Understanding your customers is crucial for the success of any business. By identifying and understanding your target audience, you can tailor your products, services, and marketing strategies to meet their needs and preferences.
This lesson will guide you through the process of identifying your customers and gaining valuable insights into their demographics, behavior, and preferences. By the end of this lesson, you will have a clear understanding of who your customers are and how to effectively reach and engage with them. So, let’s dive in and discover the world of your customers!
Targeting your future customers
To effectively reach and engage with your customers, it is essential to understand their needs, interests, and desires. Not everyone will be interested in your product or service offerings, so it’s crucial to identify and focus on the specific segment of the population that aligns with your target customer profile.
Identifying your potential customers allows you to tailor your offerings to meet their unique needs and preferences. It enables you to create products or services that resonate with them and provide value. Additionally, understanding your target customers helps you craft targeted sales and marketing messages that effectively communicate the benefits of your offerings and attract the right customers in the right places.
Market segmentation is a widely used technique to identify your ideal customers. It involves dividing the overall market into distinct groups based on shared characteristics. By segmenting the market, you can pinpoint potential customers within these groups who are most likely to be interested in what you have to offer.
Segmentation allows you to target specific customer profiles, such as demographics (age, gender, income), psychographics (interests, values, lifestyles), geographic location, or behavior patterns. This approach helps you gain insights into your customers’ motivations, purchasing behavior, and preferences, enabling you to tailor your strategies and offerings accordingly.
In the next sections of this lesson, we will explore various methods and tools to conduct market segmentation and delve deeper into understanding your target customers. So, let’s continue our journey towards identifying and connecting with your ideal customers!
Segmenting the market
To identify your potential customer it is best to start with four broad segments within the market that relate to how and where people live, what they think and how they behave. These four broad segments are a follows:
Demographic factors
Demographic segmentation involves categorizing customers based on demographic variables such as age, gender, income, education level, occupation, and family size. These factors provide insights into the characteristics and traits of your target audience. Understanding the demographics of your customers helps you tailor your products, messaging, and marketing campaigns to better meet their specific needs and preferences.
Example: A fitness apparel company may target young, active women aged 25-35 with higher disposable income who are interested in maintaining a healthy lifestyle. By identifying this demographic segment, the company can develop stylish workout attire and create marketing content that resonates with this specific group.
Geographic factors
Geographic segmentation focuses on dividing customers based on their geographical location, such as country, region, city, or neighborhood. It helps businesses understand how location impacts consumer behavior, preferences, and needs. Geographic segmentation is particularly useful for businesses operating in specific regions or targeting customers in specific areas.
Example: A restaurant chain may segment its market based on the proximity of its locations to different neighborhoods. By understanding the preferences and dining habits of customers in each area, the restaurant can customize its menus, promotions, and service offerings to cater to the specific tastes and demands of each location.
Psychographic factors
Psychographic segmentation involves analyzing customers based on their lifestyles, interests, opinions, attitudes, and values. It focuses on understanding the psychological and emotional aspects that drive consumer behavior. Psychographic segmentation provides deeper insights into customers’ motivations and allows businesses to create more targeted and personalized marketing strategies.
Example: A luxury travel company may segment its market based on psychographic factors such as customers who value unique and immersive travel experiences, prefer eco-friendly accommodations, and prioritize adventure and exploration over luxury amenities. By understanding these psychographic characteristics, the company can curate travel packages and marketing campaigns that appeal to these specific customer preferences.
Behavioural factors
Behavioral segmentation divides customers based on their purchasing behavior, brand loyalty, usage patterns, and response to marketing stimuli. It helps businesses understand how customers interact with their products, make purchase decisions, and respond to marketing efforts. Behavioral segmentation allows for more effective targeting and customization of marketing strategies.
Example: An online retailer may segment its market based on customers’ purchase frequency and spending habits. Customers who frequently make online purchases and have a high average order value may be classified as “high-value customers.” The retailer can then design loyalty programs, personalized recommendations, and exclusive offers to incentivize and retain these valuable customers.
Why is it important to use customer segmentation?
Customer segmentation is crucial for businesses because it enables them to:
Identify and understand their target audience more effectively.
Tailor their products, services, and marketing messages to meet specific customer needs and preferences.
Allocate marketing resources efficiently by focusing on the most profitable customer segments.
Improve customer satisfaction and loyalty by delivering personalized experiences.
Stay competitive by identifying market trends, opportunities, and gaps in specific customer segments.
By utilizing segmentation strategies, businesses can optimize their marketing efforts, enhance customer relationships, and drive growth by effectively targeting and serving their ideal customers.
Expert Entrepreneur Advice
Once you’ve segmented your market, I highly recommend creating an ideal customer avatar. Let me explain what an ideal customer avatar is by sharing my own experience of targeting a niche audience when I started my ecommerce store selling environmentally friendly health & beauty products at affordable prices.
Case study: Customer Avatar
Name: Karen Smith Age: 31-39
Marital status: Married
Children: 2
Income: £24,000 per year (22% less than the average UK salary)
Location: Exeter, England (voted Britain’s most environmentally friendly town 2022)
Interests: Sustainable energy, buys organic foods, watches videos of Greta Thunberg, looks for sustainability hacks on YouTube, frequent Facebook user, shops at her local zero waste store.
Shopping behavior: Karen prefers to shop locally for environmental reasons and does not use Amazon.
How we targeted people like "Karen":
- We opted for Facebook Advertising since people like “Karen” tend to spend a significant amount of time on the platform.
- We used interest-based targeting to reach individuals interested in sustainable energy, Greta Thunberg, and those who recently visited a zero waste store.
- Our advertisement focused on affordability and highlighted our environmental credentials.
- Since people like “Karen” preferred not to order online due to their environmental concerns, we communicated that we offset our carbon footprint on all orders.
How our customer avatar changed:
As our brand gained recognition for its unique selling propositions, the characteristics of our customer avatar started to become broader. This shift occurred as our business model transitioned to a more mass market approach, and our revenue started to grow. Here’s how the customer avatar evolved when I eventually sold the business for 8-figures:
Name: Karen or Steve Smith
Age: 23-60
Marital status: Single, Married, Divorced
Children: 0-5
Income: £18,000 – £52,000
Location: UK, Europe, USA or Canada
Interests: Sustainability
Shopping behaviour: Frequently shops online and also visits local stores
As you can see, each characteristic became much broader as we expanded our target market. This expansion resulted in revenue growth of over 10 times in just one year, but it also led to a rapid reduction in our profit margins.
Creating an ideal customer avatar allows you to understand your target audience deeply and tailor your products, marketing messages, and strategies to meet their specific needs and preferences. It helps you effectively target and attract customers who are most likely to engage with your business and make purchases. As your business evolves and expands, your customer avatar may also change to accommodate a broader market.
Market research tips
…social media pages for insights into customer opinions and behaviours- also compile any customer contact details you find! It may be helpful to look at your rivals’ messaging to understand who their customer avatars are too.
…and note customer related comments and insights. These blogs should also teach you the talking point of the industry and show you possible market openings due to customer pain points.
…,this area of segmentation targets customers based on their interests, values, opinions, personality traits, attitudes and preferences. More specifically, a customers’ psychographic factors may include their preferred mode of contact, whether they purchase organic food or not, whether they give to charity or what social media channels they use most frequently.
…who are unlikely to be your customers too! This way, you can avoid wasting money on marketing to people who will not buy your products or services.
