What is a target market? Identifying your audience and ideal customer profile in B2B

What is a target market? Identifying your audience and ideal customer profile in B2B

What is a target market?

Your marketing campaigns are more likely to succeed when you target them to a specific, well-defined audience.

For example, HubSpot research has found that using target market personas when developing a brand website makes it 2-5 times more effective.

A detailed, insight-backed understanding of your target audience is particularly important in B2B markets. The dynamics around who specifically you are selling to and how they make purchase decisions are much more complex than in B2C.

Naturally, your target market consists of potential buyers who your products or services are suitable for and aimed at. While that sounds simple, there are more complex considerations.

Accurately defining and engaging with your target market, or ideal customer type, can result in:

  • Better lead generation
  • Improved conversion rates
  • Tailored products and services that meet buyers’ needs
  • More effective allocation of marketing resources
  • Improved ROI for marketing campaigns

And arguably, all other research projects build on interpretations of your target audience to provide the most relevant or useful insights.

But rather than focusing on a broad target market, when you have limited time or resources is it better to prioritize customers that seemingly represent the best opportunity instead?

To make that decision, you first need to define and analyze your ideal customer profile (ICP).

 

Contents

Identifying and engaging your ideal customer type

Target market sizing

Segmenting a target market in B2B

Target market buyer personas

Tailoring B2B marcomms to your target market

How to do target market research: best practices in B2B

 

 

Identifying and engaging your ideal customer type

To identify your ICP, you can rank buyers on various profitability criteria or according to how much potential they have. 

For example, look for a high/strong:

  • Expected customer lifetime value (CLV)
  • Expected profitability of their company
  • Likelihood to purchase or percentage opportunity for a sale
  • Fit with your sales and marketing efforts

Alternatively, rather than looking for high-potential buyers that match your sales or marketing efforts and strategy, you could design these around your ICP instead.

Taken at face value, assuming there’s no shortage of potential customers out there for your offering, it makes sense to prioritize the ones presenting the best commercial opportunity.

For example, you could target customers at large companies because they are more likely to have larger budgets. Or, you may discover that in certain target markets, smaller businesses with lower acquisition costs are more profitable.

However, sometimes there are disadvantages to viewing target audiences through the prism of ideal buyer types. 

For example, during business development efforts you may not yet have enough information on a new lead to accurately assess their value. If you overlook them because it’s not clear if they fit your ICP, then you risk potentially missing out on a strong opportunity if you’re wrong.

While it makes sense to prioritize your finite time and resources on the most profitable outcomes, take care not to pass up low-hanging fruit in pursuit of higher-profile customers.

Also, don’t fall into the trap of creating an unrealistic ICP that would potentially offer high returns, but is too hard to convert. Perhaps their buying process takes too long to justify your time and effort, or maybe a competitor’s offering is a better fit for their needs.

Of course, if you can prove that an ideal customer type represents a significant proportion of your target market, that’s a great opportunity.

Target market sizing

A market sizing exercise can estimate what proportion of your target market fits your ICP.

And of course, it’s a good idea to do this before entering any new B2B market, whether you have an ideal customer type in mind or not. How many potential buyers are there in the first place?

Here’s a quick guide to market sizing:

  • The calculation you used should be tailored, usually based on a combination of primary and secondary research
  • Insights from desk research should give you a macro view of the market.
  • You could calculate rival players’ current market share from competitor research
  • But you’ll usually need some primary data as well to fill in any gaps and to calculate demand accurately, some primary research is always required.

Useful interlinking measures for estimating and assessing the market size include these metrics:

  1. Total addressable market (TAM): Including all potential customers, sales, and channels – not yet taking into account your service/product’s scope
  2. Serviceable addressable market (SAM): The proportion of the TAM within your service/product’s targeted scope
  3. Serviceable obtainable market (SOM): The proportion of the SAM likely to buy from you – based on factors such as demand, market share, price, etc.

