Unless you have the resources of a globetrotting multinational, it is not financially viable to target everyone.
So, businesses need to be innovative. And find the market segment that is most likely to buy from you. A well-defined target market can help businesses to compete.
Your business must understand a market's potential. The data you acquire based on size, needs, and stakeholders can inform your decision regarding engagement and how to target leads, convert and win revenue effectively. And allow you to find further opportunities with accounts with similar firmographic needs.
So, this article will look at how companies can understand their target market and grow it by identifying matching accounts.
We will be looking at:
- The benefits for your business by identifying the right target market
- The importance of size in a potential target market
- How to breakdown your target market into different subsets
- The importance of understanding your TAM
- How you can find matching accounts
- How many accounts do I know of that could be of value in my CRM? And how many remain undiscovered?
The opportunities a target market can bring
Whatever the circumstances, businesses need to know their target market, the section of the marketspace where they expect to sell most of their products.
By identifying your target market, you learn about your buyer demographics. With a better idea of what and who your target market is, the data you possess on their needs, alongside the right resources and execution, can ensure you effectively target these specific groups.
What are the benefits of finding the right target market?
- It reduces customer acquisition costs: less time and money on marketing.
- Improves win rates. Customers are saying yes!
- Increases sales efficiency. You have found customers and a market that needs what you sell.
- It helps to build a more recognized brand. Your growing presence in a market segment, increasing your visibility and the opportunity for potential customers to learn about your work.
- It allows you to focus on product development, aligning your customer and target market needs with your future.
Why does the size of your potential target market matter
You need to think, is your target market profitable enough for continual targeting? Is there room to grow and unearth new matching accounts?
It is crucial businesses find high potential market segments for their products. For example, are there enough business accounts that fit your specific criteria and have a steady need for what you sell?
And so, you should consider these requirements for both the target market and your matching accounts:
- When you measure the market segment, what is its scope for growth?
- Is the market reachable? Can you access and engage with potential customers?
- The segment's size can determine a return on investment. Is the number of matching accounts and the possibility of more attractive enough to guarantee profitability?
- And, is the task doable? Can your business deliver what your target market requires? Are you able to satisfy the demand?
Why it is important
It is crucial to understand a market's potential. Entering a new market and asserting yourself is a significant business challenge and comes with many risks.
Therefore, you need to build your knowledge of the potential market size and who your potential customers are. And creating different sub-segments within your target market can help you more granularly target prospects with relevant messaging.
How you can estimate the market size
To better grasp the potential of a prospective market, your business should consider:
- Market research. Learn about the nature of a market through articles, whitepapers and case studies.
- Financial reports. Businesses release their financial information, which can help you understand the market and competitors' plans.
- Interviews. Engage with those already well-placed in the industry. What do they think about the market, its potential, customers and challenges they face? Through this, you can better understand the demographics of those you will be working to acquire.
How to breakdown your target market
You can evaluate your company's different opportunities with these subsets of a market:
Total Addressable Market (TAM)
TAM considers the total market demand for your services. Therefore, it is helpful for businesses as it factors in the entirety of the market. In addition, it can help you objectively estimate whether this market has the capacity of further matching accounts.
Serviceable Available Market (SAM)
SAM offers a more realistic vision of a company's business model. It factors the specialization of a businesses' products and the geographic location that is unlikely to service the TAM. It allows companies to estimate the likely portion of the market they could acquire based on what they sell and other contributing criteria.
Serviceable Obtainable Market (SOM)
SOM can help you to understand how many customers will realistically benefit from your products. Finding your company's SOM is essential. This is because it offers practical limits. The SOM can help you find out precisely who will buy your products.
Why is TAM important?
Understanding your TAM informs you of a market's potential and stability. By calculating the total market size, you see the maximum potential and the market opportunity available.
So, you can then target the customers who are ready to buy. Knowing your TAM highlights the total revenue opportunities available to your product and the total number of companies that could go on to become customers. Thus, helping you to be:
- Realistic about your prospects
- Ensure you find those most receptive to your products, so you don't target the wrong audience
- Optimize your sales efficiency. Only target the accounts that are a great fit.
