes the primary target market, market segment, marketing efforts, target market strategy, major selling point, and customer base.

What is the purpose of a target market?

The purpose of a target market is to identify the specific group of consumers most likely to purchase your products or services. By understanding this group, your business can focus its marketing efforts and tailor their offerings to meet customer needs.

What’s the difference between the target audience and the target market?

The target market refers to a broader group of potential customers a business aims to reach based on shared characteristics. The target audience, on the other hand, is a more specific subset within that market, typically defined for particular marketing campaigns or initiatives.

Can my target market change over time?

Yes, your target market can change over time due to various factors, such as shifts in consumer preferences, market trends, technological advancements, or changes in the competitive landscape. Hence, regular target market analysis is crucial to ensure that your business remains relevant and effectively meets your customers' needs.

What happens if my target market is too broad?

If your target market is too broad, it can result in ineffective marketing strategies and wasted resources. Crafting tailored messages that resonate with diverse segments becomes challenging, which can dilute your brand's message.

By narrowing down your target market, you can focus your marketing efforts more precisely, enhancing engagement and improving conversion rates.

How does segmentation help in defining a target market?

Segmentation to define your target market helps with customer behavioral factors, customer demographics, buying behaviors, customer personas, and critical characteristics of the market.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

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BUSINESS STRATEGIES

What is a target market and how to define yours

One of the first steps in starting a business is determining your target market. This step alone can be the basis for what products you create, how you brand your business and ultimately who you market to.

With that in mind, you’ll need to develop assets that resonate with your target market. Start by creating a business website that represents your business and uses language and visuals relatable to your audience. Consider what niche you can fit into and what separates your business from the competition. From there you can create messaging, branding and advertising designed for your target market and convert more leads into customers.

Keep reading to learn more about defining your target market and gain expert tips on how to implement this targeting throughout your business strategy.

What is a target market?

Your target market is your product’s primary consumer. Once you know who this is, you can tailor your branding and marketing efforts toward them.

A target market can be composed of a broad group, such as married men over 40 in the US, or it can be quite narrow, such as urban, health-conscious, vegetarian women in Texas. Your market will depend on the particular consumer needs your product addresses.

The three key aspects of a target market include:

Demographics: Age, gender, income, education or employment status.

Geographics: Primary location of your market.

Personality traits: What they like and dislike, as well as where they shop and their favorite brands.

To pinpoint your target market, you’ll need to analyze data about your product niche, your customers and your competitors. You'll also need to understand more about the specific types of target markets in more detail.

What are the types of target markets?

In general there are several ways business owners can categorize target markets. For the most part target markets are divided into the following four main types: demographic, geographic, psychographic, and behavioral.

Demographic

This type of target market is defined by a number of demographic variables such as age, gender, income, education, and family size. Companies might target specific demographic groups based on their buying habits and purchasing power.

Geographic target markets are defined, as the name suggests, by geographic variables such as region, state, city and population density.

Psychographic

Psychographic variables such as lifestyle, values, personality, and social class make up the definition of this target market.

This type of target market is defined by consumer behavior, such as the benefits sought, usage rate, and customer loyalty.

It's important to note that a business may choose to target one or multiple types of target markets, depending on their specific business objectives and marketing strategies.

Why are target markets important?

Understanding your target market is a crucial aspect of developing a successful business. Below we explore the main reasons why understanding your target market is so important in order to ensure a profitable business.

Better customer segmentation : Understanding your target market allows you to segment your customers more effectively, which in turn helps you tailor your marketing messages and products to meet their specific needs and preferences.

Increased focus and efficiency: Focusing on a specific target market allows you to be more efficient with marketing resources while avoiding wasting time and money on efforts that are not likely to reach or resonate with your target audience.

Improved brand reputation: Understanding your target market can help you establish and maintain a positive brand reputation by allowing you to align your brand with the values and interests of your market.

Increased customer loyalty : By understanding your target market and delivering products and services that meet their needs and expectations, you will foster a loyal customer base that is more likely to recommend your brand to others.

