This was originally posted on Businessforbeginners, a resource for entrepreneurs to understand the business side of their ventures. 

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Now that you’ve figured out what it is you’re offering and why it’s valuable, the next thing to think about is identifying the group of people who will care. In a previous post, we began thinking about the answer to “Who is your product/service for?” This group of people (i.e., your target demographic or target audience) have at least one thing in common – they like what you have to offer. So, a preliminary question to ask yourself is, if your product or service solves a problem, who has that problem?

By now, you should have an idea about who your target demographic, or group of customers, are or will be. If your answer to the question above is EVERYONE… try again. Everyone is not your customer, and this is great news. Why? By focusing on the group of people who ARE interested in what you offer, you will save yourself time, money, and energy. The goal here is to identify the exact group of people who are interested in what you’re offering, and to do everything you can to make and keep them happy.

EXAMPLE:

Joe’s Steak Shop 

Joe closes his eyes and pictures a room with 100 potential customers. Joe announces, “Hey everyone! Come and buy my steaks!” Immediately, 5 people leave the room. Why? They are vegans and vegetarians. It doesn’t matter how great Joe’s steaks are, those 5 people won’t want to buy them. So, why would Joe waste his time and money trying to sell steaks to vegetarians?

TO IDENTIFY YOUR TARGET DEMOGRAPHIC, CONSIDER THESE 10 THINGS:

Still not sure where to begin for your idea? No problem. First, if you know of a similar business, go there and see what kind of people spend time there. If it’s a web-based business, look at the websites of companies that are doing something similar to what you have in mind for your business. Also, use the tips and tricks you learned in the Dollar Shave Club practice problem to examine a website for clues on who their customer is. This is an iterative, ongoing process, and the information you gather now will have to be validated through more research and the data you collect over time. If you want to open a Thai restaurant, for example, visit other Thai restaurants! Another option is to just close your eyes and picture a room filled with your future customers. For either method, think about the following ten things, with the first six being especially important in the beginning stages.

1. Age: Pick an age range that represents the group, e.g., 12 to 19 years old or 25 to 40 years old. It’s not always obvious, but you can estimate and try to confirm later.
2. Household Income: You can start with something as simple as ‘high income’ or ‘middle income’, but this part will require additional research. If you’re in Canada, this kind of statistical information can often be found here. If you’re in the USA, try here or here. Live in Europe? No problem, try here and here.
3. Gender: Male, female, etc.
4. Geographic Location: This can be something broad such as all countries, or incredibly specific, like people living within a certain postal or zip code.
5. Interests/Hobbies: Again, it may not be immediately obvious, but it can be incredibly important. A year from now, if we put all of your customers together in a room, what would this group of individuals have in common? This is where interests and hobbies come into play. It may not be obvious at first but when you start to chat, you realize they’re all obsessed with yoga, or they all love cooking. The point is that this group shares that interest or hobby, and you can use that information to build connections between your product and what your consumer loves.
6. Attitudes/Values/Lifestyle: What is important to this group? What do they believe in? Again, invaluable information for
7. Marital Status: Single, married, divorced, widowed, or dating. Again, not always obvious, but you can guess to begin with and confirm later.
8. Occupation: This information is typically gathered over time by talking to customers, through newsletter sign-ups on your website, or in surveys and questionnaires. It’s not a big deal if you can’t answer this part right away.
9. Ethnicity: Depending on what you’re selling, the ethnicity of your customers can play a role. If, for example, you’re importing a candy into Canada that up until now was only available in South America, the Latino community in your region would might be interested in a little taste of home.
10. Education Level: Similar to martial status, or age, in that you may have to guess at first. Something to keep in mind is that education level is often correlated with household income.

WHY IT’S DIFFICULT TO FIND CUSTOMER INFORMATION:

Companies spend a lot of time and money trying to determine exactly who their customer is and continuously refine their answers to the above categories of customer information. By looking at existing competitors, you may be able to learn about their target demographic. Often, this information is not readily available to people outside the company. The important thing here is to use the ten categories above to guide you as you try to figure out who your ideal customer is or will be, even if you don’t have all of the exact information you need.

EXAMPLE:

Now that we have a list of ten things to consider, let’s take a look at an example.

Example #1: Lululemon. Product – Women’s Apparel

Let’s pretend I want to start a retail business that sells high-quality yoga clothes to women. To learn more about who buys yoga clothing, I will look at another clothing brand that sells yoga clothes. For this example, I’ve chosen Lululemon, an athletic apparel company inVancouver, Canada that specializes in yoga clothes. As I mentioned before, it is difficult to find specific information on the customers who buy from a particular company. So, with my list of ten things to think about, I visited a few Lululemon stores to see who was shopping there, and reviewed their website. While I was unable to fill in every category, I found information on the most important first six items.

Lululemon Customer Overview:

1. Age: 16 to 45 year-olds
2. Household Income: Middle to high income
3. Gender: Women
4. Geographic location: North America, but expanding internationally
5. Interests/Hobbies: Yoga, running, dancing
6. Attitude/Values/Lifestyle: Physically fit, health and appearance-conscious, environmentally aware
7. Marital Status: ?
8. Occupation: ?
9. Ethnicity: ?
10. Education Level: University educated

If my business will offer women’s yoga apparel that is very similar to Lululemon’s, the information above would help me better understand who my future customer will be so that I can focus my efforts.

If my business will offer women’s yoga clothes is going to be different than Lululemon’s, this example will be a reference point, but my answers will be different. For example, if my yoga clothes are going to be much cheaper, then it doesn’t make much sense to target individuals with a high household income.

PRACTICE:

Now, just like the above example, you should be ready to apply what you’ve learned and tackle this practice problem! The company is Bentley Motors, and the product is a Bentley, a car whose starting price is approximately $200,000. So, who buys a Bentley? Who is Bentley’s ideal customer? Visit the Bentley website and try to complete the first six categories of information below.

Practice #1: Bentley. Product – Car 

1. Age:
2. Household Income:
3. Gender:
4. Geographic location:
5. Interests/Hobbies:
6. Attitude/Values/Lifestyle:

I will post my answer next week!

Practice #2: Your Company

Now that you’ve seen an example and have done some practice, you’re equipped to do the work for your company. Good luck!

Still not quite sure? Contact Us.

Final Thoughts:

If you know your potential and actual customer, what’s important to them, what they like and don’t like, the better you will be able to find them, make them happy, and keep them coming back for more. Remember, this is just a first step, as you will have to do some additional research to confirm these assumptions. Not everyone will want what you have to offer, no matter how good it is, and that is okay. Focus on the people who will love you, and you will succeed.