Psychographic Marketing – Understanding your niche market is critical for success
Do you know who your customerss are? Do you understand why they buy your services? If not, now’s the time to find out.
Without Market Research You Will Miss Valuable Opportunities
Do you know precisely who your customers are? More importantly, do you know who the best customers for your services are? Do you know what type of people or businesses they are? If you sell services directly to clients or businesses, do you have demographic information (e.g., what are their average income ranges, education, typical occupations, geographic location, family makeup, etc.) that identifies your target customer? What about lifestyle information (e.g., hobbies, interests, recreational/entertainment activities, political beliefs, cultural practices, etc.) for your target customer? This type of information can help you in two very important ways. First, it can help you make changes to your service, to better match your customer’s needs. Second, this information can also tell you how to reach your customers through advertising, promotions, etc.
At this point you may be thinking, “I’ll worry about all this targeted marketing malarky when I become big enough” However, every business can benefit greatly from understanding who their customers are.
Acquire Demographic and Lifestyle Information About Your Customer
If you sell directly to customers or businesses of your services, it is absolutely essential that you know who they are (demographic information) and why they buy your services.
Demographic information is tangible, measurable information about individuals or groups of individuals. Common demographic measures include:
- income level
- education level
- racial/ethnic identity
- marital status
- size of household
- number of children
- geographic location/size of community
This type of information is usually the easiest for the small business owner to acquire. For example, the website ZIPSkinny provides outstanding, free demographic information based upon ZIP codes.
Lifestyle information focuses on those intangible characteristics that make your potential customers unique. Demographic information can provide the facts about a person or a group of people. Lifestyle information addresses what meaning the demographic information has to the person.
Broad types of lifestyle information
- Psychographics: Psychographics refers to personality and emotionally based behavior that is linked to an individual’s purchases. One example would be whether customers are risk-takers or risk-avoiders.
- Social factors: Lifestyle factors refers to the choice of hobbies, recreational pursuits, entertainment (movies, music, media, and literature) vacations, and other non-work time pursuits.
- Belief and value systems: These include an awareness of religious, political, nationalist, and cultural beliefs and values of your customers.
- Life stage: While some life-stage information can be gleaned from demographics, a focus on lifestyle variables goes to the experience of people at different ages and in different life roles (e.g., pre-teens, teenagers, or empty-nesters, seniors.)
Many times, businesses look for correlations between demographic information and lifestyle choices to identify and market to potential customers.
How You Can Learn About Your Customers Effectively
At this point, you might be saying: “Well, that’s great for the big guys who have a huge market research budget, but it’s of no help to me.” A decade ago, you might have been correct. The small Company was at a considerable disadvantage when it came to customer research. But, then, the internet exploded and the playing field became more level. Now, there are numerous excellent and reliable sources of data available with only a few clicks of your mouse. In addition, you are likely to have an advantage that larger firms lack: direct access to your clients. All you need is a friendly smile and the willingness to ask a few key questions.
When you are your own marketing staff, every customer contact is an opportunity for free market research—the type that a large company must spend a fortune to acquire. Questions that should always be at the top of your mind and one the tip of your tongue are
- “Have you tried [your services] before?”
- “Why are you hiring me?”
- “What do you like about my business?”
- “How will it make your life better/easier?”
Of course, you don’t want to sound like a robot taking a survey or, worse yet, a defense Owner interrogating a witness. Craft the questions into simple conversations. Over time, you will begin to develop a feel for who your customers are and what is driving them.
Secondary research sounds intimidating, but it just means taking advantage of the work that someone else has done. As noted earlier, the internet provides numerous options to learn more about your customers and potential customers. In addition, local, state, and national trade organizations are often excellent sources of information on the trends that are likely to influence your business. These agencies can also be valuable sources of information.
- Civic organizations, such as the Chamber of Commerce, Rotary Club, local banks, etc.
- Development offices, such as city planning commissions, regional county business redevelopment offices, minority-aid offices, and state business development offices
- Federal regulatory and information agencies such as the Small Business Association, the Department of Commerce, and any agency that governs or buys from your type of services.