Better decision making: Understanding your target market provides valuable insights that can inform important business decisions, such as product development, pricing strategies and distribution channels for marketing efforts.

Target market vs. target audience?

Often used interchangeably, target market and target audience are not the same thing. Your target market is the end consumer while your target audience is to whom your company advertises. While your target market might fall into your target audience, who you advertise to may not, in the end, be the one who consumes the product.

To clarify, let’s look at an example: Kids toys, for example, have a very clear target market: children. In addition, toys are often marketed toward children who identify with a specific gender category. Nevertheless, kids don’t purchase their toys, their parents do. So toy companies must focus their advertising strategies on parents (the target audience) to sell toys for their kids (the target market).

For example, Generation Alpha , kids born between 2010 and 2025 with millennial parents, play with much different toys than their parents did because millennials have different consumer preferences than their Baby Boomer parents. Rather than shopping in big-box stores for brightly-colored toy packages, millennial parents are more likely to purchase clean, minimalistic, and gender-inclusive toys from Instagram ads or Amazon. Therefore, toy companies are using Millennial preferences (the target audience) to sell toys to their Generation Alpha kids (the target market).

How to determine your target market

Gather consumer data

Know your product’s benefits

Investigate your competitors

Segment your audience

Write a target market statement

Refine your research

01. Gather consumer data

The first step in defining your target market is to learn more about your customers. Even if you’ve just started an online store and don’t have many customers yet, these practices will come in handy further down the line.

Start by gathering information about current and past buyers and try to identify characteristics that they have in common. This data will help you market your product to people with similar interests. If you are still in the early stages of your business and haven’t started selling your product, look at competitor markets and use that information to determine your target market.

Using website analytics tools, social media and email marketing analytics platforms, here are some data points you’ll want to consider:

Age: Do your customers share a common decade or generation? Are they millennials, older adults, or something in between?

Location: Where in the world do most of your customers live? Consider the different cities, countries, and regions.

Language: Which languages do your customers speak? Remember that your customers’ language isn’t necessarily the dominant language of their country.

Spending power: Consider socioeconomic factors that may be affecting your customers. How much money are they willing or able to spend?

Hobbies and career: What do your customers enjoy doing? What are their professions, and what do they do in their spare time?

Stage of life: Where are your customers in life? Are they college students? New parents? Retirees?

If your company is B2B rather than B2C , you’ll want to look for characteristics of companies, rather than individual consumers. These traits include:

Business size: Are the businesses that buy from you small, medium, or large?

Location: Where are these businesses physically located?

Vertical: Which industries are most of these businesses in?

Budget: How have these businesses raised money ? Consider how much they’d be willing or able to spend on products like yours.

Be sure to track this information in an orderly manner so that you can keep your findings organized and easily identify trends. Analyzing these trends will allow you to identify shared characteristics within your customer base. These characteristics will inform your inbound marketing efforts and steer your strategy toward your target audience.

02. Know your product benefits

The next step is to understand your consumers’ motivation behind purchasing your product, rather than a competitor. You can learn this information by speaking to your customers directly, asking for testimonials, and by doing in depth competitor research to understand the difference between your product and theirs.

Get to know the benefits—and not just the features—of your product or service. The features are your product’s characteristics. For example, if your business sells suitcases, you might describe your product as being small, compact and having multiple compartments. Your product’s benefits, on the other hand, are the advantages it brings to your customers. Think about how your product makes someone’s life better or easier. The compact, multi-compartment suitcase offers the benefits of being easy to carry and pack as a carry-on.

It’s vital to understanding how your product fulfills its target market’s specific needs. For the suitcase company discussed above, for instance, the target market would be people who benefit from a lightweight, carry-on suitcase—such as business travelers who take short, frequent trips.

03. Investigate your competitors

Hone in on your target market even further by taking a look at which your competitors are targeting. Of course you won't have access to their customer analytics data, but you can understand their customers with a SWOT analysis .

Take a deep dive into competitor websites, blogs and social channels. Consider who their target market is based on their website content, content marketing strategy, and social media branding. You’ll likely be able to infer details about their audience based on their brand language and tone. You can also check for comments on their social media pages to see which types of people are engaging with their posts.

