How to Identify Target Markets and Buyers

In this post, I’ll explore how to choose target markets and who you sell to in those markets. To learn more, check out my new book, Commercialize: How to Monetize, Sell, and Market Productized Offerings in Professional Services, written with Eisha Armstrong and Sean Gillispie. 

Download the tools and templates that come with Commercialize. 

Why We Start with Who

Choosing the right market(s) and understanding the needs of the market is where all great commercialization strategies start.

This includes:

• Which customers will be interested in this new product?
• Who is the buyer at those customer organizations?
• What are the characteristics or personas of each target customer segment?
• What problems will this new product solve for each segment?
• How will they view this product versus competitive alternatives?
• What are the most attractive market segments to pursue?
  

Deciding who the best target market is for your products or services is the most important go-to-market decision you’ll make because it influences everything else. Pricing, packaging, positioning, marketing channels, and sales channels all start with your target market.

For example, TalentTether, a pseudonymed talent analytics company,  realized that the firm was spending a lot of money to land agreements with small to mid-market companies to provide customized outplacement services but was seeing little growth following customer acquisition. This is because midmarket companies typically had less frequent needs (e.g., more episodic layoffs) and smaller budgets than larger companies. One former executive described the strategy as: “We wanted to repurpose the time of our talented team members from relationship management of accounts that had limited potential to grow their spending with us to expanding the wallet share and product portfolio diversity within larger accounts. It was a big opportunity to improve customer profitability.” 

The firm made a smart business decision and created a more productized offering for the smallest companies with infrequent outplacement needs and limited budgets. But this decision to create a more standardized, lower-priced product for a different market segment had significant go-to-market consequences.

For example, a former head of global marketing shared, “We were a sales organization that was built for long sales cycles and large contract values. Initially, we thought the existing sales team would sell the new product, but we quickly found out that the sales motion was different—it was more transactional, quicker, and the value proposition was different. It also required a different marketing strategy and resource investment to support the desired lead volume.”

The firm pivoted to selling this new offering primarily through an e-commerce channel, but it took a while to build the capabilities to do this successfully. One former executive shared, “We did not fully think through the sales channel conflict implications, such as a lot of the midmarket accounts were part of existing sellers’ territories. So we had to decide if we were going to give existing sellers quota retirement for e-commerce sales or were we going to redo territories and build an inside salesforce.”

Furthermore, supporting a competitive e-commerce sales channel took significant investment. The former head of global marketing said, “At the time, we did not appreciate that success in e-commerce depends on the ability to make changes to the digital experience quickly. We were used to working in an environment where web updates were submitted to and prioritized by a centralized digital team, which inevitably took a long time to implement. We struggled to adjust to the fast-paced needs of an e-commerce platform where update frequency and speed were crucial to support a model based on rapid testing and learning. “We were trying to transition from being a high touch, white glove sales organization to an Amazon. We did not have the infrastructure to support it.”

What’s the Difference? Target Market versus ICP versus Persona

Before we dive into how to select your target market, let’s define a few terms. A target market segment, an ideal customer profile (ICP), and a persona are related concepts in commercialization strategy, but they are not the same thing. Each serves a different purpose in helping businesses focus their commercialization efforts. Here’s how they differ:

In practice, a business might identify several target market segments as part of its market strategy and then develop one or more ideal customer profiles to guide its sales and marketing tactics within those segments.

How to Select Your Target Market

Deciding which customer segments to target and defining your ICP is a process that applies regardless of your product’s maturity, though the depth and approach will vary. In early stages, it might be a quick, rough estimate. During discovery or prelaunch, you'll dive deeper, though without data on existing customers. Postlaunch, with some customer data, you’ll refine your approach as you determine what resonates. Once product-market fit is validated, use this process to hone in on segments and scale. The steps are consistent, but the technique evolves with product development.

Step 1. Understand Your Product

• Ensure you have a clear understanding of your solution before targeting customer segments, including what problem it solves, its unique benefits, and how it differentiates from existing solutions.
• If development hasn't started, prioritize selecting the most attractive target market first, and use frameworks like Tony Ulwick’s Jobs-to-be-Done Growth Strategy Matrix11 to hypothesize how your solution will outperform others:

Step 2. Identify Potential Segments

• Identify potential customer segments for your product based on factors like demographics, geography, behavior, and psychographics, focusing on those who would benefit most from your solution.
• For example, Kainos targeted public healthcare institutions, private healthcare providers, and R&D organizations with its Evolve platform, offering tailored solutions for patient records management, operational efficiency, and secure data analysis.

