How to Tell Target Customers and Potential Customers Apart

Vũ Khôi

Author at Wotech Electronics Blog

In the fast-developing era of Industry 4.0 and its fiercely competitive markets, correctly identifying target customers and potential customers is the first step of every successful business strategy. So what are these two customer groups, why do they matter so much, and how should they be properly identified? Follow along with SimERP in the article below.

What Are Target Customers and Potential Customers?

To analyze the market effectively, build solutions that strengthen your competitive edge, and design a business strategy aimed at the right customer base, clearly identifying target customers and potential customers is essential.

Target customers are the customer group within the market segment a business is aiming at — people who have both the need and the ability to pay for its products and services. Target customers fall into 2 groups:

• Potential customers: the group that has not yet paid to own the product but has both the need and the ability to pay for that product/service

• Actual customers: the group that has already paid to use the product/service

There are 4 types of potential customers businesses aim at:

• Customers who have a need but don't yet know your brand's product/service

• Customers who are researching the products/services and solutions your business offers

• Customers who are torn between your product/service and a competitor's

• Customers who are using a competitor's product/service

So, is there any difference between target customers and potential customers?

We can understand potential customers as the subset of target customers, because both share essentially the same needs and the same desire to experience the product/service. Moreover, both target and potential customers can become actual customers — the people who own and use the product/service. However, correctly identifying potential customers is always the more important objective for a business when launching sales-boosting campaigns and pursuing future growth.

Why Clearly Identify Target Customers and Potential Customers?

Correctly identifying target customers brings a business the following benefits:

• Saving time, money, and resources on ineffective marketing activities

• Targeting the right audience increases the effectiveness of creating and executing business plans and campaigns

• Helping you correctly identify potential customers

Why do so many businesses strive to identify their potential audience? Correctly identifying target customers is the necessary starting point for identifying potential customers, and this can bring the following benefits:

• More loyal customers: these are customers who emerged from the potential customer group in the past; after experiencing the product or service and having positive experiences, their goodwill and loyalty grow. They then trust and decide to keep using the company's products/services.

• Higher sales and profits: potential customers are willing to pay for products/services when they receive the experience they expect from them. So identifying potential customers helps you develop solutions and strategies that improve customer experience effectively and capture value from them now and in the future.

• A growing pool of potential customers: when potential customers have a positive experience with a product/service, they are happy to recommend it to other customers who need it.

• A measure of business performance: business performance is strong when you have an effective competitive advantage, attract many potential customers, and retain them. Misidentifying potential customers leads to poor business results, high costs, and depleted resources.

How to Identify Target Customers

Build a Target Customer Description (Customer Avatar)

When you hear "customer profile," you probably think of demographic information such as gender, age, occupation, salary level, and so on. However, in today's fiercely competitive market with constantly shifting demands, demographic data alone is not enough.

A target customer description consists of 5 main components:

• Demographic information: stores details such as name, gender, age, occupation, education level, etc.

• Goals and values: describes what consumers want and hope for from the product/service, and the values they aspire to in the future.

• Sources of information: through which sources/channels do your customers discover and access the product/service? Identifying the channels customers use to research products helps you choose the right marketing channels.

• Customer challenges and pain points: helps you identify the challenges and difficulties customers face that need solving throughout the customer lifecycle.

• Obstacles and role in the purchasing process: identifies the obstacles customers encounter that lead to a decision not to use your product/service.

Without a customer description, team members will each have a different view of the customer profile, leading to inconsistent customer care strategies, weaker business performance, and solutions that fail to reach the right customers.

Market Research

To be more confident about the information your business has, you need to conduct market research to clearly understand today's consumer needs and behavior. There are 2 types of market research you can carry out:

Secondary Market Research

This method collects information from readily available sources: government agencies, non-profit organizations, associations, trade organizations, individual research theses, and so on. These sources are usually free and easy to find on the Internet, in books, and in documents, saving the business both cost and time.

However, this method has one major drawback: it cannot be tailored to the specific needs of the business the way... For example: you can learn email marketing click-through rates from published studies, but you won't know how ready your target customers are to buy after clicking.

