Researching your target markets is one of the smartest business moves you can make. Professional services firms that do frequent research on their target clients grow 2X faster and are more profitable than firms that do not. That is a tremendous advantage in today’s competitive marketplace.
In this post we will explain what target market research is, provide examples, and show you how to go about conducting, analyzing and applying it. Our focus will be on the professional services, but the principals apply more broadly to B2B marketing.
Let’s start by defining what we mean by a target market.
Target Market Defined
A target market is a group of potential clients that you wish to sell your services to. They are typically a specific segment of a larger market that could potentially use your services. The target is often selected because the firm has a particular competitive advantage with that segment (such as the ability to deliver superior value or a higher level of demand for your services) or the segment has a higher growth rate.
Target Market Research Defined
Target market research is the process of systematically collecting and analyzing information about your target market. The primary purpose of the research is to better understand your target audience to shape your service offerings, pricing, marketing, and business development. Selected portions of such research are also frequently used as high value content within marketing campaigns.
Target Market Examples
A consulting firm that helps client set-up the financial management systems could offer their services to almost any business. Because of their accumulated experience with various manufacturers they may choose to designate manufactures of all types as their preliminary target market.
Now let’s assume they did target market research on manufacturers and learned that firms with 50-200 employees has a high level of interest in their services and the ability to afford them. This segment of the market became their new target market as it offers the highest probability of success.
Let’s take another example, this time of a firm with multiple target markets. A software company develops project management software that is useful to any project-based organizations. Their analysis of their target market research reveals that both consulting firms and engineering firms are good target markets for their software.
They may continue their research and analysis and learn that within the consulting firm market, the mid-sized firms are the best market segment for their offerings. Within the engineering market the segments may be very different. In this case firms working on small project are most responsive to their pricing model. So, in one market (consulting firms) you are segmented by size of your target clients. In the other target market (engineering firms) you are segmented by the type of projects they work on.
How To Identify Your Target Markets
Many professional service firms are challenged by the prospect of identifying their target markets. There are at least a couple of reasons for this. First, many professional services are applicable to a wide variety of organizations. For example, almost every organization keeps some sort of financial records and needs to file taxes. How do you select which organizations to target for your services?
The second reason selecting target markets is such a challenge is our natural instinct. As humans we are reluctant to exclude potential clients. We are afraid of “losing” a sale, so we try to be everything to everyone. In reality, targeting everyone means you are actually targeting no one. Trying to be everything to everyone means you are nothing special to anyone.
So how can you get past there barriers to identify your best target markets?
Let’s start with the scenario where you already have a group of clients. Ask yourself this question.
What are the types of clients that we want more of?
This is often the easiest way to see where you are delivering the best value to clients who are well matched with your firm. Are there many options? If there are, you need to dig deeper to decide which markets to target.
Here are some key questions to ask yourself to select among potential target markets. These questions also fit the scenario where you are introducing a new product or service.
Where can we deliver the most value? Perhaps your processes work best in organizations of a certain size or level of sophistication.
Where do we have a competitive advantage? For example, you may have noteworthy experience or a very high-profile client in a specific market segment. How strong is your brand in each of the potential target markets? Can you differentiate your firm from competitors?
Is the market large enough to support our needs? Are there enough organizations who fit my target profile to sustain and grow my business? Do we have what it takes to win enough of the business?
What is the competitive environment like? Are there many alternatives to our firm? Are the competitors stronger, with higher visibility? Are new competitors emerging? Are prices falling?
Some of these questions may be easily answered. Others will require some target market research. Let’s take a look at what that involves.
How To Research Your Target Markets
There are three basic approaches to research your target markets. We’ll overview each of them in turn. For a more in-depth discussion of research options and strategies we recommend Hinge’s guide to professional services research.
1 . Analyze your direct experience. Often overlooked as a source of insight and understanding, this is a great place to start. In most professional services organizations, you and your colleagues have accumulated much experience with your target audiences (unless it is a totally new target, of course).
When an individual within your firm expresses an opinion about your targets it is often anecdotal and of limited value. However, if that same experience is systematically accumulated over many people, it begins to assume more value. For example, you might survey all client facing professionals about what issues target clients bring up to them.
You may also have access to valuable financial or operational experience available through your financial management system. Here you might learn about average project size or payment histories. Perhaps your CRM system can inform you on time to close or closing percentage.
While there is great value in this type of direct operational experience, there are also limitations. It only represents a limited sample of the market and reflects what you have done in the past and not what is possible or preferred by the target audience.
Even with these limitations, it is a great place to start and gives you many hypothesis or research questions to explore.
2 . Secondary research. This approach involves exploring research that others have already done on your target markets. A great place to start is to search online for studies that have already been published by industry trade associations, government agencies, or private firms. These days there is a rich mix of free and paid sources that cover many major industries and important topics. There are also analysts’ reports and many industry growth projections.
And of course, you can use many online sources to research individual target clients or competitors. Rating sites and social media excel in this area.
These secondary sources are great for assessing overall industry grow or identifying key issues facing their respective industries. Where they fall short is that they may not single out the industry segment that you are targeting or the questions you really want answered. That is where primary research really shines.
3 . Primary research. With primary research you are determining exactly which segment you are researching and what specific information you are looking for. In this regard you are getting direct answers to you most important questions from your exact target market.
In most cases primary research is done by an outside independent firm (Full disclosure, Hinge does a lot of this research for our clients). This is very important for getting accurate and unbiased responses to your questions. And if the firm doing the research has a lot of experience with your industry they can help you put your results in context.
