Defining Your Business’ Customer Niche and Reaching New Customers (SGL0003)
Vincent: If you are a business owner, how do you make sure that your products are actually appealing to your target market? How do you define your market? And most importantly, how do you actually know if there’s a big enough group of customers there for you to be profitable. We’re talking about all of this and more today. Welcome to, Startup Garage Live. I’m Vincent.
Meredith: Hi everyone. I’m Meredith. Let’s get started by talking about what a target market exactly is. You might not even know what term is referring to. Basically, a target market is where you’re gonna break the market into segments and concentrate specifically on one or two main groups of customers, who will be the most benefited by the product, or service that you’re offering. You don’t want to just jump into your business and start selling without knowing if there’s any research done behind who you’re going to be selling to. You actually need to put in the research and think about what your target markets gonna be.
Vincent: Yeah. Those are great points. I mean, part of the reason why you would want to do this research, is to make sure there’s more than five customers that are actually interested in what you’re planning on starting a business on. A lot of this rolls straight into, why is this type of stuff important. Meredith already mentioned one of them. You wanna find out if there’s enough potential customers here to actually be able to do this business. What else do you think Meredith?
Meredith: This can also really help you tweak your idea. Make sure that it’s actually appealing to your audience. What you might think is a great business idea, you might be close to it, but your target market, your customers might have something a little bit different in mind. You can tweak that and fix it for what’s gonna be most beneficial for them. It’s also gonna help you, just target your marketing efforts. That’s gonna make your marketing so much easier, when you know exactly who you’re trying to sell to. It’s gonna be more efficient and cost effective.
Vincent: How do you think, so if we take that and we apply it to something like marketing to order customers, versus younger customers. How do you think that comes to life in the marketing?
Meredith: I think an example of that would be that, older generations are typically used to more of the blatant, traditional marketing techniques. TV commercials, and advertisements, and that’s kind of been the norm for the past so many years, but now, younger generations are kind of looking for something new, and real, and authentic. Personally, I don’t want to feel like I’m being sold or advertised to. I want to actually feel connected to a brand that I’m purchasing.
Vincent: That actually probably works better for small businesses, because large businesses can run TV commercials, and we all hear about the Superbowl commercials that cost millions of dollars. Obviously, if you’re starting a small business, you can’t afford to be able to do that. Being able to define the smaller audience actually allows you to be able to run marketing campaigns to that audience as well. You can do that with 20 dollars, hundred of dollars, instead of the thousands or millions of dollars that you would typically spend on a really broad commercial that reaches everybody.
Meredith: Right. Fun fact for some of you watching this. You might have received this through one of our targeted ads. Something really helpful with social media nowadays, is the use of targeted ads, on Facebook and on Instagram. For example, here this episode right now is being targeted to business owners within middle Tennessee. That’s just a real life example of how you can target your customers right there.
Vincent: Yeah. Absolutely. When you’re targeting your customers, how do you split this up? What different attributes are you looking at within these customer segments?
Meredith: There are a ton of different ways you can segment your customers. Whether it be by their age, you know, if you’re looking at millennials, or you’re looking at baby boomers, Gen X, whatever that be, you can do it by gender, by family. If someone has a family you’re gonna market differently than if they’re single. You can look at education, their income levels, their occupation, what they like to do in their free time. Their lifestyle choices and what motivates them every day. Another example would be location. This doesn’t really affect anyone who’s selling online, because nowadays, with online businesses, we have the ability to market to people all over the world. If you’re a brick and mortar location, you’re gonna need to think about the geographic location that your marketing to obviously.
Vincent: Yeah, that makes a lot of sense. If you take this and you apply it to different brands, how does that really come to life. For instance, obviously, a lot of people in the world workout, and so active wear is a really big market. How do you think those companies approach something like this?
Meredith: An example there would be just looking at the difference between two really big brands that we all know of, Adidas and Lululemon. Let’s just take those for example. They’re both gonna be marketed towards people who are active, and who are working out and interested in fitness. Adidas is more marketed towards both genders, I would say. Whereas, Lululemon is really only focused on marketing to females. In addition to that, I would say Adidas is more marketed to a broader social economic target, and Lululemon is more so marketed to upper class.
Vincent: Yeah. I feel like walking like urban cities, I see Lululemon everywhere. Obviously, the being able to niche down and focus on a segment of the population seems to be working pretty well for them, right?
Meredith: Yeah. It definitely does.
Vincent: Yeah. With Lululemon, I think it’s a perfect example of, you get higher market penetration within an existing group. Within this group of active females, who are typically on the upper scale of the market, they’re creating a product that really, really appeals to this specific audience.
Meredith: Yeah. Have you gone through an exercise like this with any of your businesses in the past? Have you had to sit down and define what your target market it?
Vincent: Yeah. Absolutely. You’re about to start an apparel company …
Vincent: as well, and your apparel company targeted a slightly different group than what me and the co-founders of our apparel company focused on. We were really looking at licensed collegiate apparel. Our target was incoming freshman at universities, but not even just all universities, universities that were division one football team schools, and they had an undergraduate enrollment of at least 25,000 students.