- Increase win rates, customer retention and renewal.
How can I calculate TAM?
To best estimate your market opportunity, you can use the following approaches:
- Bottom-Up. Using your data from old sales, and depending on the quality of data in your system, you can build market boundaries and sales goals that will help estimate revenue sums and potential for growth.
- Top-Down. This uses industry research. The inverted pyramid, where the narrowest part represents the end-user profile. This helps to determine how many end-users meet your market criteria and how big the industry is.
- Value theory. What do the customers find necessary and are willing to pay. The approach estimates the value customers gained from your products, and thus with its eyes firmly on the future, how much would a customer be willing to pay, affecting your pricing.
In search of matching accounts within your target market
Unfortunately, it isn't as simple as finding one account in your target market, and like pulling a rabbit out of a hat, a regular train of customers appears.
It's often a struggle for businesses to find these accounts. So, to look beyond traditional modes of finding a company via Google, business registries or LinkedIn, enterprises require innovative means in creating a target list of accounts.
How to identify your matching accounts using TAM
Understanding your TAM is not only for estimating your market opportunities. It is a valuable tool to build lists to aid further segmentation and targeting of potential accounts. You know there is potential in a market, so you can keep looking for accounts with similar attributes and purchasing behaviour.
TAM enhances your understanding of accounts. You can see trends of who buys the most and gets the most value from your production. The a great fits helps your building of lists. You can build profiles of your most profitable markets. With the firmographic data you possess on their attributes, their size, location, revenue, company audience, you can understand their needs and have the means to generate leads beyond.
Understanding what constitutes a profitable market and account for you, you can use your lists to find matching accounts with similar characteristics. So you can expand your market knowledge and presence. With an understanding of your TAM, you can build your lists intelligently and engage the customers ready to buy what you sell.
To learn further about maximizing opportunities to find customers with the characteristics you desire, read our article on how companies can discover their Ideal Customer Profile here.
How many accounts do I know of in my CRM? And how many are undiscovered?
There is a world of opportunity beyond your current customers. But, unfortunately, finding the matching accounts that are an ideal fit remains a challenge.
Think of your market as an iceberg. First, you have the your current accounts on the surface; then a little lower are accounts you have a vague awareness of. But below the water, it remains a mystery. You can't tell how deep the iceberg or TAM goes and how many potential accounts are out of sight.
How can a CRM help identify matching accounts?
CRM software is your window to opportunity. It is a critical tool for businesses as it provides a centralized dashboard to store all your customer information in one location. In addition, it can offer you a data-based representation of your business activity and segments.
How Ocean.io can help you understand your CRM data and find matching accounts
Ocean.io uses AI technology to find the most suitable market segments based on data in your CRM. It then surfaces all matching accounts from the Ocean.io database.
With Ocean.io, it’s simple to calculate your TAM, and uncover your most valuable target market. You can create target account lists with high sales potential. Setting you up for long-term success!
Finding the accounts to make your business soar
In a dynamic and constantly evolving marketplace, it is pivotal for businesses to learn about their target market. So, they can best engage with the audience in need of their products and grow their customer base.
It is essential to think about what constitutes your target market and when identifying new matching accounts. When doing this, you must consider:
- To whom do you sell the majority of your products? What market is most profitable?
- What is its size, is there scope for further expansion and segments ready to be engaged.
- What is the makeup of your target market, and what demographic characteristics define your existing customers?
- You can channel the knowledge into identifying accounts with matching requirements and promising new markets.
- The importance of variables such as location and the size of the market segment in finding matching accounts and achieving your business aspirations
- As well as the importance of your CRM. In its data-driven approach, it can help guide you to matching accounts, both known and yet undiscovered.
It is time to understand your TAM. With knowledge of your target market, you can build an understanding of what businesses require. The needs they have, and how you can help solve them. So, it is in your interest to delve deeper into your chosen segment to learn how to provide this market's solutions. Thus, bringing you to the attention of more matching accounts.