Take an especially close look at their most successful social media and blog posts. Do these pieces of content have anything in common in terms of their offering or branding? Which interests or needs do they address? Use this information to consider what kinds of qualities or advantages appeal most to consumers within your industry.

04. Segment your audience

At this point, you’ve gathered some information about the characteristics and interests of your target audience. Now, it’s time to use that information to clearly define your customer types. This is going to form the basis of your target market.

The best way to do this is through market segmentation. This involves dividing your customers into different groups, or segments, based on their shared qualities.

You can divide your customers based on:

Geography: Physical location, whether it’s your own city or a different part of the world. Note that if your customers are located around the world, you may need to create a multilingual website, as well as localized ads and marketing materials.

Demographics: Characteristics such as age, gender, race or ethnicity, income level, or marital status.

Psychographics: Inner qualities such as personality, lifestyle, or personal values. These are often a product of geographic and demographic factors such as location, generation, or stage of life.

Behavior: Perceived qualities based on online behavior, such as buyer readiness or frequency of use.

If you’re a B2B company, use similar characteristics but apply them to business. Consider firm demographics—known as firmographics—such as industry, location, customer size, business structure, and performance.

To gain a deeper understanding of your segments, you can also create buyer personas. Also called user personas, buyer personas are imaginary characters with traits and behaviors similar to those of typical customers. Ultimately, these fictional characters represent your target market, helping you gain insights into the needs, desires, and lifestyles of your actual customers.

05. Write a target market statement

Now that you’ve determined the defining features of your audience, it’s time to put your findings on paper. Write a target market statement that focuses on the most important audience characteristics you’ve identified in your research. Your statement should include:

Demographic information about your target market, such as gender and age.

Geographic location of your target market.

Key interests of your target market.

Then, sum it up in a single sentence. For example:

“Our target market is women in their 30s and 40s who live in the United States and enjoy casual, comfortable fashion.”

Doing this will keep your brand identity and marketing efforts consistent. It will also come in useful as you adapt your company’s mission statement to be as relevant as possible for your audience.

06. Refine your research

Defining your target market is based on thorough research, but that doesn’t mean it’s going to be perfect the first time around. Even after you identify your market, you’ll still need to continually test and experiment to get an increasingly precise picture of your customers. Staying on top of your market research can also help you keep up with the times, as consumer interests change over the years with technological developments, generational attitudes and passing trends.

To narrow in on your audience, you’ll need to assess your business success and test your targeting efforts. Take a look at who is actually buying from you and which specific products or services they are purchasing. Try to understand how you can adapt future product development or modify your branding or marketing efforts to better fit your customer base.

Use A/B testing with your marketing efforts to test the same ad on different audiences and see which version performs better. Alternatively, you can develop two different creatives, each with their own look and language and compare your audience’s responses. Based on the results, you might need to either adjust your business strategy or revise your target market statement. The bottom line is to build a brand that resonates strongly with your audience. Remember, the more targeted your content, the more effective your lead generation strategies—and the more customers you’ll bring to your brand.

What are examples of a target market?

These website examples clearly cater to their target markets. Take note of the phrases and visuals these websites use.

01. Amanda Darby

Let’s take a look at how nutritionist Amanda Darby appeals to her target market. She aims to address people looking to make healthier food and dieting choices. To do this, she’s created a website that fosters a sense of joy and personal empowerment around food. The light and airy background, coupled with the cheerful images of cooking and eating, instantly makes it clear that she targets people looking for a healthy lifestyle.

She also hones in on her audience even further, using phrases that directly appeal to middle-aged women. In the section of her homepage that discusses her nutrition coaching: “You will be the mom who loves food, her body, and knows life isn't perfect, but is perfectly happy living the life she has vs. waiting for the life she will have when she reaches her goal weight.” By directly addressing the concerns of her target market, Amanda helps her audience feel heard and understood. This strengthens their trust in her brand and persuades them that she is the right coach for their needs.

