"Start where your audience is" is a maxim in marketing -- and for good reason. Successfully identifying a target market is an important step in the process of forming and maintaining a profitable business. Crucial decisions about marketing issues, such as the type of ad to lead off a campaign with, are based on the target market. Companies consider several important factors when identifying a target market.
The location of a business is a key consideration of who will make up its target market. For example, New Jersey residents are not a target market for a fast food restaurant located in Manhattan. In marketing terms, such residents are "geographically undesirable." However, if the same New Jersey residents worked in Manhattan, then that would make them potential customers provided they meet other criteria, such as being fast food consumers.
Another important consideration in identifying a target market is the demographics of the market. Demographics pertain to the statistical characteristics of segments of the population. That includes age of potential customers, their ethnicity, their gender, their annual income and the highest level of education they have completed. Depending on the type of business you propose, demographics may not be very important. For example, McDonald's cuts across a broad demographic swath; however, the company is savvy enough to target different markets with unique communications such as the "Me Encanta" advertising campaign aimed at Latin Americans.
Psychographics focus on psychological variables such as attitudes, values and fears. Companies use psychographics to evaluate the lifestyles and attitudes of target consumers. For example, McDonald's is renowned for its Big Mac, yet in India, the chain offers no beef. This stance is an acknowledgment of the attitudes, values and opinions of most Indian consumers regarding the consumption of beef. Another example of psychographic segmentation is the increased efforts of beauty companies to target men by building new, more "macho" brands to sell roughly the same products to a different consumer.
It is important to identify target markets using as much data as possible about your specific business, so that you remain as flexible and open-minded as possible to new applications of your product and new target markets. For example, Ignighter is a dating site that a group of New Yorkers launched that had unexpected growth in India. The firm responded by recruiting staff in India and setting up an operation there to capitalize on this opportunity.