Testing Your Target Market
Once you have narrowed your Target Market down, go back and re-read your Corporate Mission, Values and Vision. Does your Target Market fit with your corporate foundation? Will it take you where you need and want to go? If your answer is no, you'll need to go back to the previous exercises to find a more suitable Target Market. If your answer is yes, test its viability. You'll want to be sure it has the potential to support your business, both now and in the future.
Is your Target Market substantial enough to remain profitable? Keep in mind the most profitable markets are not always the largest market segment. Answer the following questions to the best of your ability. They will help you test the viability of your chosen Target Market(s).
What is your industry's total annual sales volume to your Target Market? (See industry publications, marketing boards, Chamber of Commerce, etc., or if all else fails, your best guess.)
What is the market potential for your Target Market? What is your industry's total potential annual sales volume for your Target Market? (Target Market population) X (typical frequency of purchase) X (typical sales dollars).
What is your market share? What percentage of your Target Market currently buys from you? (Your total customers ÷ Target Market population) X 100.
What is your potential market share? What percentage of your Target Market might you be able to acquire? (Your potential total customer ÷ Target Market population) X 100.
Markets change as people change careers, as social norms change, as technology changes, as people get older, as they have families, and so forth. a) What significant changes do you foresee in the lives of your customers over the next five years?
b) How might their needs change as a result?
c) What are some ways you might adapt to the changing needs of your customers?
In this chapter you should have designed, shared, and made a plan to review your:
- Customer research plan.
- Marketing Questionnaire (if applicable).
- Target Market Grid.
- Demographic Model of your customer.
- Geographic Model of your customer.
- Psychographic Model of your customer.
- Target Market Profile.
- Tested the viability of your chosen Target Market.