If you run a business, you have likely heard that you need to identify and target a specific niche in the market. Although this is true, it is not the most helpful advice for many people. After all, you may be left wondering “what are target markets?” Even if you understand the principles, you may be unsure of how to identify and go after a specific group.

What Does Target Market Mean?

To help understand this concept, it is easiest to think of a small-scale example. Let’s say that you sell a business-to-business product. You know that there are 100 possible buyers for your product. However, there are other competitors also trying to sell to those same buyers. If you attempt to sell to all 100, you will likely not have the resources to compete against more focused sellers. Instead, you should target a subset.

You may decide that you are going to focus on selling to the 20 buyers that have less than 1,000 employees. These small businesses are your target market.

Of course, a target market can be defined in many different ways. You may sell a product to athletic women in their 20s, for example. The key is that you are dividing the market into segments and choosing to focus on one or a few of those subsets.

How To Define Your Market

Start by considering your product and its features. You may want to think about what problems it solves, and which features are particularly useful or popular.

Then, think about your competition and who they are targeting. You may realize that all your competitors are focusing on a few target markets and leaving some customers unsatisfied. That can create an opportunity for you.

Finally, start breaking up the market and doing research. You may choose to segment the market based on age, income, location, lifestyle, gender, and many other factors. Often, the best segments are defined by multiple demographic identifiers. Research the segments to help determine if your segmentation logic makes sense and to find which ones are likely to be most lucrative for you.

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Using this process of segmentation, targeting, and positioning, you can focus your efforts on selling to people who are likely to buy from you. In reality, most markets are exponentially larger than 100 possible buyers. By targeting, you can conserve your resources and ensure the highest possible return on investment. That is always good for your bottom line.