Step 3. Market Research

Voice of the Customer

• Understanding your customers’ urgent and expensive problems is crucial to successful commercialization. This research should be done before developing the first version of the product and updated regularly to refine the go-to-market strategy and product roadmap.
• Conduct both primary (customer interviews) and secondary research to gather actionable insights. For example, AMEND Consulting, shifted its focus to CFOs after discovering they cared more about inventory optimization than operations leaders. Similarly, TenTen Group learned through research that branding agencies should package their expertise within their services to be more effective.
  

Competitive Research

• Analyze competitors by considering both obvious and non-obvious ones, like free tools, existing platforms, advanced internal capabilities, or alternative solutions. Include future threats like major companies entering your space (e.g., Amazon).
• Your competitive research should cover their value proposition, target markets, marketing strategies, pricing, strengths/weaknesses, and potential future growth. Understanding these factors helps you position your offerings effectively.

Step 4. Evaluate Segment Attractiveness:

• Evaluate potential segments based on size, growth potential, customer acquisition cost, and profitability. This includes understanding TAM, SAM, and SOM to assess market size and potential for growth.
• Analyze factors like the cost to serve, willingness to pay, competition, and ease of customer acquisition to ensure that the chosen segment offers a profitable opportunity.

Step 5. Prioritize Segments and Communicate

• Create an ICP grid with key criteria (e.g., “solution fit” and “purchase readiness”) to prioritize segments, focusing on those with the highest potential and aligning sales and marketing efforts accordingly.
• Prioritize high-fit, high-readiness segments for targeted outreach, while engaging lower-priority segments with long-term strategies or market research for future opportunities.

Step 6. Develop Segment-Level Targeting Strategies

• Develop a targeting strategy by identifying key segments, estimating their size and needs, and positioning your product with tailored marketing messages, channels, and a resonating value proposition for each segment.
• For example, for a new environmental compliance software, use LinkedIn, content marketing, and industry events to reach manufacturing, construction, and SME sectors, with customized messaging that highlights key benefits like compliance management, project streamlining, and affordability.

Step 7. Operationalize the ICP Into the Sales Process

• Assign responsibility for screening leads against your ICP, with marketing typically handling inbound lead generation and qualification, and sales focusing on nurturing high-potential leads. As your business grows, consider creating a Sales Development Representative (SDR) role to improve lead targeting.
• Carefully select your early target customers by evaluating account dynamics and seller capabilities. Focusing on the right customers first—those who participated in market research or are in innovative roles—can drive early sales success and build momentum for your productization strategy.

Step 8. Iterate and Adapt

• Continuously monitor your product's performance and adapt your strategy by reviewing win-loss data and refreshing competitor analysis quarterly, tracking company health, product performance, and new marketing or product launches.

• Update customer research regularly through methods like advisory boards and track key metrics (website traffic, lead generation, and conversion rates) to ensure your strategy aligns with evolving customer preferences and competitive landscapes.

Target Market Selection Dos and Don’ts

To develop and commercialize new solutions, B2B firms should follow these best practices depending on their maturity stage:

Early Stages (Discovery & Validating Product-Market Fit):

1. Focus narrowly on a specific niche to learn quickly what works and gather early feedback.
2. Avoid adding new verticals too soon—build depth in one segment first to avoid spreading resources thin.
3. Mitigate cannibalization risks by analyzing the overlap between existing and new customer segments. Understand how new offerings might affect current revenue streams and address concerns early.

Later Stages (Scaling):

4. Engage with key buyers and stakeholders within your Ideal Customer Profile (ICP), tailoring messaging to their unique needs. Different personas may have different priorities, so it’s important to speak their language.
5. Prioritize “in-market” ICPs—those actively searching for solutions. These prospects are more likely to convert, improving sales efficiency and boosting your ROI.

Selecting the right initial market segment to pilot your solution can generate enthusiasm internally and create case studies that help prove the product’s value. Companies should focus on targeted buyers who are likely to support the new offering, gradually expanding into new markets to ensure sustainable growth.

By focusing narrowly at first and scaling strategically, B2B firms can optimize resource allocation, improve messaging clarity, and ultimately achieve stronger market penetration.

Don’t forget to download the tools and templates that come with Commercialize! These resources are designed to help B2B firms effectively market, sell, and scale their productized offerings. From pricing strategies to go-to-market plans, these tools will guide you in turning your ideas into action.