Back in the 1870s, John Wanamaker, generally accepted to be the first guy to buy modern advertising in the form of newspaper ads for his department stores, said this:
“Half the money I spend on advertising is wasted. The trouble is, I don’t know which half.”
Whether you’re a marketing professional, a startup founder or a business owner, you can probably relate. But in this day and age, things are a little different. It’s easy to track what’s working and leading to sales conversions and what isn’t, and if you’re not making use of this knowledge then you’re wasting time and money and missing out on a lot of potential for your company. No excuses.
With that in mind, I’d like to invite you to consider your target market. All too often, business owners only think about defining their target market at the very beginning of their business, and maybe again later on if they get asked while seeking investment. “Oh, men and women ages 18 – 36.” I hear that all the time. “Busy moms.” “Families with kids.” “People with iPads.” Right.
How do you know if your target market is too broad or too narrow?
Let’s run with the first one for a moment. If I want to buy a Facebook ad targeting men and women aged between 18 and 36, I’m looking at targeting 92,000,000 people in the United States alone. To some people, that sounds like a lot of potential customers. Newsflash: that’s just a lot of wasted money. Running an ad that will get you any kind of effect in that target market will cost you a fortune. And guess what? Most of those people — nearly all of them — aren’t interested in your product.
“Ok,” you say, “that’s fine, but I’m not interested in paying for advertising. I’m going to grow my following organically.” Same principle applies. If your target market is that broad, you don’t know anything about them. You can’t uniformly define what their purchasing habits are, what they read every day, which marketing channels will be most effective in reaching them, or what content they’re interested in. If you can’t look at your target market and say “my business is solving problem x for this group of people, and almost all of them want it solved,” your definition is too broad. You’ll never hit your potential in growing followers, sales, or whatever conversion it is you’re chasing unless you learn who these people are, what they want, and how to reach them.
The opposite holds true as well. If you’re peddling a solution to a very niche problem — so niche, in fact, that only a handful of people care about it and are (crucially) willing to pay for it, then your target market definition is probably too narrow. You’d benefit from seeking to solve a more widespread problem.
Either way, we’re back to this: to reach your conversion potential, you have to learn who your market is, what they want, and how to reach them. Let’s dissect this further.
What conversion matters to you? (If you’re not familiar with the term ‘conversion,’ read Marketing 101: The Importance of Conversion over on Mashable for a good overview.)
First of all, make sure you’re placing the appropriate amount of focus on the conversion that’s most important to your business. Don’t fall into the trap of getting fixated on huge growth in your social media following. If you sell a product or service, converting sales should be your first marketing priority. End of story. Social media followings are great for driving traffic into your sales funnel and building your brand profile, but make no mistake — the conversion is at the bottom of the funnel when people actually buy your product (see below). Stay focused on maximizing genuine conversion opportunities and then make adding traffic at the top of the funnel your next priority. The truth is that no matter how many thousands or millions of followers (or even website visitors) you manage to get, if you don’t understand your target market — who they are, what they’re looking for, how they think, what kind of words and phrases resonate with them, how much they want to spend and how they want to spend it — you simply won’t be able to maximize your revenue opportunities.
You need to go after the people who (a) need or really want what you have; and (b) are willing to pay what you’re charging for it. That’s your target market. Define it too broadly, and you’ll end up wasting huge amounts of time and money trying to sell to people who will simply never convert.
To figure out your conversion potential, drill down and focus on finding these people who need and want your product and are willing to pay what you’re charging for it. Don’t make the mistake of assuming the entire market (92,000,000 Americans between the ages of 18 and 36 who use Facebook!) are possible customers. They’re not.
Here’s what your online marketing sales funnel looks like:
A lot of people make the mistake of thinking all the things at the top of the funnel make up their target market. Not so. You can see that a lot of those things — paid advertising, social media followers — will require a significant portion of your time and money if you want to grow them. That’s why it’s critical that you’re using those channels to drive leads that will convert all the way through your sales funnel.
