Everything you need to know, to do everything you want to do

Business

How to define a target market for your business

Target market

To develop business success, you need to describe and define a target market for your business idea. The central question is who should buy your offer – product or service – in the future. By defining the target group, it will also be easier for you to capture the size of the market later in your business plan. The orientation of the your marketing depends on the definition of the target group.

As a first step, you can target the target group in private customers (B2C) and Business customers (company, B2B) to divide. This is followed by a detailed definition of the target group. 

Why define the target group?

If you have written down your business idea and thus the service and/or your product range, you should define a target market or target group. Your main question is: Who should buy your product?

Once you know and have defined your target group, you are able to target your target customers precisely. This not only saves you time, but also prevents you from spending a lot of money on unnecessary promotions, for example. Finally, you will also be able to determine the size of the target group and thus calculate the market potential.

How to define your audience

No matter how great your product or service you want to sell, you only serve a part (segment) of the overall market because of the different needs of people. Surprise eggs are mostly bought for children, the Toyota Prius buyer usually cares little for an 8 cylinder Chevrolet and Birkenstock sandals fans usually don’t indulge in Manolo Blahnik high heels.

Defining the target group is about identifying the characteristics of your audience. Characteristics such as gender, age, income or place of residence are just as important as the question of what wishes, problems or needs your target group have. In addition, you can also Create personas, in which you give your target customers a face and develop fictitious pattern customers based on character traits.

Because the audience definition is not easy to define a target market, it’s best to first distinguish between the following two customer groups:

  • Target group Private customers (Consumers)
    Basically, there are almost 82 million customers in Germany – the question is only which ones are eligible for your product. By defining your target group, you limit your potential buyers and can thus proceed in a targeted manner. 
  • Target group Companies (Business customers)
    If you want to target companies with your product, the industry or company size are usually important features of your target group. 

In the business plan, you describe your target group based on the respective criteria. Only in this way can you realistically assess the market and create a reasonable financial planning. The exact characterization of the target group will also help you later in the creation of the marketing concept and the customer approach.

Watch out: Who is the buyer and who is the influencer?

Beware! The person you want to buy your product (obvious target group) does not necessarily have to be the one who decides on the purchase (effective target group). So the mom buys the surprise egg, but is usually significantly influenced by the child when making a purchase decision – your target group is therefore much more the children than the parents!
The “influencer” should be identified and observed when your target group is a company: For example, the head of the department decides that a new coffee machine is purchased. However, it is usually the secretary who decides which one should be. Consider this factor when defining your target group!

Finding a new target group

You may also find a new target group for your product, which has not yet been noticed by the market. For example, Bosch, the market leader in high-quality cordless screwdrivers, has discovered a new, lucrative target group. Through a market analysis, Bosch has determined that the classic semi-professional do-it-yourselfer who buys high-quality cordless screwdrivers is increasingly being replaced by the “GENERATION IKEA”. Analysis of this possible target group showed that the large number of predominantly young people (men and women) who are not as technically savvy need a small, easy-to-use battery screwdriver. Bosch has developed a new product for this specific target group – the Bosch IXO. The Bosch IXO is one of the most successful products from Bosch and impressively shows how valuable an accurate market and target group analysis can be.