It’s time to start thinking about who is going to actually BUY from your business. Most companies have more than one type of customer. Take a moment to think about one of these customer groups, or “target markets”. Do these customers share any physical and/or behavioral characteristics? Why are they attracted to your product? What need does your business fill for this customer? Is it an emotional or physical need?

There are two main categories of describing your customer base. One is looking at your customer base from a demographic prospective, and the second is looking at the benefit variables. So what does this mean in plain English?

Demographic variables lump your customers together, often by physical and statistical characteristics. This is sometimes called “population segmentation” because it looks at statistical information based upon a population and then divides people into groups. For example, what is the age range of your customer base? Are they mostly male or female? Are people of a particular ethnicity and/or religion particularly attracted to your business? What kind of household income do they have? In what zip code do they live? Do they own or rent their apartments? Do they live by themselves, have roommates and/or families? Are they married, single or divorced? Do they have kids? What kind of jobs do they have? Do they own cars? What is their educational level? A great free source of demographic information is the US Census, conducted every 4 years: http://www.census.gov/. The “American Factfinder” section presents the information in an accessible manner.

Demographic data can become particularly helpful if you have a location-oriented business. For example, you want to open a restaurant, bookstore or clothing store in a specific neighborhood. By checking out the neighborhood demographics you should have a better sense of who is actually living in the neighborhood. For example, if you want to open up a daycare facility in a particular neighborhood, it would be helpful to find out what percentage of the local residents has children. If it’s only 2% of the population, perhaps there is not enough demand for your business to be profitable. Or if you want to open an upscale clothing boutique where a dress retails for a minimum of $200, you want to make sure the population has enough money to afford the clothing.

Demographic information only tells part of the picture. As you know from experience, not everyone who has a household income of $250,000 feels the need to purchase a $200 dress. This is where describing your target market according to benefit variables becomes useful.

Describing your customer according to benefit variables looks at what are the needs or benefits that your customer seeks.

There is a music educational program for babies and toddlers in my community. The business has been operating for about a year and the owner is in the process of developing a marketing plan. She researched the demographic information, but found that it was a bit broad for her needs. She wanted to start analyzing her current customer base. So we discussed benefit variables for the types of customers. To develop a list of benefit variables, we asked, “why are people purchasing my services?” or “why does a parent enroll his/her child in my class?” Here are some of the reasons:

* Parent thinks music education is important
* Have a fun time doing the classes
* Want a place where the young child can socialize with other children
* Classes are at a reasonable price
* Location is convenient
* Class times are convenient
* Like the instructors
* Want something to do
* Doing it because a friend is also enrolled

So you can see that even though 95% of the participants might share the same zipcode and other demographic information, what compels the individual to make a business purchase can significantly vary.

A third way to describe your target market combines demographic information along with consumer spending patterns and behaviors is “psychodemographics”. Basically select market research companies have analyzed not only a population’s demographic information, but also looked at what they have spent their money on as well as their socio-economic status. They’ve developed a series of categories that describe different types of people, such as “Bohemian Mix”, “Urban Achievers” and “Landed Gentry”. To get a free taste of what this is, visit MyBestSegments.com. You usually need to purchase psychodemographic information.

Ultimately, when developing your business plan, your goal is for the reader to have a clear picture of who exactly is your customer. So in reality, most customers are described by using benefit, demographic and psychodemographic variables.

Developing a customer analysis is often a lot of work and requires a combination of market research, intuition, common sense and risk! I’ve found many business owners, especially of new businesses, find the process intimidating. To get started, I suggest just brainstorming 5 different types of customers. Use whatever variables come to mind, whether they are demographic or benefit. Try to add as much detail to your description as possible and don’t worry about it being correct – you’ll make sure it is later on. The main thing is to get this process going.

After you have this list, then start using some of the above sources to start checking out whether your gut and intuition matches reality.

More tips and techniques on marketing next issue!