Target market analysis: how to size and choose the market to sell to first

Target market analysis compares a few candidate markets on the same questions and picks one to sell to first. The questions are: how many potential buyers there are, who pays, how easy they are to reach, how strongly they feel the problem, and what they use today. Public data answers the counting questions. Conversations with people in each market answer the rest, and those usually decide the choice.

This page is about choosing between markets. If you have already chosen and need to describe the people inside it, target audience research covers that. How to choose your first customer segment covers defining segments by the problem they share, which is a good step before this one.

A worked example: a reminder tool for clinics

Suppose you have built a tool that sends appointment reminders and "you're due for a checkup" messages for small clinics. It could fit dental practices, optometry practices or veterinary clinics, and you can only afford to build integrations and marketing for one. The product and the interview findings below are hypothetical. The employment figures come from the U.S. Bureau of Labor Statistics.

Write the criteria before you look at data

Decide what makes a market attractive before you see any numbers, so the numbers do not pick the criteria for you. The SBA's market research guide lists useful ones: demand, market size, economic indicators, location, market saturation and what customers pay for alternatives. For a business product, add who signs off on the purchase and how you would reach them.

A workable list for the clinic example:

1. How many practices could buy it.
2. Who decides, and whether they can say yes without a head office.
3. How much a missed or late appointment costs the practice.
4. What they use for reminders today, and how satisfied they are.
5. Whether there is a practical channel to reach them, such as associations, conferences or software marketplaces.

Count each market with public data

The Bureau of Labor Statistics' Occupational Outlook Handbook gives the number of jobs in each profession and the industries that employ them. Multiplying the two gives a rough count of practitioners employed in practice offices, which is closer to your buyer than the headline figure. BLS lists self-employed practitioners as a separate group, so this count leaves them out.

Two cautions. First, these are counts of practitioners, not practices, and a reminder tool is bought per practice. For practice counts, use the Census Bureau's County Business Patterns, which reports the number of establishments with paid employees by industry, employment size and county. Second, the industry split tells you something about how the market buys. BLS reports that 13% of optometrists work in retail trade, where purchasing is probably handled centrally rather than by the optometrist. That part of the market is likely a different sale.

Size is one criterion, not the answer. The largest market is often the one with the most competitors and the most built-in alternatives.

Answer the other questions with conversations

Data cannot tell you how much a missed appointment costs, what the practice uses now, or who approves the purchase. Speak to five or six practice managers or owners in each market and ask about a recent specific event:

Tell me about the last week you had several no-shows. What happened, what did it cost you, and what did you do about it?

In the example, suppose the interviews found this (hypothetical):

• Dental: most practices already send reminders through their practice-management software and see little reason to add another tool.
• Veterinary: reminders for vaccines and annual checkups bring in a lot of revenue, and several managers complained about their current reminder setup.
• Optometry: independent practices were interested, but a large share of the market sits inside retail chains.

Market research interviews with customers, suppliers and operators covers whom else to speak with, such as the software vendors and consultants who sell to these practices.

Compare the markets side by side

Put the evidence into one table and mark where each rating comes from.

In this hypothetical, veterinary clinics win despite being the middle market by size: the pain is stronger and fewer practices are happy with what they have. Dental is bigger but already served. That is a common pattern, and the reason to finish the interviews before choosing.

Test the choice cheaply

Before you commit, set a test with a result you decide in advance. For example: "If we contact 50 veterinary clinics in one state and fewer than five agree to a two-week trial, we revisit the choice." A real response to a real offer is stronger evidence than any rating table.

Your next step

List your candidate markets and write the five criteria you will judge them on. Fill in the counts from public data in an afternoon, then schedule five conversations in each market to fill in the rest.

When you do not know anyone in a candidate market, Instant Expert can find people who match a description you write, such as "practice managers at independent veterinary clinics." You review who it finds, it sends your invitations, and you pay only for calls that get booked. The directory pages for operations professionals in veterinary services and operations professionals in dental services are one place to start.