What Is a Target Market? (With Steps to Define One)

Updated 16 December 2022

A target market is a specific group of consumers who might consider buying certain products. The people within a target market typically share certain buying traits, belong to similar demographics or live within a defined geographical area. Understanding the target market may help you advertise and market a business more effectively. In this article, we explain what a target market is and explore the steps you can take to define a target market before providing examples of hypothetical target markets.

What is a target market?

Learning the answer to, 'What is a target market?' may help you target potential customers who have a genuine interest in the product or service a business offers. A target market is a defined group of customers who all share similar characteristics, such as shared interests, backgrounds, education, religion, marital status or age. Understanding which of these characteristics the customer base shares helps you to define a target market. A target market is a broader concept when compared to a target audience, which refers specifically to people who purchase a product rather than those who are interested in it.

There are several elements that typically set one target market apart from another, including:

Demographics: This categorises individuals into groups based on distinctions such as age, income, marital status, employment status, religion and gender.
Geography: This is the physical location of a target audience, such as their country, state, city or suburb of residence.
Behavioural patterns: These patterns refer to the buying habits of potential customers, such as when they like to shop or the type of advertising that attracts them.
Psychographics: This references the personal qualities that affect a potential customer's likelihood of buying a product, such as their personal likes, where they source information from and what their hobbies are.

How to define a target market

Defining a target market may help to advertise products or services to potential customers, which may help increase sales and generate profits. Creating marketing campaigns targeted at a specific market is an efficient way to boost a customer base without wasting time and resources, and it's a method that may help smaller businesses compete with larger ones. If you work in marketing or sales, you may use the following steps to define a potential target market for a business:

1. Identify the existing customer base

The first step when defining a target market is to identify any existing customer bases you might already have. You may ask existing customers for more information about their buying habits, why they buy a product or use specific services or which demographics they believe they fit into. This helps you to understand which personas are already interested in certain products and provides a target audience that you can aim to develop into a more well-defined target market.

2. Analyse products and services

Knowing the customers is vital to defining a nuanced target market, but it also helps to know the products and services offered by the business. Analysing the features and benefits of the products offered to customers may help you understand why specific demographics purchase them. For example, if there is an online clothing store that stocks lots of winter clothing items, then its target audience is likely to be based in colder locations, such as Tasmania, or regularly holiday in colder climates, such as New Zealand.

3. Research the competition

Researching competition may provide insights into a potential target market. You may ask the competition's customers for more information or look into the competition's existing advertising campaigns to learn who they're targeting. From this information, you might build a more detailed understanding of the type of customer who buys similar products or services to the one on offer. For example, you may analyse the competitor's sandwich business and realise it's successfully targeting remote workers through a new delivery service, rather than just targeting commuters from its outlets in the city centre.

4. Collect data on target market demographics

It's helpful to understand which demographics the business can aim to market its products towards, and you can do this by collecting data from the existing customers and competitors' customers. You might undertake surveys, track company sales data, analyse website traffic and ask customers for information when they make purchases. Important demographic information you might plan to find out includes:

age
education level
gender
income
job role
marital status
nationality
religion

5. Find out where customers live

Geography is an important factor when defining any target market. If you know where these customers live, then it's possible to accurately target advertising based on geographical location. You might do this through localised online advertising, playing adverts on local radio or television stations and posting flyers around a specific neighbourhood.

If there's an international target market, then you can better define these customers by finding out their home countries. Knowing which time zones they are in may help you organise more effective advertising campaigns. If you discover there is a large international customer base, then the company might decide to hire locals who know the language and culture. The company can then tailor adverts and products to suit different geographic regions.

6. Define the target market

Once you've analysed the existing customer base, assessed any products and services, profiled the customers' demographics and evaluated the competition, you can define the target market. It may help to start by defining a broad target market, based on several key factors such as age range, location or income. This gives you a wide target base, which may help when creating marketing strategies and promoting products to a wide audience.

After defining a broad target market for the business, you may then narrow this target market into more defined niches. You may do this by selecting different demographic factors that you believe customers possess, such as a narrower age range, gender or specific cities or suburbs where they live. This helps you develop more targeted marketing campaigns, which may help boost sales and improve profits.

Examples of target markets

Review the following hypothetical examples to help you understand what target markets are:

Example 1

Here's a target market for an industrial farming supply company:

Outback Farming Goods supplies industrial equipment to rural farms in remote regions of Western Australia. This area includes vast cattle farms covering thousands of square kilometres, resulting in long and difficult delivery times and procedures. Outback Farming Goods defines its target market as middle-aged farmers who live in rural Western Australia. Its target market works exclusively in the farming industry, focusing predominantly on livestock. Its target market typically requires access to the latest farming technology, spare parts for vehicles and machinery and delivery of purchased goods to remote locations.

Example 2

Here's a target market for a craft brewery:

NSW Craft Beers is a craft brewery business with 12 pubs located across New South Wales and a central brewery and headquarters in Sydney. It provides customers with four staple beers, alongside seasonal flavoured beers infused with fruits like mango and cherry. The market team has defined their target audience as craft beer enthusiasts aged between 25 and 40, living in major urban centres in New South Wales. They target beer drinkers with a taste for craft beers throughout the year and market to a wider audience who enjoy sweet alcoholic beverages when they release their fruity seasonal products.

Example 3

Here's a target market for a pie shop:

Super Artistic Pies is a pie and pastry-making business in Adelaide, South Australia. It primarily serves customers within a three-mile radius of the Central Business District, with two bakeries and a delivery service. Super Artistic Pies primarily targets commuters and people working in Adelaide's CBD by cooking traditional Australian pies and sausage rolls with an artisanal twist, incorporating seasonal flavours and unusual ingredients into its products. Its stated target market is the pie-loving young people with a taste for the adventurous.

Please note that none of the companies, institutions or organisations mentioned in this article are affiliated with Indeed.

What Is a Target Market? (With Steps to Define One)