Having a good understanding of who your target market is will help tremendously with every part of your business, particularly areas such as developing new features, marketing and branding. For this, you’ll need to start doing some simple research on your customers and competitors to narrow down your target market as soon as possible.
Think about the problem your product solves
This point was already touched on in Part 1, but if you want people to buy your product or service, it’s important to understand the problem that your product solves.
The problems you identify can be anything at all, such as needing fashionable clothes at an affordable price, or the ability to stream music on the go. You do have to believe that there are enough people who have the problem in order to support your business. If the problem affects a tiny subset of people, then your market might not be big enough to provide you with a profit.
You must try to be as specific as possible when identifying the problems your product solves. Choosing overly broad problems (such as the need for food) won’t be very helpful. They can be used at the start, but they must then be narrowed down by asking some follow-up questions (e.g. “What kind of food do my customers need?” or “How much will my customers pay for food?”).
Identify & understand your customer
Once you know what the problem that you want to solve is, you can start to understand who is most likely to suffer from it. Then, you can build a picture of the people that make up your target audience and, eventually, you’ll be able to create customer profiles. These will serve as an in-depth description of your typical customer and should include the following:
Market demographics: Age, gender, location, income, education, marital status and occupation.
Psychology of your target market: Hobbies, lifestyle, interests, behaviour, personality type and attitudes.
Both types of information are essential for developing your customer profile. Demographic information will help to identify the type of person who will potentially buy your product or service. Psychological information goes one step further and drills down to discover why that potential customer may buy.
You may need to further divide your target audience into different segments to make them more accessible and to understand their needs and expectations a little better. For example, if you have people from different geographical locations, that might suggest you’ll have to market your product differently or change the pricing options. Different segments of the marketplace will have different trends that they follow and different attitudes about their purchases.
A great method to help you fill in the blanks is to look at the competition using a service such as SimilarWeb to analyse the traffic of your competitors. You can also dive into your competitors’ social media, visiting their blogs and checking the people who are commenting and interacting with them. Clicking through to these users’ profiles will also tell you a lot about their audience.
Even after you’ve launched, it’s imperative to remember how important customer profiles are. Every time you make a business decision, whether it’s to upgrade your existing product or build a new website, you should tie it back to your profiles, asking “what do your customers really want?” (But we’ll touch on that later!).
Analyse the competition
What does the competitive landscape currently look like for your selected product? Are you the first to market? Are there a few competitors or is the market saturated with people selling the same product or targeting the same audience?
Image by David Melchor Diaz
If you are the first one to sell in your market, although you won’t face tough competition for customers, perhaps there’s a reason why nobody is operating in that market. You’ll need to do a lot of research to figure out that there is, in fact, a market interested in your product.
If there are a few competitors already in the space, and they seem to be doing relatively well, this could be a good sign that the market has been validated. However, as a startup, you’ll likely have to determine how you can differentiate your brand and products from the sea of competitors in order to carve out your own spot.
Find a niche
Choosing a niche is considered to be an important part of creating a successful product. It’s a subset of the market in which a specific product is focused.
When you’re building a product, it’s tempting to target a large market to dominate. The problem is that it’s almost impossible for a new startup to compete with the already established competition and conquer a significant market share of a big market.
Instead, targeting a smaller niche market allows you to define product features that are aimed at satisfying specific market needs, to decide on the price range for your product, and to really focus your branding and marketing. In the long run, it can create strong customer loyalty and repeat sales.
You need to remember that dominating a small market is only the first stage. Facebook started with a very limited market – Harvard students – then, they expanded to other universities, and the rest is history.
However, there’s a risk that if you start off with a niche that is so small, there might not be enough potential customers to make a profit and launching a successful product will be pretty darn difficult.
This why it’s important to spend some time choosing the correct niche.
There are some different ways you can work out which niche market you want to launch into:
Research, research, research!
Talk to people
This is the most powerful technique in defining your niche market that is interested in your idea and could be potential customers. Although it does take the most effort, the results you gain could be invaluable.
From your broad customer profiles, you’ll have a general idea of the type of people making up your target market. Now you have to actually find people who are willing to talk to you: ask friends, friends of friends, stop people in the local shopping centre, or you could always advertise and conduct formal interviews.
Taking specific demographics from people who show a keen interest, you should be able to see similarities between certain people and narrow down your market even further. It will also help you down the line if you collect their contact information – they’re perfect candidates for your marketing!
Google is your friend too
The simplest way to begin building up some ideas for your niche market is understanding how your product or service is currently being sold by other businesses. Starting your niche selection with some Google searches is a great way to get a good overview and lay of the land.
As well as looking at the actual search results that Google provides, you can also use its’ suggestions to your advantage to find a niche for your product choice. As it displays search alternatives, it essentially completes your thoughts using the queries most often searched by other users.
Google’s Keyword Planner tool (a resource located in Google Adwords) is similar to the suggestion tool, but is more advanced and allows for customisation.
As powerful as Google is, it does only show you a few suggestions, so you can use alternative tools like Keyword Tool to scrape all the suggestions available. Simply enter your product choice, and it will give you a list of other queries that people are searching for, along with their popularity.
Build a Mind Map
A mind map can be a great way to map out and discover niches for your chosen product. Since mind maps mimic the way our brains think, they are a very intuitive and visual way to organise your thoughts and build on ideas. Building a mind map for your product idea can help generate other ideas very quickly and encourage exploration of different niche paths. There are many free online tools to create a really simple and effective mind map, such as Mind Meister or GoConqr.
Look at trends
You must have knowledge about where your potential niche market is headed. You can use Google Trends to see how a specific search term has performed over the last few years. It will also show you the geography of where it is popular.
If you can see that interest in your niche is declining in popularity, this means it will be increasingly difficult for you to grow customers. If you want your business to be in it for the long run, it’s better to establish yourself in a market that is growing (or at least relatively stable), rather than one that is steadily shrinking. If you find a ‘hot’ new popular trend, the results could be incredible.
You might think that because Google Trends relies on its’ own Google search engine, it might not return accurate results. Well, prepare to be pleasantly surprised. Google has over 65% of total search engine market share, so the trends are pretty accurate.
There are two popular types of trends that you should keep your eye on:
1. Slow & Steady
These search terms show a fairly reliable market – they’ve been around for a while and managed to stand the test of time, all the while growing interest at a good pace.
The problem with these is that because it’s been around for a while and has been increasing in popularity, the competition will be fierce. This will make it much harder for you to gain authority within the market.
2. Fast increase & fast decrease
Although less reliable, there is a greater potential to make fast and easy money. They’re just surfacing and becoming popular (and growing like crazy!).
These trends are much easier to get into. They’re new and don’t have a lot of competition…yet. But, you never can tell – is it going to last or die off? Often, these types that ‘boom’ in popularity don’t last and are nothing more than a momentary fad (remember the Furby?). The good part is that you don’t have to invest much time into them because they’re easier to get traffic to your site or engagement from your customers.
The next steps…
So, now you should know who to sell your product or service to, how do you know that people will actually pay for it / use it? This is arguably the most important question you’ll face along your journey.
There isn’t much point spending time and money on a product or service that your target market doesn’t actually need or want to use.
To understand whether there’s validity in your product idea, you’ll need to test, test and test again using crowdfunding, research, and prototypes. This will be covered in part 3.
Main image by Tanakawho