Primary research can be done using structured interviews, focus groups, or surveys. In most cases, focus groups are not well suited for professional services firms because of confidentiality issues. Most executives are not forthcoming in a group of direct competitors! Individual interviews and surveys each have their strengths and limitations.
Primary research is well suited to finding out how your firm is viewed by your target market and the best approaches for messaging and marketing to your prime targets. It is perhaps the most direct way to reduce marketing risk. Of course, that value comes at a price.
What Questions Should You Ask of Your Target Markets?
Beyond the basic growth and demographics of your target market, there is no single set of questions that is right for every target market research study. Your specific situation will ultimately dictate what information is most important to your success.
Having said that, we have identified some questions that are broadly applicable to most situations. Here are some of our favorites.
- What are your target clients’ top priorities and business issues?
- How do you fit in?
- How is your firm perceived in the marketplace?
- Who are your true competitors?
- How do you compare?
- How do your best prospects search for a firm like yours?
- What are they most interested in?
- What turns them off?
- What tips the scale?
- How well does your firm deliver on its promises?
- What do your existing target clients’ value most about your firm?
- How loyal are your current target clients likely to be?
- What is your potential for more referrals?
- What other services do your current target clients want you to offer?
By the time that you have completed all your research you will have a broad array of facts and insights to draw upon for your analysis.
Research as Content
There is another use of target market research that bears consideration. Use research as high value premium content in your marketing campaigns.[link to research as content guide] The results of original research are often of intense interest to the very executives you’re targeting.
For example, you may conduct an original study that informs your prospects about social media use in their industry. People are curious about what their competitors are up to. This makes original research one of the most effective type of premium content to use in your content marketing campaign. It demonstrates to your best prospects that you “know their industry” and have relevant expertise.
Target Market Analysis
A Target Market Analysis is the process of compiling, reviewing and analyzing the research and information you have collected about your target market for the purpose of identifying which segments of the overall market are likely to be your best clients and how to best reach them.
This process typically starts by organizing and reviewing the data you have collected. What are the important dimensions that characterize the target market? What makes one prospect more desirable than another?
Consider demographic variables, such as size or location. Does your firm do better with very large clients or mid-sized? Are new firms more likely to need your services or more established players? Are firms located in one region very different than those in another location?
Also consider behavioral and psychographic variables as well. Sometimes the most powerful variables are not demographics, but the “softer” considerations such as attitudes or opinions. For example, at Hinge we have determined that our best target clients are those professional services firms that appreciate research and science-based approaches to marketing. They may be small or large or from any part of the world.
A word of caution is in order. It’s easy to get confused here. Sometimes a variable defines your target market. For example, you might target a specific industry. In this case other variables such as firm size (small vs. large) might be a segment. In another situation you might define your target as a certain size of firm (e.g. enterprise scale organizations) in which case the industry they are in (e.g. hospitality vs. manufacturing) might be how you segment your target market.
Remember, your goal here is to determine which segments of your market are your best targets. This allows you to prioritize your marketing efforts for maximum results with the minimum effort and expenditure of resources.
Target Market Segmentation
Target market segmentation is the process of dividing a large target market into smaller segments that reflect meaningful differences between the segments in their responsiveness to various service offerings or marketing messages. The purpose of such segmentation is to make marketing more effective and efficient by tailoring your marketing efforts to the differing needs and preferences of the different segments.
There are four common ways to segment a large target market.
- Geographic.This is perhaps the most common form of segmentation in professional services firms. Each office targets the firms headquartered in its local market. It may still make sense in some situations but increasingly location related segmentation is getting harder. Why? Consumer shift to online interactions are weakening the need to be local. Many firms identify more with the industry they are in rather than their location.
- Demographic. In the consumer world demographics refer to variables such as gender, age, income and the like. In the B2B professional services world you are more likely referring to characteristics of a company such as industry, firm size, revenue or years in business. If you are targeting a specific role in target firms, such as the CEO, you may also use traditional demographics as well as firm level variables. These are also very widely used ways to segment a target market. Industry and firm size are perhaps the most commonly used variables as they have profound effects on target market needs and desired services.
- Behavioral. Behavioral indicators refer to actions that firms in your target audience may or may not take. Frequent users of a service may well represent a different segment than those clients who use your service rarely. You may want to target those high-volume users for special attention. Similarly, a prospect who regularly downloads content on a specific topic could be segmented for special messaging or more aggressive follow-up.
- Psychographic. Psychographic variables are often described as softer attributes. Common examples are personality type, attitudes, opinions, lifestyle choices and motivations. While these can be very powerful segmentation variables there are some downsides. They are notoriously difficult to reliably measure. They are not always apparent or easily determined. Further, there can be a range of patterns in a single organization limiting their usefulness in B2B market segmentation.
As we mentioned above, segmentation happens during the target market analysis process. As you consider possible variables to use in segmentation, ask yourself these two related questions.
Does it really impact their value as a client?
Many differences don’t really have much of an impact.
Can you determine it in advance?
If the answer is no, it becomes difficult to use it in your marketing program.
Using these two questions you can quickly home in on a few possible segments so they can be more fully evaluated. Target market segmentation can have a big impact on marketing effectiveness and efficiency once you get the segments right. Shoot for enough segments to match the market realities, but few enough to be practical for implementation.
A Final Thought
Target market research can have a profound effect on your firm’s growth and profitability. It helps you gain a deeper understanding of your markets and identify the most profitable segments to target and the most effective and efficient ways to do so. It can even be used as high-value content to attract your prime targets. This is a lesson that the fastest growing and most profitable firms have already learned.