- The Government Printing Office (GPO) publishes many useful books to help you with research. If they’re not in your local library, they can be obtained inexpensively from the GPO at your nearest Federal Building. Look in your white pages under the U.S. Government listings. Examples include:
- County Business Patterns. Released annually by the Department of Commerce, each state bound separately, these provide figures on employment, payrolls, number of businesses and number of employees in each business class.
- County and City Data Book. A book by the Census Bureau gives you information on housing, population, income, health, retail and wholesale trade.
Segment Your Market to Drive Growth
Although the universe of all potential customers may be your “market,” dividing the market into sections or “segments” can help you generate more revenue. This segmentation can be based on any number of factors demographic or lifestyle factors. For example, you could segment your customers by age group. Or, you might divide them by family size. Different segments will have different needs and are likely to respond to different advertising or promotions. By thinking in terms of “what does this group of customers need,” you can generate solutions that resonate with the niche group.
Most marketers know that “20 percent of customers consume 80 percent of services volume.” If you can identify that key 20 percent and find others like them, you can sell more services with much less effort. These loyal customers of your services can be thought of as a market “niche” that you should attempt to dominate. Niche marketing today means targeting, communicating with, selling, and obtaining feedback on the heaviest users of your Company’s services.
Large Companies have embraced niche marketing, continuing to refine and target their services offerings to different customer groups. You are your own spokesperson, you can define your best customers and look for ways to entice them, and others like them, into buying your services.
Picking the right segment of the market is important to achieving sufficiently large sales volume and profitability to survive and prosper as a business. Picking the right market segment means one that is
- measurable in quantitative terms
- substantial enough to generate planned sales volume
- accessible to your Company’s distribution methods and
- sensitive to planned/affordable marketing
It is also important to examine other factors that could affect your firm’s success:
- strength of competitors to attract your niche clients away from your services
- similarity of competitive services in the customer’s minds
- rate of new services introductions by competitors; and
- ease of entry/protect ability in the market for your niche
It is also important to be able to identify and estimate the size of your target market, particularly if you’re thinking about a new venture, so that you can tell if the customer base is large enough to support your business or new services idea. Remember that it’s not enough that potential customers need your service. There must be enough target customers on a frequent-enough basis to sustain your business sales, spending, and profits from year to year. Selling a service that potential customers may need only once in a lifetime may not be a sustainable business, unless a large number of potential customers need it at any given time, or everyone needs it eventually.
Each total market must be examined in light of:
- size of the total market
- size of the market that is interested in your services
- size of the market that is available for distribution of your services
- size of the market that already buys competitive services
- size of the market that your Business can serve
- size of the market that your Business can reach with advertising and distribution
Channel Customers Come in Different Flavors
Channel customers may be subdivided into the following major market categories: business-to-business, government, and consumer markets.
Business-to-Business and Government Customers
Business-to-business and government customers are subject to many different influences than customers of consumer services. Generally, B2B and government purchasers have the following characteristics:
- fewer clients
- larger business transactions
- regional concentration of clients
- defined sales and broker relationships
- dependent upon end-user buying patterns and demand
- an inelastic market, meaning that the demand for goods and services is not significantly affected by a significant change in price
Business clients take many factors into account when contemplating buying decisions:
- macroeconomic trends, nationally and internationally
- long-term trends and inventory needs
- delivery rates, timing, and reliability
- financial resources
Consumer clients are subject to different influences when compared with business-to-business and government clients. The major factors affecting this channel are:
- there may be many clients at multiple levels in the same company
- small to large transactions
- national, regional, and local buyer concentration
- direct firm sales to clients, or broker relationships
- directly dependent upon end-user buying patterns
- end users influenced by company advertising and promotion spending
- an elastic market, meaning that the demand for services is easily affected by slight changes in price.
Regardless of the channel of the intermediate buyer, you can expect the sales cycle to be longer and more complicated than that involved with sales directly to the consumer. There will always be personal relationships influencing buying decisions as long as there are people selling to people. That’s why you hire good staff, they are your sales team!