I see the value proposition as the cornerstone of a successful business, something I often go back to when I discuss important business and e-commerce concepts. Another key part is marketing and how to communicate this value proposition to the world. However, I believe an often overlooked aspect is addressing the right target demographic.
I used to volunteer to help college students with business case competitions. I feel lucky to have worked with talented students, but if there is one mistake almost every student group makes, it is neglecting the customer demographic part. If the business case is about designing a marketing campaign, most students address the target customer with something along the lines of “We’ll target young moms” or “The target is senior citizens.” in a corner of a Powerpoint slide. Sometimes, we’d get a slightly better answer, such as “men aged 28 to 45, with a high income, who like basketball.” But this still leaves a lot of room for improvement. I’d like to go over why targeting the right customer is so important, and what are some factors to consider.
Why is Targeting the Right Customers Important
Let’s start with the obvious. There are around 8 billion people in the world, including hundreds of millions in the US. Everyone has different needs, different values, behavior, budget… Companies can’t just target everyone and hope for the best. By targeting specific groups of customers, companies can tailor their marketing efforts more effectively. This ensures that marketing resources, including time and money, are not wasted on those less likely to be interested in the product or service. If you sell skateboards, maybe you should not waste your marketing dollars on showing ads to senior citizens.
Showing customers products, services, and ads they might be interested in is much more likely to convert and to make the customer feel valuable and understood, leading to higher satisfaction, engagement, and revenues. On a broader scale, focusing on one specific customer segment allows companies to differentiate themselves from the competitors. The more accurate your targeting is, the closer you’ll be to your customer, which is a massive competitive advantage. It also helps build a stronger identity, which is a very valuable asset in our ever more competitive world, where new brands are popping up every day.
Finally, efficiently targeting the right customer helps brands gain credibility and ultimately become the recognized expert on this segment. Gaining knowledge on a narrow market can make a huge difference when building new products or expanding. Think about it, if you are an athlete and have joint pain, you’d rather see a doctor who specializes in athletes rather than a random general practitioner.
Basically, accurate targeting is key to staying focused and being more specific in everything the brand does, from advertising to product development or using the right tone when speaking to customers.
Important Targeting Criterias
We’ve seen that accurate targeting is key for marketing efficiency and brand building. But how is this achieved? What criteria should be used for targeting? Let’s review some of the most commonly used criteria, from the most obvious to some that are sometimes overlooked by marketers. Keep in mind that this list is not exhaustive, and there may be other criteria not listed here that are relevant to your industry.
Age : This is crucial as consumer preferences often vary significantly with age. You would not sell to teenagers like you’d sell to boomers.
Gender: Men and women have different needs, interests, and priorities, and with many products specifically designed for a gender, gender is an important factor in marketing. Even for products that are not gender-specific, the approach in advertising might change based on how different genders respond to a message.
Income Level: Targeting based on income helps in marketing products that are priced at different levels. Luxury brands, for example, target high-income individuals, while value brands might target middle or lower-income brackets. Even beyond pure pricing, different customers have different needs based on their income. For example, higher-income customers may take more vacations than lower-income people and may have higher needs for travel supplies.
Home Ownership: This criterion is especially important when selling home goods and services, as homeowners tend to invest more in their homes than renters. But it can potentially be important in many other cases, for example, if available space matters. It would be harder to sell a pool to someone renting a 1BR apartment.
Education: The level of education can influence a person’s interests, values, and purchasing power. For example, marketers sometimes assume that products that are more technical or niche often target higher-educated individuals.
Marital Status: This affects purchasing decisions, especially in categories like travel, housing, and leisure activities. For instance, products or services for families are often marketed to married customers. You wouldn’t sell a minivan to a single 22-year-old male, but a 35-year-old dad may be a better fit.
Household Size: This criterion is related to marital status, with the size of a household impacting purchase decisions. A large family is more likely to purchase products in bulk, compared to a smaller household.
Family Life Cycle: Even considering household size, a family with toddlers and a family with teenagers will have different needs, which impact many purchasing decisions.
Occupation: People in different jobs have different needs and income. A product relevant for office workers, like suits and ties, might not be as relevant for manual laborers.
Ethnicity: Ethnic background can also influence preferences, cultural practices, and even consumer needs. Brands sometimes use this data to tailor their products and marketing campaigns to resonate with specific ethnic groups.
Language: For more efficient communications, language proficiency or preference can be very important, especially in multilingual regions or countries.
Mobility: Owning a car or the means to travel easily can influence marketing decisions. Furniture delivery services, for example, are more valuable in very dense cities where owning a truck is more difficult.
Disability Status: Some products and services are mostly needed by individuals with some disabilities. In general, understanding the needs of individuals with disabilities can help in creating more inclusive products and services.
Even when selling products online in a globalized e-commerce world, location matters. Different customers have different needs depending on where they are located.
Country: Choosing the right countries to target depends, of course, on the customers’ characteristics but also on local regulations, tax policies, and your business’s capabilities to ship to these countries.
State/Region: Targeting different states or regions matters, due to all the differences between each state and how your business addresses them. This applies to business retails, but is also relevant in ecommerce. For example, companies selling snowboarding gear may want to target customers in Colorado rather than those who live in Florida.
City/County: Even within each state, there can be major differences between customers’ groups and their needs. For example, if you sell 49ers vintage jerseys, instead of targeting the whole state of California, you can decide to target only the San Francisco area.
City Size: Size matters, as customers in larger cities have different lifestyles. Density is also an important criterion. The most dense cities tend to have smaller apartments, and people use cars less.