02. Curtinsmith Guitars

From the very first image that appears across the top of this website, it’s clear that Curtinsmith Guitars is crafting something unique. By displaying photographs of their workshop and describing their guitars as “custom” and “handmade,” they directly single out a target market of those looking for unique, one-of-a-kind guitars. This target market is likely musical, appreciative of craftsmanship and not afraid to spend their money on their passions.

The About Us section of the site confirms this targeting. The owner, Paul, writes, “I find it quite profound to create something which, in itself, will continue to create. It is an absolute joy crafting these instruments and it is my prayer that they continue to be a joy for those who play them and listen to them, for many generations.”

In this statement, the brand makes it clear that it targets musicians who value the creative process. They also allude to the quality of their product, portraying them as long-lasting heirlooms with sentimental value.

03. Lima Cakes

Sona Karapetyan uses her artistic vision to create showstopping celebratory cakes. The About section on her website says that Sona “was always experimenting with graphic art & design” and, “When Sona decided to embark on the cake art journey, she experimented with different textures, shapes and architectural elements to create a unique design language.” It also states that she never creates the same cake twice so each cake is unique to each client.

Her neutral-colored web design and sophisticated copy narrow her target market down to mature individuals who appreciate art. Her website also features images of her cakes, clearly displaying her skills to her potential customers. The prices of her custom-made cakes will reflect the effort that goes into each one. These details show that she likely targets an educated, older, affluent crowd with an appreciation for modern art and design.

What are market segments?

Market segments are subgroups within a larger market that share specific characteristics and needs. These characteristics can include demographics, lifestyle, interests, behavior and purchasing patterns. By identifying and understanding these segments, businesses can tailor their marketing messages, products and services to better resonate with each group. This allows for more targeted and effective marketing efforts.

Target market FAQ

How detailed should a target market be.

The level of detail for a target market depends on your specific business and goals. However, it should be defined enough to create targeted marketing campaigns and avoid wasting resources. Consider including demographic information (age, gender, income, etc.), psychographics (lifestyle, values, interests), and behavioral factors (purchasing habits, media consumption). While details are important, avoid over-segmentation, as it can limit your reach and marketing effectiveness.

What is an example of a target market?

What is the purpose of a target market, what is the best target market, related posts.

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• Getting Started

How do I define my target market?

By Ana Bacioiu 3 min read · Posted Oct 18, 2024

A target market consists of the most likely customers for your company's products or services. Understanding this high-potential population is the cornerstone of a successful business strategy and enables you to tailor your products, marketing efforts, and customer service, ultimately driving growth and loyalty. Accordingly, Market Research is a crucial section of any Business Plan and informs the strategic direction of a company. This article covers the fundamental aspects of defining your target market, while highlighting some nuances and complexities.

Main Considerations

Defining your target market takes several steps.

• Analyze your product. How do features and benefits of your product (or service) respond to the customers’ needs?
• Research your competitors. What are your competitors’ target markets and can you identify underserved market segments (niches) and gaps that you can fill?
• Understand your customers, current or potential. What are their common characteristics? Can you segment your market based on clusters of such characteristics (for example demographic, geographic or behavioral)? Can you create ideal customer profiles, buyer and user personas that are detailed, vivid descriptions of your target customers?

The steps for defining and refining a target market are rarely linear. The sequence will vary depending on the origin story of your business. Are you following in the footsteps of existing competitors, in an established market? Are you “playing to your strengths” and competencies? Were you inspired by an unmet customer need? Each of these scenarios is different, making market analysis as much of an art as it is a science.

The Marketing Mix (the 7Ps)

The marketing mix is a useful framework for creating a marketing strategy that meets customer needs, conveys value, and emphasizes differentiation.. The 7 Ps are an evolution of the traditional 4P marketing mix (Product, Price, Place, and Promotion), expanded to include three more dimensions (People, Process, and Physical Evidence).

