business-plan, target-marketI’m working on an idea where the potential market is all consumers who go on vacation; It’s a travel related business.
Are there any processes or best practices for narrowing down your total potential market to a target market. So far, I’ve only come up with starting geographically.
Narrowing down your customer base comes down to “who should I spend most of my efforts on”, which means, “who will make me the most money”, correct?
So for one, I would assess which segments give me the most profit vs effort and zoom in there.
Second, I would also consider risk. Is it risky to just focus on this narrow segment? What if there are some seasonal factors which mean that I won’t have business from this segment in winter months, for example?
So while zooming in on the most profitable segment, I would also have smaller level commitments with other segments, to spread the risk - roughly 70% - 30%.
The caveat is that if you feel that you know that lucrative segment (and risks) in and out, you should try to scale down on the other less profitable segments. When there’s space to grow or innovate in your core segment, you should focus on developing more product/service lines to increase revenue.
As a side note, CNBC’s “profit”, is a great show that focuses a lot on how to zoom in on your most vital/profitable segments. Much recommended.
As your product becomes more specialized, so should your market. Every business has one core service they do extremely well, and until you find out how that core functionality behaves, it's basically impossible to logically break down your target market to make it specific enough to mean something. Look at companies like Starbucks, Walmart, or even Chipotle. Concepts change, and you eventually adapt to your market and cast your net in the most logical place to catch as many fish as possible.
It should basically be a one to one relationship.
Start with people who like vacations.
Find what sets you apart from other vacation companies.
Find the subset of the generic "vacations" market that applies to your subset service.
Market away and have fun fishing :)
The idea, then, is to try and build your business in a way that the subset of people in the vacation industry like your service so much that they adapt to it, and can't help but share their increased happiness and share it with their other vacationers. That's how you build retention and loyalty. Your company becomes a brand, and everybody knows you for that brand - so make it strong.
If you want more resources, check out this article on the importance of specifying your target market - offering one core service is how every large business started. It's just how people work. It's just like any other process - break it down until you've identified the core components of a customer that would actually buy your core service. That's how you break it down.
Hope that makes sense. Best of luck in your ventures.
Please consider getting Travel Handbook that is released annually and contains tremendous amount of data as to where travelers go and what they do. For instance, I was shocked to learn how many people travel for primary reason of bird watching and butterflying.
Most of the travel money goes to food, which is expected.
I have version from 2009 and can get you some numbers if needed, but you better use most recent. You’ll be pleasantly surprised with the amount of data.
http://www.rkma.com/report-detail.cfm?report_id=105
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