Behavioral segmentation divides the market based on consumer behavior, especially regarding the way they shop and respond to brands. Some key aspects of behavioral targeting include the following.
Purchasing Behavior: The way people purchase your products can be an important criterion and can include the average cart value, the product they typically purchase, the purchase frequency, or any other criteria relevant to your strategy.
Benefits Sought: Most products have multiple benefits, and some customer groups might value one benefit over another. This is especially relevant when advertising a product to different audiences with different needs. If a business sells coffee mugs, maybe those who commute long distances will be more interested in the spill-proof lid, while those who work outside in cold areas will value the insulation over the lid.
Engagement: How and how often customers engage with the brand can impact targeting decisions. For example, if a strategic goal is to encourage UGC, targeting customers who engage the most with the brand can be relevant.
Device Usage: Devices matter, as there are significant differences in shopping behavior. Mobile is typically used for impulse and/or urgent buys, while a laptop may work better for more complex purchases that require more thought and planning.
Psychographics are consumers’ characteristics related to psychological characteristics, such as their attitudes, interests, values, lifestyles, and opinions. These criteria allow marketers to understand the “why” behind consumer behaviors, helping them perfect their marketing strategies. Here are some good examples of psychographic criteria used for customer targeting.
Personality Traits: While this data is difficult to collect and process, understanding the target customers’ personality traits can give a different and more refined perspective of their needs. This includes things like extroversion vs. introversion, optimism vs. pessimism, or adventurous vs. cautious.
Values: Another criterion that can be a little difficult to measure accurately but is key when understanding customers. Do they have strong family values? Care about social justice? Make the environment a priority? This is important to marketers. For example, making the decision to use recycled materials in products may be influenced by the target customer’s values regarding the environment.
Opinions and Beliefs: These can be opinions on politics, economics, or any other relevant subject.
Lifestyle: Knowing how customers live is extremely important. A brand selling fitness supplements may decide to target athletes who train every day. Or they can focus on weekend warriors, depending on their strategy. Either way, their customer lifestyle will be an important part of their plan.
Interests: hile obvious, customers’ interests should not be lightly considered. Going back to my example of fitness supplements, what should be the interest targeted? Is it fitness? Or is it a specific part of the fitness industry, like powerlifting, bodybuilding, or CrossFit?
Motivations: What drives a customer to purchase is, like many psychographic criteria, difficult to measure but can be used to design strategies and marketing campaigns. Do customers buy to make their life better, due to the desire for social recognition, or due to the fear of missing out?
Life Goals and Stages: Another example of psychographic criteria is the target customers’ current goals. If a business sells financial products, they’ll have to figure out whether their target customer’s current goal is to retire, buy their first house, or pay off debt.
Position in the Marketing Funnel
Finally, how familiar a target is with the products or services and its position in the marketing funnel is extremely relevant. Let’s say you work for a company that sells hard seltzer in the early days of the industry. You sell delicious, low-calorie alcoholic drinks in cool looking cans. Some people will have no idea what you’re talking about, while others are already drinking a case every weekend. Addressing different stages of the funnel will require different tactics and messages.
If you’re talking to consumers who have never heard of hard seltzers before, you may want to focus on the core value proposition of the product and its main benefit, for example, that it is a low-calorie drink. As your audience becomes more aware of what the product is, and competitors enter the market, you can focus on the next stage, consideration. For instance, a tactic could be to advertise what makes your product better than the competitors, such as superior taste. Tactics for consumers at the conversion stage could be a discount on the first purchase, while loyalty rewards can help retain loyal customers. Finally, if a goal is to build brand awareness, the company can target the most engaged customers who regularly create content on social media to review the products.
How to Target the Right Customers?
If you’ve built a product, or at least done some research, you should have a decent idea of your audience segmentation and who your target customer is. The better your understanding of your product, the better you can conceptualize your target customer. Reviewing the criteria I listed above, along with any other criteria you find relevant, can help refine this understanding. Studying the market and competitors can also provide valuable insights.
A common method when working on market segmentation and customer targeting is creating customer personas. Customer personas, also known as buyer personas or marketing personas, are semi-fictional representations of your ideal customers based on market research and real data about your existing customers. They help businesses understand their customers better by helping marketers visualize the person they are selling to. Naturally, there can be multiple personas for the same business, as most businesses cater to several groups of users sharing common characteristics.
From there, the best way to improve your targeting is through experience, testing, and data analysis. Using small-scale tests to evaluate the response of your target segments to your product or marketing strategies can provide valuable data on customer reactions to the strategies employed. Surveys and discussions with customers can offer unique insights that might be obscured by raw numbers. While there are numerous ways to gather data, businesses with limited resources should have a solid understanding of the best practices for using these resources effectively.
Finally, it’s important to note that target audiences are not static and evolve over time. A good example is Stanley cups, which were initially purchased by outdoor enthusiasts. Recently, younger women with an interest in fashion and recent trends have shown interest in the cups, making companies adapt their marketing strategies to this new segment. This shows why companies should continually monitor the market and reassess who their target customer is, identifying which segments are growing, shrinking, or if new segments are emerging.
In conclusion, accurately identifying and targeting the right customer demographic is crucial for both immediate and long-term success. While a solid value proposition is the foundation, the real test is communicating this value to the right audience.
There are many approaches to defining a target audience, from demographics to analyzing customer behavior and determining their position in the marketing funnel. The more accurate the better, without of course narrowing it down too much and operating in a market too small to generate growth. As the business environment evolves, so do customers segments and companies should always have in mind an accurate idea of who they are selling to.