Once you’ve estimated the size of your primary target market, many companies conduct a robust segmentation to better understand who their potential customers are. What are the different segments and what’s the best way to engage each buyer type?

One or more of these segments could be your ICP. Alternatively, if a high proportion of your target market fits your criteria for ideal customers, you could run a segmentation solely on your ICP criteria to segment them further.

Segmenting a target market in B2B

There are plenty of different B2B market segmentation types. They often include data based on the following criteria:

  • Organization type: Such as sector, size, revenue, and location
  • Decision-maker type: Seniority, department, etc.
  • Needs and attitudes: Business priorities, pain points, purchase needs, values, traits
  • Behavior: E.g. buying habits or previous product purchases
  • Jobs-to-be-done: The true task customers want a solution for

The Jobs-to-be-done (JTBD) framework can be very valuable and out of the above factors, it’s often the most commonly overlooked. Doing so runs the risk of defining target audiences too narrowly.

JTBD involves thinking about your marketing strategy – and product/service design – more broadly.

Beyond focusing on existing customers and their current purchase habits, by analyzing the specific ‘job’ customers want solutions for instead, you may find a bigger opportunity.

The key thing is to analyze product/service outcomes, rather than features. A good example in B2B of the JTBD framework comes from Amazon Web Services (AWS).

Trying to make physical IT infrastructure cheaper, smaller, or less reliant on access to skills would have defined target markets too narrowly. Instead, Amazon showed that the real job was to provide access to a virtual service, with significantly lower barriers to entry, that any company can benefit from.

Instead of building or buying physical servers and data centers, businesses can hire what they require through cloud computing instead, then scale up when needed. AWS is more profitable than the Amazon e-commerce business and it now owns nearly half of the public cloud infrastructure it helped pioneer.

Therefore, you can use the JTBD framework to segment your target market, or your ICP.

Businesses have different contexts for their ‘jobs’ – for example, in terms of complexity, pain points, or the sophistication of their current approach – and you can segment them accordingly.

Target market buyer personas

Similar to segmentations, the broad goal of building several buyer personas is to better understand the different groups in your target audience.

Then you can tailor your marketing efforts to each group more effectively. This should improve your sales to each different buyer persona type.

Whereas a segmentation study uses quantitative data to divide your target market into separate groups, buyer personas are based on qualitative insights.

Regarding quantitative vs qualitative research methodologies, the former provides robust data and statistics to inform your sales and marketing strategy decisions. The latter provides the reasons ‘why’ to help you make these decisions.

As with segmentation research, it’s common to include some or all of the following in a B2B buyer persona template:

  • Profile: E.g. job title, years in role, department, seniority
  • Purchase criteria: Ranking the hierarchy of factors they consider when buying
  • Pain points: Frustrations and challenges which your marcomms should focus on
  • Jobs-to-be-done: The task(s) this buyer wants solutions for
  • Influence: Are they the sole decider or only an influencer? Who else is involved?
  • Information sources: Which channels should you use for sales and marketing?
  • Comms preferences: What’s the best way to engage them?

You’ll likely have some of this information already, while primary B2B research can fill in any gaps.

Again, one of these buyer personas could be your ICP. And if you’ve identified a high proportion of ideal customers in your target market, you could create multiple ICP personas with differing qualities.

Tailoring B2B marcomms to your target market

When you have identified and segmented your audience, it’s vital to tailor your marcomms strategy accordingly.

And B2B marcomms research can help by providing insights or recommendations around:

  • Which channels to use
  • Which unmet needs to focus on in messaging
  • How to optimize marketing materials
  • Their impact and effectiveness post-launch

You can identify the right channels and messages via qualitative research – for example, by running a media diary with some customers and ideally, prospects too.

Once you’ve conceptualized your channel and message strategy, test the approach with target customers by interviewing them about your draft materials. They’ll provide feedback on how well they understand them, as well as how appealing, credible, and unique they are.