Source: Wikimedia Commons

Key Distinctions

• Target Audience is not the same as target market. The former is a specific sub-segment of the latter. Target audiences are the focus of individual marketing campaigns whereas target market is the broader group potentially interested in your brand.
• Startups and established companies have some key distinctions in terms of defining their target market: Innovation and uncertainty levels are higher for startups, so is the need for experimentation and pivoting. Established companies with existing products can expand more predictably, though they, too, can benefit from agile approaches and hypothesis testing.
• Resource constraints force startups to focus on the most promising market segments (niches) where they can realistically gain traction. By contrast, larger companies can afford more extensive research and targeting multiple segments simultaneously.
• Market validation and tuning are easier for companies with existing products, whereas startups need to establish a de novo product / market fit and quickly adjust based on customer response. Established companies also benefit from the insights afforded by historical data. The silver lining is that startups can identify and exploit surprising niches (market segments) whereas established companies may find themselves bound to their existing markets and customer base.

Some literature refers to the target market as the “Ideal customer.” We avoided the phrase, because of the shortsighted implication that other possible customers are not “ideal” when, in fact, they are full of potential.

Three metrics commonly used for startup market sizing capture this growth potential from. Companies typically start from an initial target market sometimes called SOM (Serviceable Obtainable Market) while keeping an eye on and expanding into their SAM (Served Available Market), and TAM (Total Available Market) .

Matter-of-factly, the target market is today’s ideal customer, who can consume your product right away , given current market conditions, trends, and your business’s current capabilities. Balancing short term tactics with long term strategy can be beneficial. Focusing on today’s ideal customer helps you achieve short-term goals and generate revenue quickly, stay agile and responsive to market changes. On the other hand, by taking a longer term view, you can strategically expand into new market segments and tap into a larger, more diverse customer base.

About The Author

Ana Bacioiu

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What Is a Target Market?

• Defining a Product's Target Market
• 4 Target Markets

Why Are Target Markets Important?

What are market segments, target market and product sales.

• Target Market FAQs

The Bottom Line

• Marketing Essentials

Target Market: Definition, Purpose, Examples, Market Segments

Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies.

Investopedia / Mira Norian

A target market is a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics, such as age, income, and lifestyle.

Identifying the target market is a key part of the decision-making process when a company designs, packages, and advertises its product.

Key Takeaways

• A target market is a group of customers with shared demographics who have been identified as the most likely buyers of a company's product or service.
• Identifying the target market is important in the development and implementation of a successful marketing plan for any new product.
• The target market also can inform a product's specifications, packaging, and distribution.

How Do I Define My Product's Target Market?

Part of creating a new product is envisioning the consumers who will buy it.

A new product must satisfy a need or solve a problem—or both. That need or problem is probably not universal (unless it reaches the level of indoor plumbing). More likely, it is needed by a subset of consumers, such as environmentally-conscious vegetarians, science nerds, or outdoor enthusiasts. It may appeal to a teenager or a middle-aged professional, a bargain-hunter or a snob.

Envisioning your likely target market is part of the process of creating and refining a product and informs decisions about its packaging, marketing, and placement.

What Are the 4 Target Markets?

Market researchers use activity, interest, and opinion (AIO) surveys to construct psychographic profiles of their target customers. Marketing professionals divide consumers into four major segments:

Demographic : These are the main characteristics that define your target market. Everyone can be identified as belonging to a specific age group, income level, gender, occupation, and education level.

Geographic : This segment is increasingly relevant in the era of globalization. Regional preferences need to be taken into account.

Psychographic : This segment goes beyond the basics of demographics to consider lifestyle, attitudes, interests, and values.

Behavioral : This is the one segment that relies on research into the decisions of a company's current customers. New products may be introduced based on research into the proven appeal of past products.

What Is an Example of a Target Market?

Each of the four target markets can be used to consider who the customer is for a new product.

For example, there are an estimated 49,773 Italian restaurants in the U.S. Clearly, they have enormous appeal.

But a corner pizza joint might appeal mostly—although by no means entirely—to a younger and more budget-conscious consumer, while an old-fashioned white tablecloth place might be frequented by older individuals and families who live in the neighborhood. Meanwhile, a newer venue down the street might cater to an upscale and trend-conscious crowd who will travel a good distance for the restaurant's innovative menu and fancy wine list.

