Know Your Target Market
When crafting your business plan or giving it an overhaul, it's critical to thoroughly understand your target customers. Understanding your target customers' demographics helps you determine exactly what your products or services will be, and what kind of customer service tactics work best.
Smart marketers know there are many subsets of every group targeted; not every message will work on every person. However, despite consumers' resistance to stereotyping in media, demographics certainly aren't becoming obsolete. It's still useful to get the big-picture view of your target consumers. If you know, for example, your product will be geared toward seniors, then your research will tell you the font on your website should be easy to read, with a white or light-colored background and that it should avoid excessive use of Flash.
As the boundaries between categories begin to blur, and consumers no longer like to be singled out based on income, gender, ethnicity or education, one of the keys to keeping your marketing cutting-edge is customization, and personalization--essentially letting your customer know you think of them as an individual and understand their lifestyle. If you don't speak to their lifestyle, a customer will tune you out. Get a firm grasp on the lifestyles of the five very distinct generations:
Also called Gen Z, the internet generation or iGeneration, they're the children of the youngest boomers. Because this generation is still very young, marketing and demographics theories are still developing. One huge distinction, however, can be made: This generation is the only one to be born entirely in the internet era, and to parents who are generally more accepting and knowledgeable of such technology. This differs from the next generation, Gen Y, which sometimes dealt with tensions stemming from their parents' lack of technological savvy or acceptance.
Also referred to as millenials or "echo boomers," they are the children of boomers, ages nine to 27. Because of higher costs of living or, in some cases, the over-protective nature of their boomer parents, many are choosing to live at home. University of Michigan economics and public policy professor Bob Schoeni told Time magazine that the percentage of 26-year-olds living with their parents rose from 11 percent to 20 percent between 1970 and 2004. They're 75 million strong and they have disposable income because of their parents' support. Growing up with computers means this generation is especially responsive to internet campaigns. They process information quickly and are especially brand loyal. Gen Yers like innovative marketing approaches and advertising that uses humor or is "outside the box."
They are perhaps the most overlooked generation, falling in the shadow of the powerful baby-boom generation. But the 44 million Gen Xers born between 1965 and 1975 are entering their peak earning and buying years. They're tech-savvy and love to shop. They have a high value for education and knowledge. Unlike Gen Yers, brand prestige alone won't woo this generation--let them know why your product is a good value. They are independent and like to save.
Until the boomer generation hit age 50, marketers generally forgot consumers once they passed that age mark. Today, however, they're awakening to the buying power of this 76 million-strong group. On average boomers spend $400 billion more per year than any other generation. They're at many life stages: empty nesters or full nesters, boomer grandparents, single or married, etc. What they have in common is exceptional drive and the ability to evaluate advertising and determine its value to them. Between 2005 and 2030, the over-60 group will grow by 80 percent--as they age, be careful not to label them as "old." This generation has a Peter Pan complex--play up their youthfulness in marketing.
The Greatest Generation
Born between 1909 and 1945, today's octogenarian has seen it all when it comes to advertising, resulting in a particularly savvy consumer segment. They are more careful about whom they do business with, and they want to know more about your business before they choose to patronize it. Having been born during, or lived through, the Great Depression, World War II and many economic recessions, they're keen on value and in general don't "shop for fun" as other generations tend to do. They have pensions to rely on that other generations won't have as they become senior citizens, so concentrate on communicating the value of your product or services. A practical bunch, they also tend to be extremely loyal customers.
Seniors like to spend money on their grandchildren. Seventy-five percent of the over-50 crowd are grandparents; they buy 25 percent of all toys sold in America.
Today's senior is living longer than ever before, and they're dealing with fewer acute illnesses and more chronic ones as their lifespans increase due to science and medicine. They want products to help them stay active, learn and be independent. There's plenty of room in the marketplace for products and services to help them achieve this lifestyle.
It's a mistake to think octogenarians aren't using the internet. According to the U.S. Census Bureau, people over the age of 65 spend more than $7 billion per year online.
Test Your Product By Area
Another way to use demographic research is by testing the popularity of a product within a chosen community. How do you know it will be successful in that particular locale? You must look at the community's:
Purchasing power. Find out the degree of disposable income within the community.
Residences. Are homes rented or owned?
Means of transportation. Do prospective customers in the area own vehicles, ride buses or bicycles, and so on?
Age ranges. Does the community consist primarily of young people still approaching their prime earning years, young professionals, empty nesters or retirees?
Family status. Are there lots of families in the area or mostly singles?
Leisure activities. What type of hobbies and recreational activities do people in the community participate in?
Detailed demographic information is available from the Census Bureau's website. Click on "State and County Quick Facts" for your state, and you can find county-by-county demographic information. You can also get this kind of information from established businesses within your industry or from a trade association. Gale's Dictionary of Associations, available in most libraries, contains listings for more than 30,000 trade associations' national headquarters. Many associations also have local or regional chapters that serve members in a variety of ways, with everything from newsletters to lobbying actions.
In addition, the Bureau of Labor Statistics publishes the Consumer Expenditure Survey, which you can find at the Bureau's website by clicking on "consumer spending." The CES annually samples 5,000 households through its Quarterly Interview Survey and its Diary Survey to learn how families and individuals spend their money. Unlike other surveys that might ask only how much people are spending on household or home appliances, the CES collects data about nearly every category of expenses--from alcoholic beverages and restaurant meals to pensions and life insurance.
Bureau of Labor Statistics analysts then sort the information and group consumers by income, household size, race, gender and other characteristics relevant to your business. Read more in the full article on testing your product by area and researching demographics.
Apply Your Research
Write your findings into your business plan. List each product or service along with its respective target market(s). Include your marketplace research: your competitors, geographical boundaries, customers, latest demographic data, trends in your markets (both demographic and product-related) and list the most crucial points that need to be included in the coming year's marketing plan.
For a detailed look at how to develop a "market situation" section in your business plan, read the full article.