One smart metric to track is your Cost to Acquire Customers (CAC). Take your online marketing spend over a specific period of time and divide it by the number of new customers you generate over the same period. You want your CAC as low as possible to have a nice, streamlined sales funnel. If it’s high — or if it starts to grow over time — invest some time in whittling down your target market definitions.
The last segment in the funnel — people who will take the time to purchase, fill out necessary forms, and supply credit card info — is all about your conversion process and how well you’ve optimized your website for sales. More on that in my next post.
If location matters, have a relentless focus on it.
Service businesses in particular often operate in a specific geographical area. If that’s the case for you, don’t waste a single dime trying to attract attention outside of your serviceable market. 10,000 social media followers or website visitors from around the world are useless if only 1% of them are in an area you can actually convert to customers. So make sure your location features prominently across your entire online presence. Don’t leave any room for confusion.
What can you learn from your existing customers?
The first thing you can do is look at those existing customers who make it all the way through your sales funnel. (I’ll use the word ‘customers’, but let’s assume that also means ‘successful conversions’ for those of you not selling a product or service.) Who are they? How are they finding out about you? Why do they purchase from you? You can get a good picture of your target market by examining all the data you have about them. But the secret sauce is in finding your best customers.
Are you familiar with the Pareto Principle? It states that, with reasonable frequency, roughly 80% of effects result from 20% of the causes. For you, this means that in all likelihood something like 80% of your revenue comes from just 20% of your customers. Do you know who your top customers are? Do you know why they’re your customers and what drove them to purchase from you? This is the group to focus on.
You can learn a huge amount by breaking down your sales and identifying your top customers. What do they have in common? If you have more than one product or service, what is it they’re purchasing? Why? What do they read? Where do they live? What is it about what you’re doing that’s resonating with them in particular?
What would happen if you focused solely on the target market that the top 20% of your customers are in? Remember that excluding people from your target market definition doesn’t prevent them from buying your product. But if you focus your marketing and product design on the part of your market that holds the highest revenue potential, you stand to gain.
Use all the data you can get your hands on to learn as much as you can about your customers and to test the effectiveness of your marketing process. Google Analytics is a no-brainer. To get deeper with your insights, check out tools like KissMetrics, Hubspot, Unbounce and CrazyEgg. Make sure you’re integrating analytics wherever possible.
Once you’ve got some good data about your customers, break them down into segments. Aryng, a San Francisco analytics consulting company, has a great method of visualizing the data you have about your customers and deciding which segments to focus on. Once you’ve broken your customers down into segments that make sense to you, plot their historic value to you in revenue over a set period of time against the growth you’ve generated in that segment over the same period of time (see below). Depending on which quadrant each of your customer segments falls into, adjust your focus accordingly.
Who else should you be targeting?
Maybe you’re a new startup with no customers at this point. Or maybe you’re already operating but you’re looking to grow into some new market segments. How do you know who to target?
Check out the competition.
You can get some interesting data about their website traffic by entering your competitors’ URLs on Alexa. See who their followers on social media are. Check out their advertising. (You can do this the old fashioned way by doing the research yourself, or you can use a more powerful tool like MixRank.) Understanding who your competitors are pursuing will be useful intel, but don’t make the mistake of just blindly doing what they’re doing, even if they’re successful. You don’t want to be the Microsoft Zune to their iPod. Instead, figure out what niches or market segments they might be overlooking, or which ones you might have a competitive advantage in. That’s your ticket.
Go for the long tail.
The long tail concept was popularized by Chris Anderson in a 2004 Wired article in which he applied it to the entertainment industry. In short, the idea is that a distribution showing sales of any given range of products will have some blockbuster successes at the high end of the chart, and a ‘long tail’ of less popular products with lower sales. It used to be — in the entertainment industry in particular — that it was only really profitable to produce and sell music, film or books that had mass market appeal. The internet has changed that, however. Now you can make pretty significant money going after a niche part of the market, because you’re able to find your niche customers a lot more cheaply than you used to be able to. Your advertising efforts in the ‘long tail’ niche markets are usually significantly cheaper, as well. Seth Godin said it well:
“If you want to compete with all those folks shortsighted enough to shoot for the big win, you need to invest a great deal of time and money.”
