Identifying your business’ audience is one of the first — and most important steps — you should take as an owner to set yourself up for success.
We know that running a small business takes a lot of an owner’s time, efforts and focus. There are customers to satisfy, new sales to be made and payroll to be met among a myriad of other issues, all of which taken collectively can sometimes cause owners to take their eye off the ball and lose sight of the blocking and tackling — the basics every business, regardless of size and purpose, must master in order to be successful. The first of these basics we will cover is your business’ audience.
When asked the question, “Can you describe your market to me?” the answer most often heard by business intermediaries is something like, “All of Washington County, the eastern half of Hillsborough County and the northern third of Pasco County including everything on Highway 27.” Now, we all know that such an answer is a description of a territory, not a market. So the question is often re-asked as, “Who is your business’ audience?” The most common response is something like, “All men and women between the ages of 25 and 50.” But such a response is too broad and may not serve your purpose. So what is a market?
Philip Kotler, the longtime professor of marketing at Northwestern University in Chicago, set forth the classic definition when he wrote: “A market is a group of people with similar traits and characteristics; wants, needs, desires, demands and the ability to buy.” What separated Kotler from just about all of his contemporaries and made him the guru for almost every successful marketer since the publication of those words is his insistence that a market is always about people — not geography — and, radically enough, his inclusion of the phrase “ability to buy”.
I know of one small manufacturer of sportswear (excluding shoes) for runners, who offered a broad line of products because he defined his business’ audience too loosely: anyone interested in running and who likes quality goods. For a while, he did well, based on the quality of his goods. As time passed, he added more products he thought runners would like. After two more years, he realized that even though sales had increased, the added products had driven up his manufacturing costs without a corresponding increase to the bottom line. He compounded the problem by looking for ways to cut his manufacturing costs and moved part of it offshore. That worked briefly — until his loyal customers complained about the decline of quality in the merchandise they purchased from him.
One day over coffee he confided to an intermediary he knew (a Murphy Business broker) that he was at a loss as to how to correct the downward trend in his once-thriving business. The agent said, “Tell me about your business’ audience.” The owner gave him the loose definition you read above. It didn’t take long for the agent to figure out the problem. So the two of them set about to find out — using Kotler’s definition as a template — more about who runners are. What kind of people are they? And, into what categories can they be sorted?
What they discovered is that there are people who run for routine exercise, people who run because of some needed health benefit and people who run to compete. When they did more studies, they discovered that of all the types of runners, marathoners were the group who best fit Kotler’s guidelines. Marathoners are a group of people who are competitive, dedicated, extremely fit, and require high-quality, durable goods. They also discovered that of the 18 million Americans who participate in marathons each year, 80% of them are college educated. But more importantly, they found out that marathoners have a median household income of $112,000, whereas runners as a whole had a median household income well below that. In other words, marathoners were “people with similar traits and characteristics; wants, needs, desires, demands and the ability to buy.”
Well, as you can guess, the owner moved his manufacturing back on shore, limited his product line to the needs and demands of marathoners, raised his prices and started focusing his sales efforts to his newly defined business audience. He is still doing quite well because that market continues to grow and he continues to meet their needs.
The point here is that such an exercise and self-audit can be done for any business. Whether you are producing a product or providing a service you must know who your business’ audience is — not what or where. It’s always about people.