Chapter 2: How to Determine Your Target Market
Understanding who your target market is, is probably one of the key rules in understanding your business. In school, and I'm talking to you like, a very fancy college and a very fancy degree that I honestly I could use as toilet paper, because all they taught us was know your demographics, and demographics lied to us. I can give you a hundred different examples of people that have million dollar homes and they drive fancy new cars, and they have two kids in private school and where does that customer shop? They shop at Target, because they're completely maxed out.
Understanding the demographics is not as important as understanding the psychographics of the consumer. The reason why they buy things. If we take this last economic crisis, we see that designer shoes, which is classified as shoes over $800, they never lost a hiccup in sales. Never. That means that during this crisis, people, their value system was different. They might have given up taxis, or lunch dates or you know, exotic vacations but they weren't giving up their shoes. Understanding the value system of a customer and what's important and where they spend money is very important along with knowing their shopping routine.
You might say to yourself, well I'm going to open up a store in this location because there's nothing like it. There's a reason why there's nothing like it. Some of my clients in the Caribbean, their competition is actually Miami. People will get on a plane, fly to Miami, go shopping at the outlet malls and come back to their tropical island. Understanding the shopping patterns of the customer is very important too. The other thing is understanding price resistance. This is very scientific and people spend all day long studying why people will pay more for something and less for something else.
Think of it this way, when you wake up in the morning and you want to buy yourself a little cardigan. You go to the store, you try on a couple of them and all of the sudden you look at the price point and your brain says what? It says, oh my God, this is so expensive or this is the right price, but you didn't wake up saying to yourself, I'm going to pay $12.95 for a cardigan sweater. That's understanding price resistance. The next thing is sizes. People forget that we come in all shapes and sizes and I think a lot of lost business is due to not knowing the sizes.
The last thing I want to talk to you about is the overall image of your store. I'll give you this example, everybody goes to Whole Foods and they feel good about themselves, that they're buying organic products, right, but did you know that Wal Mart is the largest retailer of organic products? But you don't get that crunchy granola feeling at Wal Mart that you do at Whole Foods. Understanding the image and understanding the consumer's behavior is very important and understanding who that target market is.
I want to leave you all one last thing, we're all familiar with Anthropology and how great we feel when we walk into the store and we walk in looking for that cardigan sweater, and we walk out with a lampshade. These people know their target market so well that they can sell you a lampshade, a tea cozy or a doorknob along with that cardigan sweater.