How can you size your core market?
There is also often a disparancy between the customers you want to attract and those that respond to your marketing communications. Therefore, you could be faced with a choice of repositioning your target market to fit your responders, or changing your marketing communications to attract the type of customers you have been seeking.
The decision should be based on the profitability and potential size of each segment. Once this is determined, targeting becomes more meaningful.
The key will be to establish whether there are ways to define the market using segmentation variables, or combinations of variables, that are both representative of the audience and are widely available for targeting across responsive marketing options.
The simplicity with which you are able to define your market will be dependent upon the reasons that people buy from you and on how hard they are to separate from the greater population.
Let’s take the example of an expensive women’s anti-aging cream, sold directly to consumers via mail order. At first glance this may seem simple to define: Initially it would be tempting to assume that the target market will be female, wealthy and older, as older females might want to look younger and wealthy females would be able to afford the product. However, if we take a step back and consider this further, there may be more to the target market that meets the eye. For example, younger females may also be interested in the product, to avoid aging. Also, some females that are less wealthy may be happy to spend a more significant portion of their disposable income on anti-aging cream if looking younger is of significant importance to them.
We will also need to determine which females are likely to respond to an offer, to determine the market size. When using direct mail, for example, we could look to a large-scale compiled mailing universe and cherry pick people according to the target demographic of wealthy older females, as this is who we might believe should be buying the product and because the list type offers the highest market coverage. However, being within the defined target market will not necessarily be predictive of responsiveness. We might, for example, find that using a direct response list, with less targeting options in terms of demographics, offers a greater campaign ROI, as the females within the list have historically exhibited the behaviour of responding to direct mail in general.
Taking all of this into account, the answer to the size of the target market becomes increasingly complex.
The answer might ultimately be established through marketing execution, so any assumptions and conjectures made in planning will also need to be proven in testing.
A direct marketing plan should be built through setting a wide array of target options and testing them in small quantities to build statistically significant learnings, without blowing budget based on assumptions.
Ultimately, these test results will enable a meaningful sizing of the target market through building an understanding of the market segments interested in your product and the number of marketing options available that can target each segment with an acceptable ROI.
Therefore, only through building a sensible long term approach to learning more about your core market will you learn how large it truly is.
