Your Definition of a “Target Market” is Wrong
Products solve problems, not people
One of the first questions that’s always asked when someone hears “I’m starting a business” is “what’s your target market?”
The answer that follows is usually something like: students in college. Urban moms. Welsh Corgi owners — and only Welsh! According to businessdictionary.com,
The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.
Normally when we think of these kinds of customers, the first thing that comes to mind is a group of people that share the same attributes.
Maybe they went to the same school, happen to be the same age, or they share the same ethnicity or geographical location.
The problem is — the attributes of a group of people rarely ever cause them to purchase a product.
However, with the advent of the internet, globalization has shown us that the reasons why a suburban mom of 3 wants to share her photos on Instagram are actually the same reasons a female Korean student wants to as well.
Sure, someone’s attributes may correlate with why they want to purchase something, but that’s all it is — a correlation. Let’s use a pizza business as an example.
The target market of a pizza business may be young professionals. Does that mean that a. being 25–35, and b. working in a professional field causes you to want pizza?
If that’s the case, I should be able to walk up to every 25–35 yr old professional and they should all be willing to pay for pizza.
Simply put, operating under the assumption that a person’s attributes will cause them to buy will cause disastrous ripple effects through an entire company’s marketing.
If you’re wrong about the 25–35yr old professional, every dollar you spent trying to target them will be a dollar down the drain.
Behavior & situation, not attributes
Instead, we should look at the behaviors and situations surrounding the individuals willing to purchase — aka, look at their problems. If we do that, we’re much more likely to unearth the actual reasons that cause people to buy.
Products solve problems, not people.
-Des Traynor, Intercom
We know that a business consists of selling a product (pizza) to a group of people want it. We also know that the reason why people want products is because they have a problem that needs to be solved.
So where do problems come from? They certainly don’t come from your age. They arise out of situations that you find yourself in.
Maybe the attributes that you have increase the chances of you finding yourself in a certain situation, but they certainly don’t cause it.
If pizza is the product, does it solve the problem of someone being a 25–35 yr old professional? Of course not! It solves the problem of being hungry and in a rush.
If we look at the behavior and situation, we’ll find that actually, many different kinds of people find themselves in a position where pizza could be a good solution.
My parents are nearing 70 & retired, and they still eat pizza on occasion (despite my objections concerning health implications).
It’s not because they fit the attribute demographic, but because at times they still find themselves in the same situations as the 25–35 yr old professionals.
Conventional market segmentation all of a sudden then becomes a lot more challenging. If we define a market by behavior and not attributes, how on earth do we target our advertising efforts? How do we even know where to get our first adopters from?
Imagine being the VP of marketing for a new pizza business and being told to create an ad campaign for people “in a rush”. It certainly sounds a lot more intimidating than targeting “young professionals”. Where would you start?
And yet, without the knowledge of what truly causes someone to seek a solution, we can’t accurately say that we’re putting our products in front of real potential customers.
How can we dominate a market if our definition of a market is wrong?
A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system. — John Gall
Peter Thiel is famous for taking Gall’s law and applying it to startups, saying that startups should focus on trying to monopolize one market first before expanding to others.
His reasoning is that being the small fish in a big pond means if you take on too much from the beginning, you’re setting yourself up for failure. Instead, do one thing, and do it right first before replicating what worked to other groups of people.
We see this in oft-quoted examples like Amazon, where Jeff Bezos started with online book sales and dominated that “market” before expanding to other forms of e-commerce.
Or how about Facebook and their choice to dominate the college “market” across the US before opening it to the masses?
How then do we reconcile what worked for Amazon & Facebook with what we believe to be true about the incorrect definition of a market?
Nextdoor CEO Nirav Tolia encountered the answer in a situation he faced building his startup. When they were trying to focus their efforts after receiving some initial success, Nirav kept telling his staff not to narrow their target market to 35–55 year old mothers.
Next door was a platform for all members of the neighborhood, not just the moms. It solved problems for everyone — fathers, sons, daughters, anyone who had a problem that needed to be surfaced to the community they lived in.
That being said, he couldn’t dispute that the data coming back suggested that their first adopters always seemed to be exactly that group of people, the ones who shared the attribute of being 35–55 year old mothers. And so they over served that segment of the market (full lecture here).
What that means is, although the definition of a market is not who is making the purchase but why, often times people with similar attributes find themselves in similar situations.
Being a young professional doesn’t cause you to buy pizza, but it does mean you’re more likely to be hungry and in a rush.
Traditional marketing works, but walks a fine line
If you think about it, that’s why traditional marketing has worked so far.
What I’m certainly finding from building & marketing products however is that to really understand why someone may buy what you’re selling, you need to understand the problem more than the people.
Sure, you can shoot in the dark and say “white-collar men would love this product!” but just be aware that that’s all it is — a shot in the dark.
The smartest companies in the 21st century will use this to their advantage. Take a look at Apple’s video ad for Airpods for instance and you’ll see a company putting this into practice.
Are they targeting young, African American hip hop dancers? Certainly not. They’re targeting people who are mobile, who want to be seen as cool, and who listen to music commuting from point A to B. That could just as easily be my uncle as it could be my wife.
At best, you find a competitive marketing edge to use as a weapon against other products trying to advertise the same thing. At worst, you shot in the dark, missed, and have no idea why.
Let’s redefine a market by what it really is — a collection of a group of people who need a product because of their circumstances, not their demographic.