An Better Way To Research & Define Your Target Market

An Better Way To Research & Define Your Target Market

Gathering Data

It doesn't take half a million dollars and an expert research agency to get good data these days. That's one of the beauties of the Internet. Using online surveys, customer calls, and focus groups can give you all the data you need.

The key is to ask the right questions. Of course, you'll want to gather demographic information - so don't forget to ask those questions. But you'll also want to drive on some question that help you better understand the benefit(s) that your customers are looking to get out of your product or service. Here are some questions that can work well to draw out those benefits:

  • What are you trying to accomplish with our product/service?
  • What were your goals when you bought X?
  • What product(s)/service(s) were you using before us?
  • What were the problems you ran into with those previous products/services?
  • What was going on in your life/business that made you decide to purchase our product/service?

The goal here is to find the pains that the person was experiencing and the solution to that pain that they were looking for.

Organize Data in Meaningful Ways

The next step is to start organizing the data in meaningful ways. A colleague recently shared one helpful way to do this. It starts with an alteration of the Boston Consulting Group (BCG) Matrix. On the X axis, measure a customers cash inflow - or how much money a particular customer brings into the business. On the Y axis, measure the customer's cash outflow - or how much that customer costs you (acquisition cost, service costs, etc). Not all customers are created equal - some make you money, and some bleeding you dry. The BCG calls the customers that bring in lots of money and don't cost you much "cash cows". Those that cost you a ton to bring on and service, and don't bring much revenue into the business are called "dogs". The goal is get lots of "cash cow" customers and deter the "dogs".

When you survey your customers & prospect as well as gather data from interviews and focus groups, start plotting them on this grid. You'll start getting a good sense for the qualities that good customers have and the undesirable qualities of bad customers.

Draw Important Inferences

Next is to start to identify what makes a bad customer. In many cases you'll discover proxies that can substitute for the actual qualities. For example, many customers can identify a bad custom right away because they haggle you on the price. Annual household income or annual revenues might be the best indicator of whether or not the person is going to haggle on price because if they're income/revenue is higher they may not struggle as much to pay. But, asking "How much do you make?" is usually not the best way to move the sales process along. So, you may need to find a proxy for annual income/revenue. These proxies should become clear as you plot your customers and their qualities on the BCG Matrix. For B2B companies, years in business and number of employees might be good proxies for business acumen or even annual revenue. For B2C companies, you might use zip codes of wealthier neighborhoods as proxies for annual income. You get the point. Find measurable, objective factors that you can use to determine whether someone is a good fit or not.

The next step is to take the two most important factors and plot them on a two-by-two matrix similar to the MCG Matrix.