Target Customer

A short post entitled Build Value in a blog called Peter's Thoughts got me thinking about the all important and often neglected concept of target customer. The key point in Peter's post was that you create value by satisfying the customer need. He goes on to say that management should never define the product features, but instead management should talk to a lot of customers. I agree 100 percent with what he says, but here is the problem. Who is the customer and more precisely who is the target customer. Most business plans, start ups and troubled companies lack an understanding of their target customer, which is usually demonstrated by their inability to fully describe the customer. Let's take an example. Here are five descriptions of a target customer:

1. A woman
2. A woman with children
3. A middle income woman with children
4. A low middle to middle income woman with children
5. A single, low middle to middle income woman with children

Notice how your perception of the woman changed with each additional descriptor. As your perceptions changed so did the probable needs of the woman.

Probably the most important concept in business after cash flow is target customer. Target customer defines the product, targets the selling strategy, refines the pricing and most importantly gives a concrete reality to the customer by defining their needs. Target customer is not a theoretical concept and is defined and refined by reviewing sales data, meeting customers, analyzing product sales trends and talking with the sales force for their feedback. Understanding the target customer, who may be in a state of constant change, such as for a retailer, is a continuing, constant process. Through this constant process of analysis you insure that your definition of the customer's needs is current, that you have not overlooked a key need which may still be unsatisfied and perhaps most importantly you keep management focused on the customer.

In many of the business plans that I see for new social networking sites I see detailed lists of site features but never get an idea of who would use the site. Most social networking sites are now oriented toward a particular vertical market, but this approach actually places a greater importance on understanding the target customer. If ten sites target photographers, the site that wins is the site that better satisfies the needs of photographer. This will probably be the site that has the most profound understanding of their target customer and not necessarily the site with the longest feature set.

In summary, a target customer is defined by their needs which provides the concrete information that fleshes out the standard demographic or segment analysis. While a target customer will undoubtedly evolve, particularly in a start up, one is well advised to define a target customer early in the business plan process in order to provide a concrete reality for the market you propose to serve. Otherwise you may end up with a product or feature set that does not match a customer need.