In this article we look at why understanding your customer and market is so important for business success.

Who is your target customer

To build a successful business one of the most important actions you can take is to really understand your target customer. A first step is to become crystal clear on who your primary customer is.

Many first time entrepreneurs want to sell to as wide a market as possible to see where they might get traction. However it is generally better to focus on a smaller niche set of customers when you are starting a new business. Trying to tackle the whole market rather than a niche is often cited by entrepreneurs as a reason for failing.

Niching helps companies stand out from the crowd, speak the language of that subset of customers, reduce the number of direct competitors and possibly allow you to charge a higher price. You may need to tailor your products or services to this niche and you will need to determine if the niche market is big enough, with enough customers to achieve your financial goals. While your market potential is smaller, once you become established in that niche you can expand to other niches or a mass market.

Understand your market

Undertake upfront market research to identify any barriers to entry such as high degrees of brand loyalty to existing companies. Understand the trends in your target market, is it growing slowly or quickly, or is it in decline. Once a trend becomes hot more entrants are likely to enter that space. Assess the industry structure using a framework like Porters 5 forces and undertake a competitor analysis.

Customers are motivated by much more than just rational evaluation. The value proposition canvas can be a useful tool that can help you to understand the needs, wants, gains and pains of your target customers.

Get out and speak with your customers.

Understand as much as possible about your customer’s behaviour. What are they currently doing to solve this specific problem and where do they feel the most pain in the customer journey. Understand the underlying motivation and context, both emotionally and functionally, and test their willingness and ability to pay. Speaking with potential customers can be difficult for some businesses but this step is really important to validate your assumptions.

Customer personas and journeys

Traditional research into demographics, building a customer persona and customer journey can be useful for some businesses. For others focusing on the specific problem you are solving will provide the clues you need to get inside a customers mind.

Listening and engaging with customers on social media can provide you with valuable insights. Surveys and looking at how customers engage with your business or content through your analytics can provide important clues to what customers see as important. At the startup stage where you don’t have your own data you can look at competitors.

The Competition

Getting outcompeted is a common cause of business failures. Some failures occur because there was simply too much competition in a price sensitive market, others where you don’t have a unique selling point that customers see as a differentiator.

Startups need to consider the possible reaction from incumbents when you enter a market. Some sectors or regions are so cutthroat that competitors are willing to win at any cost which can be difficult to compete against. Will competitors lower their prices, mount a legal challenge, spend more on marketing or launch a new product or service that overtakes your competitive advantage.

Expanding internationally

If part of your strategy is geographical expansion you need to really understand the local market and customers. What works in one location may not work in another.

Consider your route to market, it may be better to work with a local partner or distributor who knows the needs and wants of regional customers and can help you to localise your products and marketing. Even small changes that tailor your messages to the intended audience, in their language, can make a big difference.

Understanding your customer is an ongoing process. You can’t stand still, the marketplace is constantly evolving and you need to too. By truly understanding your customer your business will be well positioned to succeed.


Starting a Business is hard – that is why The First Time Entrepreneur provides online business training that guides you through a step by step process and shares the best practices used by successful startups, giving you the clarity and confidence to start and grow your business.

Where you need additional support, we can work with you through our coaching programme or do tasks for you through our outsourcing and consultancy.