Why should you be concerned with target marketing? The answer is one simple word – PROFIT! If you can accurately define a specific target market and then penetrate that market, you will make money. On the other hand, if you fail to define a target market and simply sell to the whole universe, you undoubtedly will lose sales and profit opportunities.
Target marketing works whether you are in the wholesale or retail sector of the industry. In essence, you simply turn your company’s most promotable competitive edge into a powerful marketing message delivered directly to the right prospects.
Many of us miss the fact that every product and service appeals more strongly to a certain definable group. Target marketing starts with defining who you want as your customer, and then providing the products and services they desire and need. By focusing on only the “right” prospects, you reduce your promotion and operating costs while maximizing profits. So here’s how you go about target marketing:
1) Obtain demographic data. You want to identify the potential pool of choices you have for your target market. Depending upon your company’s focus, retail versus wholesale, the pool will be segregated using different criteria.
For instance, if your company is in the wholesale sector, a logical way to segregate potential target markets is by industry classification. You can either obtain an SIC list (U.S. government’s Standard Industry Classifications), or use your local yellow pages to identify industry categories of potential fuel, lubes or propane purchasers.
If your company has a retail focus, consider segregating your target market by age group, socio-economic level, occupation, geography, etc. Use any and every breakdown you can think of that makes sense to you. In the c-store business, be sure to look beyond your store’s neighborhood demographics. You need the demographics on anyone who is driving by!
2) List all potential target markets. Using the demographic data from step number one, make a list of the types of customers you could potentially serve or sell to. Don’t limit your thinking. You are in the stage where more is better, so don’t be satisfied with your first try.
There is a story told by marketing guru Daniel Kennedy about a man who was selling product distributorships using the white pages of the phone book, an expensive and incredibly inefficient way to reach the marketplace. He finally took a hard look at his actual customers and realized they were mostly forty-ish men with out-of-style crew cuts.
He realized that stubborn individualists, prone to crew-cuts, were exactly his target market and immediately changed his marketing plan to send recruiters out to barber shops. The result? Phenomenal success! The moral to the story is don’t limit yourself to conventional thinking when it comes to target markets.
3) Estimate gross profit potential. With the list in hand or potential target market categories from step number two, estimate the gross profit potential to your company over the next year for each market. Yes, this takes some guesswork, but often you’ll find you are reasonably accurate just using a little common sense and past customer sales history.
For instance, you may have identified senior citizens, working professionals, and teenagers as three possible target markets for your c-store. Based upon current sales trends, estimate the weekly gross profit from one typical individual from each group. Then decide how many of those folks would visit your store in a week under ideal circumstances (including clever advertising). This will determine the gross profit potential for each segment.
4) Identify the highest profit market segment and any compatible segments. For instance, you may have identified your top target as white-collar workers that travel to a business park located in your neighborhood. Your store is located in retirement community, but there is also a junior high school one-half block away.
With a little thought about product needs for each of these three target markets, you can see how the working professionals and seniors would buy similar products such as gourmet coffees and lotto tickets, but you would need an entire separate product offering for the teens. In addition, a large teen crowd might prevent the older age groups from frequenting the store. Therefore, you would conclude that your primary target market is the drive-by professionals, compatible secondary market of neighborhood seniors, and would exclude the incompatible teen market.
5) Design your product offering around the target groups’ needs. By focusing on your target market(s), you will know exactly which products you need in your wholesale or retail line. If you are in the retail sector, bring in expert resources to help with customer pathway design and plan-o-grams.
6) Tailor and deliver your promotional message to your target group(s). You must absolutely start thinking like your customer. What discount or promotion will appeal to your target customer? Since you now know exactly who the customer is you want, you can decide what will entice them to buy more from you. For instance, your professional and senior customer is likely not going to be interested in low prices on a gallon of milk. A coffee club, or daily specialty coffee may be just the ticket.
This psychology works for the wholesale segment as well. If you are trying to penetrate a specific industry, what would get them to buy from you? In the lubes area, that might be industry-specific technical expertise. You may even want to hire salespersons from your target industries who know the vernacular for those industries.
7) Measure results. Always be sure to check your actual results against your forecast. Measuring market penetration will help you fine-tune promotions plus provide a monitor to marketplace to detect inevitable changes and target market repositioning.