And when your campaign is live, you can also run research to measure its effectiveness e.g. by testing for spontaneous recall.

How to do target market research: best practices in B2B

#1 Sense-check your target market segments

When you’ve segmented your target market, check with colleagues and/or your research partner that it makes sense intuitively.

Is each segment different in a meaningful way and is it possible to develop a strategy for each one? Are they easy to explain to colleagues who haven’t worked on the project?

Crucially, are the segments large enough to justify all the resources that will be used on them? Is each segment likely to exist in a few years?

You can also try using various data sources for secondary research to help sense-check definitions of your target audience, but this may not be possible for a very niche market.

#2 Make your buyer segments/personas easy to use

Your segmentation or buyer personas must be memorable and an engaging representation of buyers.

If they’re too dry, your teams won’t use them frequently enough and they’ll have diminishing returns.

Materials need to be easy to scan and share. Visualization techniques and vox pop videos, where possible, help to bring buyer personas to life.

Moreover, any new data for target markets should fit in with your existing processes, so that it’s not standalone and impractical to use.

#3 Update your target market definition as it evolves

Over time, external factors can have a significant impact on customer behavior. New technology may alter their needs, or changes around channels may affect their customer journey, for example.

Over time, important details about your target markets might change, or there may be a new buyer group that’s worth targeting.

At regular intervals, or if there’s a major external factor that’s disrupting your sector, review your segmentation or buyer personas. Keeping them up-to-date improves their longevity.

#4 Use specialist tools and techniques to uncover hidden insights

Taking what target customers say at face value doesn’t always tell the full story. Sometimes, they may overthink their answers – e.g. by overstating the importance of certain decision-making criteria, or by understating others.

Regression analysis is an advanced statistical technique for quantitative datasets to analyze connections between answers to different questions in more detail. It calculates the derived importance of criteria.

For example, it can evaluate the trade-off analysis a customer would do in real scenarios. It can also effectively provide insights into subconscious thinking, rather than claimed.

There are also options for qualitative research methods, to identify the subconscious factors behind what respondents are saying.

Purchase decision-making isn’t always completely rational, emotions affect B2B buying behavior too – there are plenty of common cognitive biases too.

Projective interview techniques dig deeper and identify these. This information can be invaluable when creating a sales and marketing strategy for different buyer groups in multiple target markets. Adience is a b2b market research agency.

Summary

What is a target market?

Your target market consists of potential buyers who your products or services are suitable for and aimed at.

Accurately defining and engaging with your target market, or ideal customer type, can result in: better lead generation; improved conversion rates; tailored products and services that meet buyers’ needs; more effective allocation of marketing resources; improved ROI for marketing campaigns.

Identifying and engaging your ideal customer type

To identify your ICP, you can rank buyers on various profitability criteria or according to how much potential they have. For example, look for a high/strong: expected customer lifetime value; expected profitability of their company; likelihood to purchase or percentage opportunity for a sale; fit with your sales and marketing efforts.

Segmenting a target market in B2B

There are plenty of ways to do a target market segmentation. They often include data based on the following criteria: organization type – such as sector, size, revenue, and location; decision-maker type – seniority, department, etc.; needs and attitudes – business priorities, pain points, purchase needs, values, traits; behavior – e.g. buying habits or previous product purchases; jobs-to-be-done: the true task customers want a solution for.

Target market buyer personas

As with segmentation research, it’s common to include some or all of the following in a B2B buyer persona template: profile; purchase criteria; pain points; jobs-to-be-done; influence; information sources.

Tailoring B2B marcomms to your target market

And B2B marcomms research can help by providing insights or recommendations around: which channels to use; which unmet needs to target in messaging; how to optimize marketing materials; their impact and effectiveness post-launch.

How to do target market research: best practices in B2B

We recommend that you: sense-check your target market segments; make your buyer segments/personas easy-to-use; update your target market definition as it evolves; use specialist tools and techniques to uncover hidden insights.

Chris Wells
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