What does your target market look like?

As your business grows, your market may change too. You may want to explore new locations. Maybe you’re looking to attract different clients. You could also be trying a new way to sell your products or services. For each of these, your target market will change. But the end goal is the same – to attract more users and increase sales.

In this lesson, we’ll help look at how to grow your target market. We’ll also help you decide if re-shaping your market would help you with your growth goals.

KEY LEARNINGS

  • Evaluate the markets you’re in
  • Understand the changes you can make to your market
  • Check if any of these options help your growth goals

Read time:

10 mins

Chapter 1

What market are you in now?

Read time:

1 min

Know where you are before you plan where you’re heading

Before you think about growing, you need to be clear about your current market. Who are the customers in this market? Where are they?

Once you know your market, you can start to think about how you might re-shape it to grow your business.

 

Questions to ask about your current market:

  • Who buys from your business?
  • Why do they buy from you?
  • What factors influence their buying decisions?
  • Where do they buy from you (online or in person)?
  • Have their buying habits changed over time?
  • What are their expectations? Look at quality, price and service
  • Is there a similar audience elsewhere?

Activity

Spend a few minutes thinking about these questions. Jot down your answers. Feel free to note down anything else you know about your current market.

Seeing opportunities

When you look at your current market like this, you may start to see gaps. Are these gaps you could fill? For example, if your customer has had a change in buying habits, how can you cater to this?

You should also think outside your current market. Are there any markets that are similar to yours? Look at your answer to the questions to help. If there are, this might be an option for growth.

In the rest of this lesson, we’ll take a deeper look at how you can grow both inside and outside your market.

Chapter 2

Grow in your market

Read time:

4 mins

Why focus on your current market?

You may have started to see gaps in your market from our last chapter. So you may have ideas on how to grow and increase your market share.

Staying in your current market can be safer than expanding into new ones.

You already know this market, and have existing relationships there. So you don’t need to spend time and money researching. Instead, you can focus on gaining sales – or customers – in a market you’re already familiar with. We’re going to look at two ways of doing this.

 

Market penetration

This is where you look at the market you’re in, and work out how much of this market you already have. Then you can use this measurement as a baseline for growth. The idea here is to improve your share of the market you’re in.

 

Working out your market penetration rate

So the first step is to work out your current rate. This is how you do it:

Market penetration rate = (Number of customers/target market size) x 100

Let’s work through this with an example. Say you know you have 500 customers. You estimate that your overall market size is around 2,000.

So your market penetration rate is (500/2,000) x 100 = 25%

You can use this as a baseline, and to show that there’s potential for growth in the market.

 

Using market penetration to grow

If you know there are potential customers in your market, you can look at ways to attract them.

 

Here are some examples:

Offer discounts

Improve customer service

Launch a new marketing campaign

Develop a rewards programme

Segmentation

Here’s a different approach. You split your target market into different groups. This could be by location, age, lifestyle, income or other factors. Then you can focus your attention on one or more of these smaller groups.

This can be a useful strategy if large businesses dominate the overall market. Instead of competing across the whole market, you’re using your resources to target certain areas of it.

 

Here are some examples - select each one to find out more

  • When you split your market by location, you can target customers who are local to you. You might also be able to think about what people in a specific area need or use.

    For example, customers in rural areas may need more rugged, weatherproof clothes that people based in cities.

  • You may find an opportunity to target products to people of certain ages. What does this group need? Are you - or others - meeting these needs?

    For example, some beauty brands have specific ranges for those in the 50+ age group. Perhaps you can shape your services to meet the needs of college students or retirees?

  • This is where you think about how much your customers earn. Plus, what their disposable income is.

    You can then focus on one or more income groups to grow your market. Is there a gap in the market for high-end products or luxury services? Can you create a low-cost option for those on a low income?

Chapter 3

Grow to new markets

Read time:

4 mins

Why focus on new markets?

You may feel that your business has grown as much as it can in your current market. Perhaps you’ve found a similar market that would be easy to enter. You may even want to extend your reach to other countries.

When you move into a new market, you’ll need to research it first. There may be extra costs or restrictions to consider. The risks – and rewards – may be greater than staying in the market you know.

Let’s look at some methods you can use to enter new markets.

 

Expansion

Your growth might have peaked in the market you’re in. To check this you can use the market penetration rate we explained in chapter 2. If so, it may be time to find other markets that are easy to reach.

Here, you still have a presence in your current market. But you’re also selling elsewhere. Let’s look at some options for expansion.

