Target market definition is critical in understanding how your company and provide the best value to prospects and customers. Grouping your customers into defined segments will help you better understand their wants and needs. One way to proceed is to first look at defining your main target market. After this is done, you may need to define additional secondary or specialized markets.

Target Market: The main subset of customers that provide your greatest revenue source is your target market. The overall target market size is not important, but you must be able to clearly define the wants and needs of this group.
Secondary Market: A secondary market is a similar group of customers that, while not providing your main source of revenue, is still profitable. For example, a commercial roofing company may find that they have a secondary market providing residential roof repair and replacement. The residential market may not be their main target market, but it still provides a solid revenue.
Niche Market: A niche market is a group of customers that have a defined need that few other companies are providing. For example, a graphic designer may find a niche in the area of ebook cover design or a maid service may find a niche opportunity is cleaning blinds.

Looking at your past clients is a great way to help uncover the information required to build out and define your primary, secondary and niche opportunities. Start by creating a spreadsheet and populating it with company name, industry type, products purchased and the total amount spent. Look for common patterns as you go through your data, look for common customer patterns that will allow you to start creating definable data on your main target market as well as any secondary markets or niche areas.

You may find that some companies tend to take quite long in the buying process while other customers tend to purchase impulse-type items. Let the data help you decide how to group together your prospects and customers into definable markets. Looking for patterns like this will allow you to start grouping customers by different attributes. There is no right or wrong way to do this. Just work to uncover any patterns in the types of customers that buy from you.

When defining your markets, make sure you spend a little time checking out the competition. Who do they seem to be targeting with their brochures and catalogs?
Ask the following questions to determine if your markets have potential.
1. Does this group of customers have a problem that my product or service solves?
2. Is there differentiation between my products and those of my competitors?
3. Will this target market pay full price for my products and services?
As you grow your business, you may uncover new secondary and niche opportunities. Add them to your market list as long as they are well-defined and focused around a similar set of needs.

Here is an example of how a commercial roofing business might define their target and niche market areas.
Primary Target Market: Industrial andamp; Commercial Buildings
Secondary Target Markets: Residential Repair, Real Estate Managers
Niche Markets: Hospitals, Elementary Schools

Defining your primary, secondary and niche markets allows you to really understand the needs of your various customers. Once you understand these needs, you'll be in a position to develop compelling and relevant solutions for them. This is the most efficient way to grow your small business.

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Article Submitted By: Corte Swearingen
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