If your target market falls into a niche that’s in the ‘long tail’ distribution of your industry, you can still be very successful. Don’t be afraid to go niche.
Define customer personas.
This may seem like a cheesy exercise, but it’s worth taking the time to do. Put pen to paper and, reflecting on everything you’ve learned, build out some detailed imaginary personas of the people you’re trying to target. Twoodo has a great template that you can copy.
Join their conversations.
Now that you’ve put some thought into who you want to target, what do you do next? First of all, follow people who represent your target market on social media. Find out what they talk about, what their problems are, what issues they care about. Get to know them. Go where they are. If you’re interested in learning which social media outlets you’re mostly likely to find your particular target market hanging out on, the Pew Research Internet Project has a wealth of statistical data you can check out.
Here are some interesting facts about social media demographics that may interest you:
- Don’t listen to people who say Facebook is a passing fad. About 71% of adults who use the internet are Facebook users, and that number is going up not down. Teens aren’t even abandoning Facebook. According to Pew in August 2013, “there were no indications in either the national survey or the focus groups of a mass exodus from Facebook.” In fact, 94% of teens said that they have a Facebook profile, and 81% said that it’s the social media profile they use most often. Only 7% use Twitter as their main social media network, and a measly 3% say Instagram is their main social media network.
- The 55-64 year age bracket is one of the fastest growing segments on Twitter in particular — up 79% since 2012.
- Only 8% of men use Pinterest, compared to 33% of women.
- Twitter and Instagram users overlap a lot — 53% of Twitter users are also on Instagram, and 53% of Instagram users are also on Twitter. And a huge percentage of 18-29 year olds can be found on these networks. 31% and 37% of 18-29 year olds are on Twitter and Instagram, respectively.
Keep in mind an often overlooked factor when you’re deciding which social media network to target your market on: their users’ state of mind. People go on Facebook to hang out and spend a few moments of leisure time. People go on LinkedIn when they’re thinking about work, their resume, or their career. Pinterest attracts people who want to look at nice images, or maybe plan a wedding, a vacation, a renovation or a dinner party. Depending on what your product is, consider the mindset that you want your target customer to be in when they see your content, and plan your social media strategy accordingly.
Make sure you build in referral mechanisms.
It follows that people who are in your target market probably know other people who are also in your target market. Give your customers every opportunity to share your product with their friends, or to invite them to try it. If you have an email auto-responder that goes out after someone purchases from you, make sure it includes an ‘invite a friend’ link. Run contests (if you need help, try tools like Contest Domination or InviteBox) to encourage your most devoted users to spread the word within their networks.
Test to see if you’ve got it right.
Spend some time testing different approaches with the target market you’ve identified. Unbounce landing pages and A/B split testing in your email marketing are a great place to start. Are they biting? Try different approaches with your marketing copy, your sales process, and your website design if you can. Test, test and test some more. Don’t assume you know everything.
Have meaningful conversations with people in your target market whenever the opportunity presents itself. Steve Blank’s guidance on customer and market validation is great material. Stay in touch with your customers — solicit their feedback through both formal surveys and casual conversations.
Be prepared to evolve.
It’s easy even after you’ve hit the nail on the head to get wrapped up in what’s worked in the past and then forget to evolve along with your customers. MySpace is a classic example of a company that missed the boat by failing to notice the ways in which the things their users wanted were changing. Get comfortable with conversing with your market and staying on top of the data and analytics that are available to you. It’s important to keep your finger on the pulse of what your target market and your customers are doing. The better you can define the group of people you’re marketing to, the better you can be in touch with what they’re interested in and what their needs are… and the more successful you’ll be.
Kristin Eberth is a tech marketer based in Vancouver, BC. Find her on Twitter @kristineberth.