The Marketing Plan: The Target Market
Most small businesses operate within a market segment or niche. The product or services offered may belong to a wider market but the individual business focuses on a particular segment. Rather than trying to be all things to all people, the business defines itself by the range of product or service, level of quality and price point and the profile of the customer in the target.
For example, specialty grocers do not attempt to compete with major supermarkets. Rather, they focus on the segment of the market which sources fresh produce from local growers, meats from small, organic farms, coffee from fair-trade sources and condiments from specialty importers. The typical customer is discerning, probably an amateur chef or a so-called foodie. This customer base is less price-sensitive than the supermarket shopper and demands fresh, ethically produced goods. The store is smaller than the typical supermarket and sells fewer packaged and household products. Its sales volume is smaller than a supermarket but its costs are lower and gross profit margins are wider. It is not compete directly with the supermarket and its dedicated customers may travel some distance, drawn by its quality and the particular range of products it sells. Staff is generally well-versed on the features and benefits of the products, take particular pride in the store and are eager to share their enthusiasm with customers. We would call this a “niche” retailer.
Most major department stores sell ladies and men’s ready-to-wear clothing in “popular” price points. Specialty clothing retailers will offer “designer” brands with superior cut and fit, “off the rack” or custom-tailored garments, along with alteration services on the premises. Generically, all sell clothing. The specialty or “boutique” shop focuses on customers who demand design originality or exclusivity, superior fit and “one-off” custom tailoring. Sales volumes are smaller, overhead is smaller, gross profit margins may be larger and the sales people are generally highly experienced and knowledgeable.
In most markets, there is room for the mass merchandiser and the specialty shop. Each needs to clearly define its customer and to know that customer well. There are many stories of small specialty retailers who have failed as a result of lack of capital, poor choices of inventory, failure to accurately identify their target market or a lack of business savvy. Large retailers fail too. In Canada, the T. Eaton Co. And Sears are two notable examples.
In a competitive marketplace, a business needs a clear understanding of its target market. It is this consumer group that will define the mix of goods and services, price points and marketing and sales strategies. A new start-up may open with a well-defined target market group, only to find that the target is not as large or as loyal as originally estimated. If the business can adapt and innovate, it can survive and grow. It may be successful at the outset then after several years of growth, stagnate or decline. Accurate reading of market forces and a willingness to adapt and innovate may enable it to recover and re-ignite its growth trajectory. Small businesses have the advantage of being able to adapt and respond more quickly to changes in the market. Larger firms can be slower to respond by the sheer weight of their size and entrenched leadership.
Smaller companies have the ability to interact directly with their customers, learning first-hand about their needs and preferences. The wise business owner takes note of customer feedback and responds accordingly. Staying relevant in the market requires constant effort and an ability to be creative, while staying true to the target market. For retailers, it is essential to align with current and emerging market trends, while carefully managing inventory and cash flow. The retailer who is saddled with excess inventory will be cash-flow-challenged and ill-equipped to keep pace with market shifts. The key words for survival and longevity are be profitable, stay nimble and listen to your customers and suppliers.
For service-only businesses, it is essential to stay on constant touch with clients, provide state-of-the-art service and be constantly prospecting for new clients. There may be periods where the 80-20 rule prevails in the business: 80 percent of the business comes from 20 percent of the client base. The loss of a major client will have a disproportionate affect on the health of the business. The wise service provider will strive to keep a broad base of clients, old and new and to constantly look for new service products which add value for current clients and attract new ones. When small service providers compete with large ones, they must find that “niche” where a high level of service and dedication will inspire strong customer loyalty.
Given the ability to stay profitable and adapt astutely to changing market conditions, a small business can endure for decades, providing a valuable service to the market, gainful employment for its staff and a solid income for the entrepreneur.