A lot of people would think, “Oh. Let’s just go create apparel for people 18 to 25.” Within that, there’s millions of people. We actually targeted down to a group of 25,000 people to begin with, because then it became easier to market to that smaller group, and also we can start measuring market penetration within that group.
You know, through this journey, some of the things that we were measuring is that, we wanted every single person to be able to, obviously wear our T-shirts. We did get to the point where one of out every five of students at some of these schools were buying our apparel. Now, Dress By Grace is the company that you’re about to launch, early next year. How are you thinking about approaching this?
Meredith: Yeah, so I’ve kind of gone through some of the same exercises there. Mine, might not necessarily be as specific as yours is. I am marketing towards females. I’m selling women’s clothing, and so that’s one differentiation point right there. Also, the age group I’m looking at is, gonna be from about 15 up to 30’s. Could go higher though, so I’m kind of looking at girls, who are in high school, up to girls in college, up to young adults. I’m really looking more so at a southern market here, just cause, I’m from the south. I have a pretty southern style. That’s kind of the look I’m gonna be going for, with my business.
Vincent: Yeah. That sounds great. You have a lot of information. You have some thoughts already on who your target market is for this business that you’re about to launch. How are you finding this information?
Meredith: There’s a ton of different ways to do research out there. One of the best tools that I’ve used is, Google actually. As we said earlier, we are broadcasting here from Google Fiber in Nashville. Shout out to Google. I love Google, love their services that they offer. Something that I have found really helpful is the use of Google Trends, which is a free website. If you’ve never heard of it, you definitely need to check it out. It’s so helpful. What you can do is, type in specific phrases, or terms that you’re looking for, and you can see the search results for those terms over time, and by location. It’ll let you know if so many people are searching for clothing boutiques a year ago, versus how many people are searching for those now. You can see the trends there.
Vincent: That’s awesome. You were talking about location earlier. One of the things that I love about Google trends is that you’re not only able to take a look at these trends on a global market, but you can also narrow down to specific locations by city, by state, by country, as well, to be able to find out, are customers in that specific region interested in this type of trend.
Another tool, and shout out to Google Fiber again, Google survey is another tool that Google has. Good Survey. It’s at survey.google.com. You go to this website and you can basically type a question. You can structure these questions such as, how interested would you be in purchasing a product like blah, blah, blah, blah, blah. And then you can have a couple different options from very interested, to not interested at all.
You can actually target these advertisements towards a specific demographic, in a specific area. Google will go out, do online advertisements, where they put the survey. People can answer the survey questions, and then you can start to understand, if you talk to a thousand people in that city, would they be interested in your specific products. This is a much, much cheaper way of being able to get this information and to test your market fit, than to actually go to that city, set up a brick and mortar storefront and try to talk to a thousand people who walk by the front of your store.
Meredith: Right. I’ve actually never heard of Google survey before, so that’s a really awesome thing, that I definitely am gonna have to look more into. What I’ve done a lot of, rather than surveys, is just using social media. Social media’s fun and we all love it, but you can actually use it to do so much research, and find some really useful information for your business.
Something that I’ve been doing is, on my YouTube channel, I have talked about my business idea before, and gotten people’s feedback. First of all, I’ve been able to get some great recommendations for my business, which is helpful, because everyone has an opinion and wants to share advice with you. I’ve also just been able to see if people are actually interested in the business idea that I have.
From this, I’ve been able to really test the idea and see if it’s a fit for my customers. Another tip though, before you go posting on social media, you’re gonna wanna make sure that you have all the necessary patents, and copyrights, and legal verifications there. We’re gonna be talking about that in a future episode.
Vincent: Yeah. I am really excited for that future episode. We actually have a patent attorney here in Nashville, that’s gonna be joining us for a live episode in a couple weeks. Make sure to tune in for that one. We’re gonna be taking questions live, and so if you have a business that you’re starting up, and you have no idea what the difference between a trademark, a copyright, or a patent is, stay tuned and subscribe to our channel on YouTube, or here on Facebook, down below. We’ll make sure that we’re bringing that information to you.
Meredith: Yeah. Are there any other research tips you have?
Vincent: Yeah. A couple … Google Survey and Google Trends, amazing tools. Feels like Google’s taking over the world, and really organizing the world’s information into a way that’s easy to be able to understand. Another tool, the US Small Business Administration. Their website has databases full of statistics and market research and different information that’s helpful to be able to understand for people who want to start a small business, what are different areas that they can potentially go into, and what are the pro’s and cons of those different areas.
Another area that has really great demographic data as well, the US Census Bureau has a database that’s full of searchable data. You can break that data down by different cities, by different states, by different zip codes as well, to be able to understand different audiences. All great tools, but you know, most of these tools are free. You don’t have to spend a ton of money. It just takes a little bit of time to go to these websites and to check it out.