In each successful case, a savvy business person has consciously considered the ideal target market for the restaurant and has tweaked the menu, decor, and advertising strategy to appeal to that market.

Few products today are designed to appeal to absolutely everyone. The Aveda Rosemary Mint Bath Bar, available for $26 per bar at Aveda beauty stores, is marketed to the upscale and eco-conscious woman who will pay extra for quality. Clé de Peau Beauté Synactif Soap retails for $110 a bar and is marketed to wealthy, fashion-conscious women who are willing to pay a premium for a luxury product. An eight-pack of Dial soap costs $11.49 at CVS, and it is known to get the job done.

Part of the success of selling a good or service is knowing whom it will appeal to and who will ultimately buy it. Its user base can grow over time through additional marketing, advertising, and word of mouth.

That's why businesses spend a lot of time and money in defining their initial target markets, and why they follow through with special offers, social media campaigns , and specialized advertising.

Dividing a target market into segments means grouping the population according to the key characteristics that drive their spending decisions. Some of these are gender, age, income level, race, education level, religion, marital status, and geographic location.

Consumers with the same demographics tend to value the same products and services, which is why narrowing down the segments is one of the most important factors in determining target markets.

For example, people who fall into a higher income bracket may be more likely to buy specialty coffee from Starbucks instead of relying on Dunkin' Donuts. The parent companies of both of these brands need to know that in order to decide where to locate their stores, where to stock their products, and where to advertise their brand.

A business may have more than one target market—a primary target market, which is the main focus, and a secondary target market, which is smaller but has growth potential. Toy commercials are targeted directly to children, and their parents are the secondary market.

Identifying the target market is an essential part of a product development plan, along with manufacturing, distribution, price, and promotion planning. The target market determines significant factors about the product itself. A company may tweak certain aspects of a product, such as the amount of sugar in a soft drink or the style of the packaging, so that it appeals more to consumers in its target group.

As a company’s product sales grow, it may expand its target market internationally. International expansion allows a company to reach a broader subset of its target market in other regions of the world.

In addition to international expansion, a company may find its domestic target market expands as its products gain more traction in the marketplace. Expanding a product's target market is a revenue opportunity worth pursuing.

How Detailed Should a Target Market Be?

It depends. Broadly speaking, a product may be designed for a mass market or a niche market, and a niche market can be a very small group indeed, especially in a product's early introductory phase.

Some carbonated beverages aim for a practically universal market. Coca-Cola had to branch out to 200 markets abroad to continue growing its customer base. Gatorade is owned by Pepsi Cola, but the brand is positioned as a drink for athletes. The soda brand Poppi, which is branded as a healthy, sparkling, prebiotic soda with real fruit juice and gut health and immunity benefits, is clearly aimed at a younger, healthier, and more trend-conscious target market.

Consider a casual apparel company that is working to build its distribution channels abroad. In order to determine where its apparel will be most successful, it conducts some research to identify its primary target market. It discovers that the people most likely to buy its products are middle-class women between the ages of 35 and 55 who live in cold climates.

It's reasonable for the company to focus its advertising efforts on northern European websites that have a strong female audience. But first, the company may consider how its apparel can be most attractive to that target market. It may revise its styles and colors and tweak its advertising strategy to optimize its appeal to this new prospective market.

What Is the Purpose of a Target Market?

A target market defines a product as well as vice versa. Once a target market is identified, it can influence a product's design, packaging, price, promotion, and distribution. A product aimed at men won't be packaged in pink plastic. A luxury cosmetic won't be sold in a pharmacy. An expensive pair of shoes comes with a branded cloth drawstring bag as well as a shoebox. All of those factors are signals to the target audience that they have found the right product.

Identifying the target market is part of the process of creating and refining a new product.

A target market can be translated into a profile of the consumer to whom a product is most likely to appeal. The profile considers four main characteristics of that person: demographic, geographic, psychographic, and behavioral. These characteristics help determine who might purchase a company's product.

IBISWorld. " Italian Restaurants in the U.S. - Number of Businesses ."