Primary Market Research

This is an indispensable method for any business activity. Carried out directly by you or by a service provider, primary market analysis meets your exact needs in understanding customer needs and behavior and measuring their satisfaction. You can do this through the following steps:

• Surveys: run surveys to learn more about your customers. Survey types include: in-person interviews, email surveys, phone surveys, online surveys, and tracking behavior across the Internet, social media, wifi, and Big Data.

• Interviews: by talking with people you trust whose buying habits match your business, you'll receive plenty of useful feedback for upcoming campaigns.

• Focus groups: gather feedback from customer groups matching your customer profile through Q&A sessions and discussions.

Re-evaluate the Products/Services You Offer

After building the customer description, seriously re-assess your competitive advantages as well as the weaknesses that hinder the customer experience of your current products/services.

When the market shifts, customer needs and behaviors shift with it. So re-evaluating your products/services and having a research strategy to promptly update your customer descriptions appropriately — along with solutions that improve the customer experience — is an effective way to strengthen your competitive advantage.

Research Competitors

An effective way to understand and reach your target customers is to study what your competitors are doing. By learning about the channels and strategies they have deployed, you can find out why your target customers choose their products/services.

There are 3 types of competitors:

• Tier-1 competitors: businesses with the same target customer group or similar products/services to your company

• Tier-2 competitors: businesses in the same industry selling substitute products

• Tier-3 competitors: businesses that are not direct competitors today but could compete in the future if they expand their product lines

So what exactly should you do when analyzing competitors?

• Identify and classify competitors

• Record the basic information needed for analysis: general company information, customer base, competitor revenue

• Analyze product characteristics and technological strengths/weaknesses

• Understand their target customers, brand recognition levels, and the channels/platforms competitors use, through analyzing their customer base

• Analyze the competitor's SEO

• Understand the competitor's positioning: who is their target customer group, and what message are they trying to convey?

• Compare pricing: assess whether your current prices are high or low, and whether you could penetrate a more advantageous market segment

How to Identify Potential Customers

Identifying target customers is the necessary first step toward finding your potential customers. Below are the effective tools you can apply.

Online Advertising Tools

Online advertising is a strategy that uses the Internet to reach audiences, increase website traffic, and deliver the right message to the right customers. In today's fast-developing digital era with its fiercely competitive environment, this is the advertising format many businesses invest in and develop the most. Here are some of the most commonly used online advertising tools:

• Display ads: allow you to place image/video/text ads on third-party websites

• Social media ads: use images/videos/banners on media channels such as LinkedIn, Facebook, etc.

• Search engine marketing (SEM): the process of gaining website traffic by purchasing ads on search engines such as Google, Bing, etc.

• Video ads: publishing video ads across channels such as Facebook, Twitter, Vimeo, etc.

• Email marketing: using the email channel to market products/services

Social Events

Making the most of large event celebrations, mall programs, music festivals, and so on is a great way to introduce your products/services to customers and attract many potential customers. You can also use your personal network to connect your business with more people through social media and other promising channels.

Affiliate Marketing

Affiliate marketing is an effective way to promote products to potential customers that you often encounter on social media pages or published blog posts. By sharing product links with users, whenever they click the link and decide to buy, you receive a commission at the agreed rate.

Telesales

Telesales is the department within a business responsible for calling a prepared customer list, then advising and persuading them to use the product/service. It is the most widely used method, but the telesales team needs solid professional skills and must reach the right potential customers to be effective.

Forum Activity

Discussion forums are an effective channel for businesses to attract and reach potential customers. By regularly posting articles with useful information and practical solutions for users, you catch Google's attention — and potential customers will easily find your posts appearing in the search bar.

Conclusion: beyond correctly identifying the target and potential customers your business is aiming at, you need to carry out regular market and customer research to collect, supplement, and update information about consumers' changing needs and behaviors. Through the identification guide above, SimERP hopes you will succeed in correctly identifying your target and potential customer groups and in running campaigns that fit each customer group effectively.

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