Subscribe to Entrepreneur for $5

Determining Your Target Market

Opinions expressed by Entrepreneur contributors are their own.

You need to know from the very beginning who your customers will be. Many people have a problem focusing on a specific market, and consequently waste a lot of time and effort on people who will never be customers. Or, something might happen in the community which causes your neighbors and fellow townspeople to question your business or products. In this case, your "public" does not consist of those who patronize the business, but of the community.

Consider an air courier service that doesn't cater to the public, but has a decided interest in gaining the industry's attention. They want a higher profile and more recognition as a major competitor within the courier business. The service, therefore, has a trade relations problem, and they would focus on the trade media to get their message across.

Another firm may have poorly informed employees who hear important information only through the grapevine. The employer could deal with this employee relations problem by instituting a monthly newsletter which would discuss all the important information on company policies and events.

When building a company image you should direct your energy and strategy toward the segment of the market you have identified as the most likely to purchase your product or utilize your service. Then you need to ask yourself a few key questions that will help you develop the type of image these people will feel most comfortable dealing with. These questions include:

1. What is the lifestyle of my customers?

2. What are their buying habits?

3. Are they budget-conscious?

4. Where do they live?

5. What features do customers like about my product(s)?

5. What features do customers like about my competitor's products?

6. What benefits do my competitors list in their promotional material?

7. What benefits does my product have that gives my company a competitive advantage?

8. How are my competitors' promotional materials designed? What colors are they using? What typefaces are they using?

9. What type of packaging are my competitors using?

10. What is the pricing like in the market I am targeting?

You should also be aware of potential problems that may arise, and who would most likely be the people involved. For example, if you own a pest-control business, the chemicals you use may affect the area in which you work. Anticipating potential problems is always better than reacting to actual problems.

In estimating the sales volume of competitors or potential competitors, develop the mind-set of a marketplace detective, checking out the competition with a pair of binoculars if necessary. At what time of day are there high traffic counts? Are they at night? During mealtimes? Afternoon? Early morning?

Without disturbing competitors, conduct exit interviews with customers. From a distance, observe shipments arriving and leaving via the back door. If possible, talk to everyone revolving through the business -- sales reps, truck drivers, and other merchants. Compare this information with published data on your industry, such as reports from market research firm Dun & Bradstreet, which you can find in your local library.

If you're already in business and are thinking about expanding to an additional location, begin by studying the characteristics of existing customers. If, for example, you were a restaurateur thinking of opening a second location, you could develop a brief questionnaire that uncovers information such as:

*The customer's address

*Favorite time to eat

*Favorite food

*Preferred seating (smoking or non-smoking)

*Preferred beverage

*Frequency of dining

Give away a freebie with the question cards -- a dessert, a glass of wine -- something to let your customers know you value their opinion. Be sure to involve your hosts and serving help. They are at the contact point with customers. Your image is dependent on what they observe.

Once you know who your target market is, you are then ready to sit down and figure out how you are going to develop the right image.

Tomorrow's tip will focus on developing your company image.

Entrepreneur Editors' Picks