Monday, November 07, 2005

Targeting customers

A common issue that shows up with people who start businesses is that they don't target their customers. If I ask the question "What customers do you want to target first?", and they answer anyone and everyone who may be able to use their product or service, then they have this issue. They feel their product could be usable by anyone, and they don't want to miss any possible sales. The problem with this is that by not specifically targeting the best customers, they either don't get the information out to anyone or what information goes out goes to people who won't become customers.

Think of it like shopping. If you don't target what you want to buy, then you are walking in to every store in the area (whether it be a wedding dress store, sporting good store, or grocery store) in the hopes that you find something that you need. Because there are so many stores, the chances of walking in to that store that has what you need at the price you want to pay is small. You may buy some things, but you either got there by luck or in a very inefficient way.

A more efficient approach is to think through what stores you want to go to, what you want to buy, and then go to those stores. Applying this to your product's customers, you should be able to answer some or all of:
  • what geography/country they are in
  • what size company they are
  • what industries they work in
  • how they will use your product
  • why they would use your product (what benefit they gain from using it)
  • how much/how often they would possibly buy and what they would be willing to pay
  • etc.

You actually do this for different groups of potential customers. Yes, there are many people who could possibly use your product or service, but it is best to choose a specific subset of these and then target them. This is called "picking the low hanging fruit". Look at each potential market and determine its return (how much you get versus how much it will cost you to get into the market). The market with the best return should be the one you go for first. Then the one with the second best return, etc.

Note, the return of later markets may change once you enter the first (and each subsequent) market. For example, if you sell a product to software retailers, their may be synergy to selling to other retailers. So the return on other retailers may increase just because you are already in the software retailer market.


At 11:39 AM, Blogger California Kayaker Magazine said...

There is an article which was recently published on that talks about targeting customers in some more detail than my short Blog posting. If this subject interests you, this article is worth reading.


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