Tips for Identifying Your Customer


Before you start a new business, you may have a general notion that there are customers who need exactly what you want to sell.

Maybe you’ve noticed the need for your product or service on an anecdotal basis. You waited too long to get a massage at your local spa or you can’t find the brand of coffee you desire at your local café.

That gut feeling that something is missing is not to be dismissed. To convince others that your idea is of merit you will need to present the facts.

A key step toward enabling others to take your business as seriously as you do is to be able to define your potential customer.

Get estimates

Define the number of people or businesses within a defined geographic area who will need your product or service. Reliable sources to find such information include the Small Business Administration (sba.gov) or the federal government (fedstats.gov). Look also to professional or industry associations that serve your particular industry. They may be able to provide useful data or statistics on your potential market.

Narrow your estimates

Once you’ve identified a large pool of potential customers, you will want to begin to narrow that group. If, for instance, you want to sell a grooming tool for cats, you will want to retain the cat owners and eliminate the dog owners from your potential market.

Develop a customer profile

To better define your potential customer you will use demographic information such as gender, location, martial status and income and psychographic information, which covers such items as hobbies, interests, values, attitudes, behaviors, and lifestyle.

Demographic information pinpoints customers who would buy your product. Psychographic information answers why they would buy it.

In the example of your cat grooming tool, you might decide, for instance, that’s it’s too pricey for a cash-strapped family. Instead, you may define your ideal customer as well-to-do cat owners who are willing to pay for a tool to ensure their felines look fine at cat shows.

Estimate your market share

Identify the other companies in your area that are selling a similar product or service to yours. Find out what their annual sales are.

Talk to potential customers

Survey potential customers. Present your survey by e-mail, paper or use a web-based service. One goal will be to learn if they would be willing they to try your product or service. Remember that interest doesn’t always translate to action so you will need to take that into account. Interview them, too. A trade show, for instance, can allow you a chance to meet with potential customers and chat with them about their needs and how our product might fill them.

Final result

The end result should be definition of your potential customer that is based on research rather than a gut feeling. Don’t worry if your segment of the market seems to decrease as you do your research. There are many successful companies that thrive on serving a well-defined piece of a much larger market.

For more tips on identifying your customer, go to the Quickbooks blog.