How Big is Your Target Market?

Last week, I asked a business, ‘How big is your target market’? Full of pride they said 1.2million. This number was the size of all small and micro companies in the UK SME market. I waited for them to cut that figure into smaller more manageable segments but they didn’t.

They currently have 3500 clients.

But they are aiming at 1.2M…!

A rather large gap, no wonder they have a massive marketing spend. Segmenting the 1.2M into smaller, more defined, and accessible segments would be much more effective. Cost of acquisition would fall significantly.

Segmentation gives them a chance to become a ‘master or expert in that segment’. For example, the expert supplier of ‘paper’ to ‘fish and chip shops’. If everyone knows that you are the expert they’ll make a bee-line for you rather than start a random search.

But how do you segment?

First look at the customers you have and find those that are the most profitable and the ones that you like working with. What do they have in common?

Look at geographical factors. If you are based in Scotland delivering a face to face service do you really want to be selling to customers in Birmingham, London and the south? Consider restarting you geographical area; become ‘well-known’ locally before expanding outwards.

Consider the profiles. How big are the companies; what industries are they in; how many staff do they have? How many industries do you have and what are the common threads?

Why is it so good to work with your top customers? What attitudes and approaches do they have? Do they pay on time, respect your business and are the fun to work with?

Finding more of your best customers is the goal. Combine these factors and you’ll come up with several target markets. For example

1. Dynamic growth companies with a turnover over £5M but less than £10M with up to 50 staff, based in the north-east and including Scotland, operating in the manufacturing.
2. Technology driven precision manufacturing companies based in Scotland. Fast growing with turnover circa £1M- £3M and up to 20 staff. Some exporting to EU and USA.

Once you have identified the segments, test that they are viable. How many are there, where are they and can you get messages to them? As you rank the markets check the profitability and margins so that you know you are aiming at the very best prospects.

Next craft the marketing messages for your target markets. The business I spoke to use the same marketing message for everyone. Marketing spend was huge as they pushed out generic messages hoping that someone would pick it up.

Some did. That’s how they acquired 3500 clients. But there were a huge number of time wasters. Businesses were responding, but not sure why or what benefit they would get. A large number fell out of the sales process – an expensive way to attract new customers.

So understand, define and craft messages to your target market. Execute the plan and build your expert position. Once built, build another segment and expand.