 

Here are some examples:

Open in new locations

Target new customer groups

Enter international markets

Open in new locations

You may find you need to expand into a new venue. Maybe you can no longer meet customer demand where you are now You may be running out of space.

To do this, research the new locations. Check - does it attract your target customers? Are there others competing locally?

Another solution may be to grow online. You can also still keep your physical location. You may even decide that a mobile service, like a van or bus, would attract customers who can’t come to you.

There are benefits of expanding like this, within your own country. You may meet less competition than if you moved to a wider overseas market. But in time, you may outgrow your home market.

 

Target new customer groups

Who are your customers? And who aren’t?

Maybe you have a service that works well for most age groups, but are looking to break into the retiree market. Perhaps your products don’t appeal to young professionals now, but you’d like to attract this group.

Sometimes, with a little creative marketing or product development, we can capture an entirely new customer group.

For instance, Coca-Cola’s Diet Coke product had a wide appeal among women. But men were less attracted to it. This prompted the launch of Coca-Cola Zero.

The aim here was to target young, health-conscious men. The company designed packaging for the new product around that target market. They launched a £10m ad campaign to promote it.

Ten years later, it became Coca-Cola Zero Sugar. Plus, more recently, their CEO cited it as being the best growth driver for the business.

 

Enter international markets

This could expand your reach much more than growing in your home country. It can also be riskier and more costly.

How will you transport or deliver your goods? You need to factor in time differences and extra paperwork. Plus, you must research the tax laws and other legislation.

Finally, you need to get to know your new customer base. Ask – how do their needs differ from your home market? You may need to change your product or service to cater for different cultures, languages and ways of working.

 

Diversification

This can be more complex, as it involves creating new products for a new market. When you diversify, you’re launching new products or services. You’re often entering new markets or sectors at the same time. So there’s much to research - and much to invest. Equally, this approach does bring key benefits.

 

Diversification can help you:

  • Reach new customers – If your current market becomes saturated
  • Manage risk – You’re spreading your investments, which can reduce the impact of risk
  • Become more competitive – As you widen your range and attract new customers, you can reach untapped markets
  • Stabilise the business – There is less dependence on a single product or service

 

Examples of diversification

Two well-known brands show how this approach can really turn around a business.

 

Select the brand to find out more

  • In the mid-1990s, Apple was struggling. Their competitors in the PC market were producing cheaper and simpler products. Then in 2001, Apple launched the iPod. iTunes software came next. And the iPhone emerged in 2007.

    In those early days, people had no idea of what a 'smartphone' was. So the differences between a computer and a phone were huge. But Apple used many of their computer design ideas and resources to build the new devices.

    This approach saved the company from failure and helped them grow into a global brand.

  • Amazon started as an online bookstore. This worked well - there was good demand for books. And they were easy to source, store and send. But after a few years, they diversified. First, into music and computer games. Then other electronics, toys and household items. Now, you can buy most consumables from this site.

    The shift from selling just books to other items online was a natural one. But their next move was different. With cloud platforms and smart devices, Amazon became a key player in the tech market. It is now the most valuable brand in the world.

    Amazon is an example of two types of diversification. The first was lower risk, as they already had much of what they needed in place. The second was a more dramatic shift, with equally high risks and rewards.

Adapting to grow and succeed

We’ve shown how two big brands have diversified. This approach isn’t just for large companies, though. Sometimes we make a decision to adapt. At other times, outside challenges may prompt these changes.

Think of the challenges that Covid brought, for example. Businesses needed to meet the new ways of living. The ‘stay home’ rule meant priorities changed. We found new ways to use digital tools. We got creative in how we worked. Businesses learnt to become agile and respond quickly to a changing market. It also gave us the chance to think: ‘how can I thrive in an uncertain future?’. This is often the kind of question that prompts growth through diversification. While it may not always feel like it, times like these can inspire you and your business to greater things.

Chapter 4

Match your market strategy with your growth plan

Read time:

1 min

Which methods can reach your goals?

In this lesson, we’ve covered four different ways to re-shape your market.

 

Select each one to see how they could meet your needs:

Each of these methods has benefits and drawbacks. The right one for you will be the one that fits with your goals for growth. It will also need to align with your business vision, mission and overall goals. Keep these in mind as you research your options.

Activity

Now you’re done with this lesson, you should take time to do the exercises in your workbook. We recommend you revisit your growth goals and consider each of the four market strategies. Answer the question, ‘which strategy could help with each goal?’

 

Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 10th May 2023.