Aveda. " Rosemary Mint Bath Bar ."

Cle de Peau. " Synactif Soap ."

CVS. " Dial Antibacterial Deodorant Bar Soap, White ."

Coca-Cola Australia. " Coca-Cola: From Start-Up to Global Enterprise ."

Pepsico Partners. " Gatorade ."

DrinkPoppi. " Home ."

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What Is a Target Market? And How to Define Yours

Target markets help businesses craft compelling market strategies that can lead to successful market growth. Learn how to define the target market for your business.

A target market is a specific group of people with shared characteristics that a business markets its products or services to. Companies use target markets to thoroughly understand their potential customers and craft marketing strategies that help them meet their business and marketing objectives.

Identifying a target market is an integral part of any new business undertaking, whether at a Fortune 500 company or a soon-to-be-launched small business. Knowing your target market sets you up for success.

Explore why target markets matter, examples of target markets in action, how they are defined through segmentation, and the range of marketing strategies used to reach them. You will also find next steps and suggested courses to help you with your next marketing endeavor. 

Target markets: Why they matter and examples

When you identify a target market, you can improve your overall marketing outcomes. Learn why it matters and find examples of it in action to help you better understand how it works.

Why target markets matter

The purpose of identifying a target market is simple: to have a clear understanding of the possible customers that might purchase a product or service in order to direct marketing efforts.  

Knowing their target market helps businesses craft marketing campaigns that reach and appeal to their customer base. You can define a target market using several different strategies, including demographics, psychographics, firmographics, and customer behavior.

Research suggests that thoroughly preparing a market strategy, which includes identifying a target market, could lead to marketing success. A study by ZenDesk found that 65 percent of customers are looking for personalized product recommendations and offers [ 1 ]. A comprehensive understanding of a target market could help businesses meet their overall marketing objectives.

Target market examples

Businesses define their target market to know who they are selling to and how to reach those customers through their marketing efforts. In effect, every product or service on the market today can be said to be directed toward a specific target market. 

A target market can be defined by various factors, such as shared demographic characteristics or traits. Some examples of target markets—and products that might be marketed within them—include the following:  

An action figure targeted to boys aged 9–14

A pair of vegan running shoes created from recycled materials targeted at eco-conscious athletes aged 24–45

A high-end, direct-to-door meal kit company that targets busy professionals with disposable income ages 30–45  

Target market vs. target audience 

Occasionally, people interchangeably use “target market” and “target audience.” But, despite their similarities, the terms refer to different groups of people.  

A target market is the overall group of people a business is trying to reach through its marketing efforts. Meanwhile, a target audience is a specific subset of the target market that a company attempts to reach through targeted marketing efforts.

For example, imagine a tech company has developed a smartwatch capable of taking phone calls, answering text messages, opening apps, and keeping track of the wearer’s blood pressure and step count.

Although the watch likely appeals to many people (the target market ), the company might craft a specific advertising campaign emphasizing the watch’s health features to attract an older audience of health-conscious consumers. This group of older health-conscious people is an example of a target audience . 

Target market segmentation: Defining your target market

Market segmentation is the process of dividing a market into smaller groups of people, or segments, to identify areas for possible market growth. Through segmentation, marketers can identify the key characteristics that define their target market and direct marketing efforts to their unique needs, interests, and personalities. 

To help you define your target audience, review four of the most common types of market segmentation. Though each segmentation is distinct and offers its own view of a target market, it is also common for marketers to use many of them together to paint a more complex and telling portrait of their potential customers.   

Demographic segmentation

Demographic segmentation classifies consumers based on specific attributes, such as age or income level. Demographic segmentation offers a glimpse of consumers as actual people in the real world using common data collection methods. Typically, this segmentation is best used for business-to-customer (B2C) marketing efforts. 

Typical attributes to consider during demographic segmentation include: 

Gender identity

Sexual orientation

Income level 

Household size

Education level

Geographical location

Psychographic segmentation

Psychographic segmentation classifies consumers based on their psychological and personal traits, such as values and attitudes. Unlike demographic segmentation, which describes who consumers are, psychographic segmentation offers a glimpse into the motives behind why they buy something. Typically, this segmentation is helpful for B2C and business-to-business (B2B) marketing efforts.

