Finding the RIGHT Customers Simple Market Research for Small Businesses

  Demographics of your geographic trade zone can be powerful tools for small businesses especially those selling to household consumers.  Demographic Segmentation is one of several segmentation tools that any small business can access to help them ZOOM in on specific segments of an overall market to find those groups that can be the best customers for them.       

If you are a small retailer, service or professional business do you know what your market potential is in your trade zone?  If you are a retailer in Jonesboro, Arkansas selling women’s clothing and apparels (or wanting to open one) did you know that there are 38,332 households in Craighead County (households are the basic unit for consumer sales) and that those 38,332 households are going to spend an estimated $24 MILLION dollars this year on Women’s Clothing and Accessories? And that does not include shoppers from surrounding counties who will come to Jonesboro to shop?      

Out of those 38,332 households do you know which ones are your best possible customers? Would it be helpful to your business to be able to divide those households out by categories to determine which ones are the best fit for you and which would be the most profitable? In this article I am going to show you some simple but effective ways you can:      

 Segment all the potential customers in my market area into distinct groups 

• Determine which groups are my most likely target market(s)
• Apply my limited marketing dollars at the target segments that meet my profile of the “right” customer for us
• AND why this is IMPORTANT to your business success.

 Recently my consultants met with a new client interested in opening a Women’s Clothing and Accessory retail outlet in Jonesboro and was considering including jewelry in her merchandising mix along with women’s apparel.  She had a “gut feeling” that there were “under-served markets” in the Craighead County tradezone but wasn’t sure how to locate that subgroup, what the market potential was or how to reach them.  She knew intuitively of course   

Market Potential to Income Level of Households

 She knew intuitively of course that households on with lower incomes obviously had less money to spend than those in higher brackets.  That women’s taste in clothing differed depending on the age of the customer as did the potential customer’s education level and type of job but she wasn’t sure how to get good information to help her make decisions OR if that information was even available.      After an hour with one of our consultants she came out of the meeting with the information she was looking for. These two tables show her not only the demographic make up of her trade zone by Age and Income but also show how many households are in Craighead County by the sub categories, how much those sub categories will spend on women’s clothing AND what that sub group’s market potential is.  Here we have one table dividing her market out by Age of Householder and the second by income levels.      

 As becomes very apparent from the two charts of market potential based on both Age of Householder and on Income Levels certain categories it confirms what our “gut” told us about who spends more than others in our trade zone but more importantly it gives good hard numbers that not only show who spends more but by how much.  A look at the graph on the right for apparel purchases in our trade zone by households it also shows for example that while households earning under $20,000 make up 23.6% of our total households in the trade zone they only contribute 11% to the total market potential.  Good quick indicator of which demographic segments may be better to attract than others.  Of course there are a number of other factors to consider and we will look at these additional factors in upcoming articles.  But for any small business that is involved in selling to households in a specific geographic area, having market potential data broken out in this manner is an important planning tool.  

With this information we can start to consider which specific subset or sets we feel will be the best for us to target.  Other considerations choosing a specific target group will have on my business planning will include:  

• Depending on whether targeting high – middle – low income households will impact the inventory I plan to carry
• The choice of groups will impact the type of marketing message that I will use in the media 
• It will also impact my choice of the channels for media (different categories consume information through the media in different places)
• Possibly even where I should locate my physical store

So determining the RIGHT target market(s) to zero on will have a much larger impact  on my planning than just which subgroup to tartet.  It will drive my entire business planning and marketing decisions in the future.   

 A couple notes:  The consumer expenditure data by demographics is based on national average and came from an e-Book that we use at the ASU SBTDC called “Who’s Buying Apparel” breaking out all types of apparel and clothing accessories into groups (men’s clothing, infant clothing, shoes, etc.) and it is only one of 20 e-books we use covering a wide variety of consumer expenditures from health care to groceries to household appliances.  For more information about the topics available through our E-books contact the ASU SBTDC or put your question in the comment section of the blog!   

 Also for the demographic data we use DemographicsNow an online database with demographic information that includes states, counties, cities, even zip codes.  The report does not have to be limited to a county (Craighead) that I used here.  If we assumed our trade zone included Craighead and surrounding counties we could have just as easily included those in the review.   

 If you are a retail, service or professional business and your customer base is dependent upon household consumption the information to start your search is readily available.   

 Next time we will expand the apparel example out further to show how easy it is for a small business to really zero in by cross comparing Age to Income levels to target exact groups within both categories as well as how to determine the most likely geographic sub areas in our county to target based on their consumption habits AND how to find our competition.  So I hope you will come back to read the next installments.   

 If you found this helpful please let me know, make a comment, ask a question or share this with your small business friends.