Meredith: That’s awesome. We’ve touched a lot on finding your target market. Now, I think we’re gonna talk a little bit more about how to narrow down your niche. The niche market that you’re looking into. This is gonna involve just focusing on a smaller group in the market, where the competition isn’t as heavy. You can really focus on the customer’s value proposition for this small group of your potential customers.
Vincent: Yeah. Over time, you can create broader offerings to be able to appeal to larger groups of customers. Sometimes it makes sense to do this under one brand. Sometimes it makes sense to split this into multiple brands. You don’t want to diminish the value of a high end brand by also creating similar products that reach a lower end market.
A good example of companies doing this on a larger scale, are car companies. It’s not uncommon for car companies to be able to have mass market brands, like Toyota, and then a smaller niche brand, like a Lexus, that reaches a specific group of customers. And so, don’t worry about being able to get into two small of a niche, because you can always expand out to a broader market later on.
Meredith: Yeah. I think it’s really helpful, just to consider that, especially. Did you go this deep with any of your businesses?
Vincent: Yeah. The collegiate apparel company. We did license apparel previously. You know, there were a couple different ways that we could have done this. We could have launched a national campaign, tried to do 50 different schools all at once. The reality of it is, we probably wouldn’t have been able to really understand what students at those specific schools, loved about the products that actually allowed this company to grow. We started really small. We started with one school, 5,000 people. We got to the point where, we had a thousand orders of those 5,000 people and then, you know, that’s where it starts to get harder, to penetrate the market beyond that.
The decision that we made was, we started launching two, to three more schools. We did that two, to three school at a time, until the point where we had thousands of customers, who were buying these products. The nice thing is, each time that we launched a new school, we understood what worked well at that previous school. We were really testing along the way, learning along the way, and then being able to incorporate those learnings directly back into launching new markets.
Meredith: Yeah. That’s awesome. Just being able to see, starting from such small place and then growing into a larger customer base.
Vincent: Yeah. The other things too, is that, being able to grow the number of customers that you have, isn’t always the only way to increase your revenue. Even if you have a set group of customers, you can also organically grow them, by being able to get repeat customers, which, I think Dress By Grace will be a great example of customers falling in love with the brand, and it ends up being their go-to destination, versus a one time purchase.
You can continue to grow the business, just by getting that repeat customer, or going after the basket size of customers, who are making a first time purchase, by trying to have promo’s to get them to be able to do extra items. Good ways of doing this, I think, every single website we see, you get free shipping, if you spend 25, or free shipping if you spend 50. All of those methods are focused on being able to grow basket size.
Meredith: Yeah. Another, kind of random example we were thinking about, when it comes to defining your niche market … For example, you might not think that there’s a specific need in Middle, Tennessee for people, who are interested in fishing. You know, that seems like a really small group of people there. Believe it or not, there’s actually a conference that is the Tennessee Boat and Fishing Expo here. It generates so much money, so many customers come there and really express interest. It just goes to show that something even like that, that seems so small, a lot of people can be interested in. That can really grow.
Vincent: Yeah. If there’s enough people that are interested in going to a conference, there’s obviously enough customers that are interested in that niche, to be able to grow a business around it. I guess free shout out to Tennessee Boat and Fishing Expo.
Vincent: It’s gonna be next February in Wilson County, here in Tennessee.
Vincent: You know, all really great strategies. You don’t have to get a perfect market niche, when you launch your business. It’s not uncommon for startups to talk about pivots, or changing the direction of their business. This is where, when you think that your target market is one thing, and it ends up, that you end up finding a target market that’s more interested in your products and services, and so you change the direction of the company over to this new niche. This happens all the time, and so you don’t have to get it perfect, the first one. Later on, we’ll probably do episodes about being able to test and learn and how to adapt with the market. This is an ongoing process.
Meredith: I think I actually have a personal example, just from that. My YouTube channel has kind of grown with me over the years. When I first started it, back when I was in high school, I was really interested in the beauty and the fashion and now that I’ve gone into college, I’ve transitioned into more of a lifestyle and advice channel. I think that’s just an example right there, of how I’m finding what I’m passionate about, and what my viewers continue to be passionate about too.
Vincent: Yeah. That’s a great example. What’s your YouTube channel?
Meredith: It’s Meredith Grace, if any of you guys want to go look it up. We’ll have a link down below. I would love if you subscribed.
Vincent: It’s a great channel. Meredith’s been able to grow up to about 95,000 subscribers on YouTube, which is absolutely awesome.
Vincent: Hey. Thanks so much for joining us for this week. We’re broadcasting again, live from Google Fiber, in the gulch, in Nashville, Tennessee. It’s been great having all of you. If you are not following our Facebook channel, there’s a follow button down below, or up there, or over there somewhere. Type in the comments, things that you would love to be able to hear about in future episodes, if you’re starting a business, or you have a business. What are the challenges and things that you’re facing today. We can focus on those in future episodes. We also put these up on YouTube, and so, join us on our YouTube channel, and subscribe there as well. We broadcast every single Saturday, 10 o’clock central, that’s eight o’clock pacific time. It’s been great to have all of you. I’m Vincent. This is Meredith. Have a great weekend.
Meredith: Bye everyone.