Understanding your customer is one of the most important things every business should be able to do. However, it is particularly important for small businesses.

Why? Because only by having a clear definition of the exact type of customer you are trying to reach can you make the most of your limited marketing dollars and have the biggest impact on your bottom line. You need to know your ‘target market’.

Narrowing the type of customers you would most like to reach (and the kind that are most likely to be willing, eager and able to buy from you) is a key building block to success. Defining your target market gives focus to all your marketing and sales activities, helps you craft your advertising messages and images, choose where and when to advertise, influences which distribution channels you use and perhaps even helps you decide the colour of your employees’ uniforms or the music playing in your store.

Knowing your target market can also help to differentiate your business from competition, tailor your marketing efforts to better meet customer needs and potentially boost sales. Having a broad target market that tries to appeal to everybody can easily get lost amongst the crowd.

When defining your target market, keep the image of an actual target in mind. Demographics alone, such as age, gender, income and occupation, do not provide enough insight into the attributes of your target customer. The outermost ring of the target is the universe of potential customers; everyone who might ever possibly be interested in your product or service.

As you get closer to the centre of the target, focus on customers who are more likely to actually make a purchase. The group at the centre should be those you would most like to have as customers, who you can reach and sell to affordably, and who are most likely to buy.

Some of the factors to help you close in on the bull’s-eye:

• Features and benefits of your product or service: Which group is your product/ service best suited for?
• Competition: Is there a segment of the market that competitors are not reaching or under-serving?
• Market trends: Is there one part of the market for your product/service that is growing?
• Most motivated buyers: Which part of the market has the most immediate need or desire to buy your products/services?
• Most ability to purchase: What type of customer is most likely to have the disposable income to spend on your products/services?
• Ease of reaching your prospects: Is there part of the market that is easiest to tell about your products/services because of trade shows, media such as magazines, or other communications directed specifically at them?
• Ease of selling to your prospects: Are there any existing distribution channels, such as specific stores, websites, wholesalers, that make it easier or less expensive to reach one part of your market?