Common psychological characteristics and traits to consider during demographic segmentation include:

Personal values 

Religious beliefs 

Aspirations

Political leanings

Firmographic segmentation

Firmographic segmentation classifies companies and businesses into a set of shared attributes, such as their industry and number of employees. In effect, firmographics is akin to demographics, except that it focuses on the characteristics of businesses rather than people. As a result, it is used exclusively for B2B marketing. 

Common attributes to consider for firmographic segmentation include: 

Status or Structure

Performance

Behavioral segmentation

Behavioral segmentation classifies consumers based on their behaviors surrounding products or services, such as when they decide to purchase them and how they use them. By focusing on consumer behavior, behavioral segmentation provides a look into how consumers interact with businesses, which allows marketers to improve the effectiveness of their efforts. Typically, this segmentation is as useful for  B2C as B2B marketing efforts.

Common areas of consideration for behavioral segmentation include:

Usage frequency

Brand loyalty

Benefits needed

Target marketing strategies

A range of strategies allows you to market your product or service to your target market. Typically, these strategies are broken down from the broadest target market to the most narrow and specific. The exact method you use will largely depend on the target market you have identified. 

Learn more about four of the major target marketing strategies : mass marketing, differentiated marketing, niche marketing, and micromarketing. 

Mass marketing

Mass marketing is a marketing strategy that forgoes segmenting a market and instead advertises to the broadest possible number of people. Unlike other marketing efforts, mass marketing doesn’t create different campaigns for different market segments but instead runs a single campaign for the entire market.

Mass marketing is particularly attractive to companies selling products or services with broad appeal. For example, gas companies, telecommunications companies, and manufacturers of salt and sugar typically only conduct mass marketing campaigns because nearly the entire market uses their products. 

Differentiated marketing 

Differentiated marketing is a marketing strategy in which a business creates different marketing campaigns to appeal to different target audiences. By differentiating their marketing campaigns, businesses are able to more effectively articulate their value proposition to various market segments and, ideally, increase the success of their marketing strategy. 

In order to reach diverse segments, differentiated marketing requires businesses to dedicate more of their budget to the creation of different marketing campaigns. As a result, differentiated marketing is a strategy well-suited to businesses selling goods and services to a target market composed of distinct target audiences. 

Niche marketing 

Niche marketing is a marketing strategy in which a business focuses all its marketing efforts on a highly specific and unique target market. As a result, niche marketing often targets gaps in the marketplace, where the needs of specific customers are not currently being met. 

In targeting a niche, businesses can craft highly targeted advertising campaigns that appeal to their specific market. In turn, these efforts are well-suited to smaller businesses looking to enter an already crowded marketplace that nonetheless includes several, specific gaps that are currently not being serviced.

Micromarketing 

Micromarketing is a marketing strategy that specifically targets a narrow segment of a niche market. Typically, the target audience of a micromarketing campaign is defined by specific characteristics such as age, job title, geographic location, or gender. 

As a marketing effort that targets a highly specific group, micromarketing can also be more costly than other marketing strategies, such as mass marketing. In effect, micromarketing is best suited for target audiences where the rewards outweigh the potentially costly effort to reach them.

Learn more about target markets on Coursera

Understanding your target market can help you reach customers in personalized ways and develop a more robust marketing strategy. To help you hit a bullseye on your next business undertaking, you might consider obtaining a professional certificate in Social Media Marketing offered by Meta. The University of Illinois, meanwhile, offers a specialization in Digital Marketing that provides insight into the data collection and analysis methods used by marketing professionals.  

Whatever you decide, though, just remember that thoroughly identifying your target market can help you hit your marketing targets. 

Article sources

ZenDesk. " CX Trends 2023 , https://zen-marketing-assets.s3.us-west-2.amazonaws.com/CX_Trends_2023_AI_Report.pdf." Accessed November 11, 2024.

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