One of the biggest decisions a business makes is the decision on which market segment to focus.
‘Market segment’ is the term that describes a group of suspects and prospects who have something in common. For example, if you are a mechanic with an auto repair shop, you could say your market is anyone with a car that needs repair or maintenance. “Anyone who owns a car that needs repair or maintenance” is a description of the market you are attempting to serve.
You could break that down into more precise, narrower market segments. For example, you could define your market as owners of Ford products, or General Motors or so on. Each of those describes a market that is smaller and more precise than the first description.
A Powerful Principle
One of the most powerful principles of effective sales systems principles:
Define your target market as narrowly and precisely as possible.
Let’s go back to our auto repair shop for an example. Instead of defining your market as “Anyone needing a car repair or maintenance,” it would be more effective to narrow that down to “Anyone owning a Ford product needing repair or maintenance.” That’s a smaller market and a more precise definition.
Even better would be to narrow that down more, say something like “Anyone owning a Ford pick-up truck needing repair or maintenance.” And, to narrow it even further, you could narrow it down to “anyone owning a Ford pick-up truck which was manufactured in the last ten years, needing repair or maintenance.”
Let’s keep going: You could then use the type of repairs as one of the criteria to narrow your market. For example, you could say “Anyone owning a Ford pickup truck which was manufactured in the last ten years, needing mechanical (as opposed to body) repairs or maintenance.” Or, to narrow it even further, you could say, “Anyone owning a Ford pickup truck which was manufactured in the last ten years, needing transmission repairs or maintenance.”
Each time you narrow the definition of your market segment, you sharpen your market focus and make it much easier and more effective to reach them.
Now, at this point, you might be thinking, “Wait a minute, every time I narrow my market segment definition, I eliminate some possible customers. “
The response to that is “Yes, sort of.” Let me explain. Your sales system is going to organize and direct your proactive marketing efforts. But your overall system is going to allow for both passive as well as pro-active marketing efforts.
Here’s an analogy I’ve often used to explain the difference. Imagine a fisherman, in a boat in the middle of the lake. He has rigged up two rods with hooks, worms, and bobbers. That’s his passive fishing approach. He will reel in anything that bites, and he doesn’t particularly care what it is.
However, he wants to catch salmon. So, he has a spin-casting rod with a salmon lure on the end, the right line for salmon, and is fishing at the right depth to catch salmon. He has a fish-finder in the boat, and he makes adjustments from time to time in an effort to catch his limit of salmon.
Now the salmon is the pro-active market segment for which the fisherman is fishing. He’s going to spend 80% of his time, money, and energy trying to reel in salmon. However, if a lake trout comes along and bites on his worm, he’ll reel that in.
That’s an analogy that describes how to think of your marketing efforts. The fisherman had a passive approach and a proactive approach. Eighty percent of his investment went into the proactive approach
So, you too should have a passive and a proactive approach, with the proactive approach consuming 80% of your marketing budget. Once you put your passive marketing in place, you don’t spend a lot of time on it. Like the fisherman with the bobbers and the worms, it just sits there. In our auto shop example, passive marketing might be a sign in front of the establishment that says “Auto repair.” Once you put that sign up, you are not going to think about it much or reinvest time and money into it. That’s your passive marketing – you are going to respond to whoever comes in as a result of it.
However, most of your time and effort will be invested in growing the proactive section of your market. Once you have decided that your proactive efforts are going toward attracting owners of Ford pickup trucks, you then put in place a number of initiatives designed to attract them.
If you narrowly and precisely define your market segments, you make your proactive marketing efforts more effective. That doesn’t mean that if someone shows up at your auto repair shop with General Motors sedan wanting an oil change that you have to turn them away. Think of them as your passive marketing approach. Occasionally something comes along and bites. But the bulk of your time, money, and effort is invested in trying to reel in your target market.
It is a basic tenet of effective sales system design that you define your target market as narrowly and precisely as possible.
Three Reasons to Focus on a Target Market
Here are the top three reasons why narrowing defining your target market is good sales system sense.
1. Narrowly defining your target market allows you to distinguish yourself from your competitors.
For example, if you fix any car or truck, you have put yourself in the same class as your competitors. But, by specializing in a narrow segment, you stand out to the folks in that segment. Since you are seen as a specialist, you appear to offer more value to the market. Why take your Ford pickup to just anyone, for example, when you can take it to a specialist?
2. Narrowly defining your target market allows you to leverage your marketing efforts and thereby be more effective and efficient.
For example, there are probably websites devoted to Ford pickup owners. Since you are a specialist in something that interests them, you have synergy. A few dollars spent on advertising on those websites will get a greater return. You could probably buy a list of Ford pickup owners in your area. You leverage your investment to a greater return. There may be a magazine for them. There could a Ford Pickup owners club. Money spent in advertising to a broad market is often diluted and ineffective. Money spent advertising on a narrow market is more effective.
3. Narrowly defining your target market allows you to become more important to your market by expanding your product or service offerings.
For example, you could begin to offer a line of decals and add-ons to customize the looks of a pickup truck. When you specialize in a market segment, you can leverage the knowledge you gain from one customer to another. That is much easier to do when your customers all have something in common.
This is one of those practices that seem counter-intuitive at first glance, but that has been proven countless times. Narrower, when it comes to target markets, is almost always better than broader.