Market identification helps you define your business’s target market so that you can best serve and advertise directly to your real customers. To identify your target market, you first need to answer these questions:

• What are you selling, and what makes it so unique? 
• To whom do you want to sell it? 
• Why should people buy the product or service from you? 

When you have the answers to these questions, you should do two things:

• Focus on your primary market 
• Research your market
   

Many business owners fall into the trap of believing that their products or services are “for everyone” or they target "anyone interested in my services." Some say they target small-business owners, homeowners, or stay-at-home moms. These targets are too general. 

Targeting a specific market does not mean that you are excluding people who do not fit your criteria. And even if your business appeals to a broad market of diverse consumers, you need to identify who your ideal consumer is. 

After you have identified your primary market, your advertising should match that focus. Identifying your market allows you to focus your marketing strengths and brand message on a specific market that is more likely to buy from you than other markets. This is a much more affordable, efficient, and effective way to reach potential clients and generate business.
 

Analyse your customers: You will want to include demographics such as age, income, and location here. You need to understand their interests and buying habits to meet their needs. See also Unit 1 of Pathways2market & customer identification course: Customer Identification.

Competitors: Who are your competitors targeting? Who are their current customers? You may find a niche market that they are overlooking. Understanding your competitors is important for a couple of reasons: on the one hand you would like to know who are you going to compete with, but it also helps you to unveil competition’s weaknesses. 
Who are your main competitors? Are there also any secondary competitors who could impact your business? What are their strengths and weaknesses?  How am I different from competitors on that market? What are my advantages and disadvantages? What are my unique features? Is there anyone offering a similar product? Be careful with a statement like “there is no competition”. It is uncommon to be in a market without competitors. If you really believe there are no competitors, ask someone to search for you. If you still don’t find any competitors, there might be a logical explanation - maybe you are targeting a market that is not viable for such products. Don’t be afraid of competition. Even if there are many competitors and the market is fragmented, it can be good news for you: you are probably offering a product that is really wanted by your potential customers
 

Barriers: What are the potential pitfalls of entering your target foreign market? What are the costs of entry? Can anyone enter the market? Do I have the capacity to serve the market from my home country? Am I able to ship to the selected market? Is my product culturally acceptable? Can I speak the local language? Do I have access to distribution channels? Can I offer a competitive price (including shipping costs)?

Regulations: Are there any specific regulations or restrictions on your target market? If so, what are they and how you are going to comply with them? What is the cost of compliance?

Opportunities: Are there particularly favourable times in the year to enter? Is there an opportunity to get in early to take advantage of an emerging market?
 

Determining the characteristics your potential target market and analysing this information will help you make decisions whether and how to enter. Once you've decided on a target market, be sure to consider these questions:

• Are there enough people who fit my criteria?
• Will my target really benefit from my product/service? Will they see a need for it?
• Do I understand what drives my target to make decisions?
• Can they afford my product/service?
• Can I reach them with my message? Are they easily accessible?
   

Don't break down your target too far! Remember, you can have more than one niche market. Consider if your marketing message should be different for each niche. If you can reach both niches effectively with the same message, then maybe you have broken down your market too far. Also, if you find there are only 50 people that fit all of your criteria, maybe you should re-evaluate your target. The trick is to find that perfect balance.

How do I find all this information? Try searching online for research others have done on your target. Search for magazine articles and blogs that talk about or to your target market. Look for survey results, or consider conducting a survey of your own. Ask your current customers for feedback.

Identifying your target market is the hard part. Once you know who you are targeting, it is much easier to figure out which media you can use to reach them and what marketing messages will resonate with them. You will save money and get a better return on investment by defining your target audience.
 

Knowing your target audience is critical: Your ads will not work if they don’t appeal to what your potential customers want or need. Research and find out as much as possible about the people you want to sell to.

Market analysis studies the attractiveness and the dynamics of a special market within a sector. Understanding how the potential market works and what customers want is key to your success as a rural microenterprise. 

Market identification should help you spot where to focus your efforts and how to maintain a competitive business. Your market identification should include: sector overview, target market definition, competitors’ analysis and regulations compliance. Small businesses can effectively compete with large companies by targeting the right market and with a clearly defined target audience, it is much easier to determine where and how to market your company. 
 

Here are some concepts that you need to explore to define your target market.

Sector description: What is the current state of your sector in the target country and where it is headed? What is the market size? What are the current trends? In which life cycle stage the market is, and what is the projected growth? 

Target market - While the scope of the previous section of your market analysis is general, the next step must be specific. You need to establish a clear idea of your target market before you decide whether to enter or not. Lots of businesses think that everyone is their potential market, but, in fact, they are definitely not. 
By narrowing in on your real customers, you will be able to direct your market entry efforts and limited resources and capacity more efficiently. How many customers do you want to sell your products to within the first year on the foreign market? This is a proportion of the market you want and can reach with your products.
 

Market size: Try to estimate how much is spent annually on your product category. This will tell you the size of the potential market for your products. Estimating market numbers is probably not the most enjoyable part of the market analysis. However, it truly helps you to get a basic understanding of how big the potential market is, and whether it is big enough to start a profitable business there. There are two basic rules to follow: 1) always look for numbers from reliable sources (e.g. statistics from government or private sources, objective figures from online marketplaces etc.); and 2) stay conservative. 

Total market: How many customers want/need the product or product category you plan to offer? How large is the market in terms of units sold or sales? 

Serviceable market: How many customers can I reach with the sales channels I am considering to use (e.g. online marketplaces, partners etc.)? Try to estimate what is the growth rate of your total and serviceable markets. Is the number of customers growing?