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Start-Up School | Chapter 4: Identify Your Target Customer

Founders must have a clear vision of their target customer, backed by a mix of intuition and data. Understanding who will buy a product forms the basis of nearly every business decision, from marketing strategy and pricing, to whether and where to open stores.
Illustration by Elin Svensson
By
  • Cathaleen Chen

This article is published in tandem with Start-Up School, BoF’s new resource comprised of a practical guide and supplementary tools, templates and frameworks to fuel your journey to successful entrepreneurship. Become a member to access.

Heidi Zak, the founder and chief executive of bra start-up ThirdLove, could picture her customer perfectly from the moment she launched.

“We created a whole character — she’s a married woman in her late 20s or early 30s, living in Brooklyn, no kids but a dog, and has a job in advertising,” Zak said.

She was describing a woman she thought would want ThirdLove’s hero product — a T-shirt bra that fits well and could be bought online. And she was right. Since launching the brand in 2013, ThirdLove has sold over four million bras worldwide.

Every brand has its own raison d’être. It could be a market gap or a price advantage. For many founders, finding that winning advantage means starting with the customer. Understanding who will buy a product is the basis on which a marketing strategy is built, as well as other key decisions, from whether and where to open physical stores to setting a pricing strategy.

Connecting with the customer requires a mix of intuition and data. Zak had worked with a branding agency to create her customer archetype, poring over demographic data and research to confirm her initial hypotheses. Other founders take a more introspective approach, looking to their own lifestyles and that of their peers, to understand who their product may serve.

This can be dangerous however, as simply defining your customer around what you and your friends might buy can saddle your business with a bias that you may never be able to overcome. Intuition is a good place to start, but you will need some rigorous analysis to back it up.

We created a whole character ... late 20s or early 30s, living in Brooklyn, no kids but a dog.

The next step is learning how to use your customer insights strategically. For example, to limit customer acquisition costs, a direct-to-consumer brand must know what “pool” to target with sponsored ads on Facebook and Instagram, as well as which neighbourhoods their customers live and work in, to determine the best store locations. Companies are analysing more and more data about their customers and developing elaborate profiles they can use to offer personalised services and marketing designed to encourage repeat purchases.

Here is BoF’s guide to identifying — and keeping — your customer:

Picture the Customer as a Real Person

When Maria Cornejo opened her shop-and-atelier space in the Nolita neighbourhood in Manhattan more than two decades ago, she did so with one customer in mind — herself, a working mother.

“There was a disconnect at the time between fashion editorial and what people actually wanted to wear,” the designer said. “For me it was about finding that niche of timeless, interesting clothes with heart, but for working women who may have children… who need clothes that flattered them and made them feel like they were good enough.” Essentially, Cornejo created her label — back then, it was known as just Zero — for herself and her friends.

While some brands still spring from their founders’ raw intuition, most businesses in today’s saturated, digitally-driven fashion market begin with a more rigorous understanding of potential customers.

When Sterling McDavid and Emily Burnett launched their luxury ready-to-wear line, Burnett New York, late last year, they envisioned their prospective customers’ lifestyle — a working professional late in her career with a full schedule every day.

There was a disconnect between fashion editorial and what people actually wanted to wear.

Knowing that this customer will have spending power, McDavid and Burnett were able to pinpoint pricing as well. Their thousand-dollar price tags — reflecting local sourcing and craftsmanship — pointed to an older, professional woman as their ideal customer, a Wall Street woman who needs a day-to-evening outfit because she’s too busy to change between work and social functions.

“This dynamic customer of ours could be a mother and a chief executive, and also be into fitness and health,” McDavid said. “She’s got a very busy day, which is why we wanted to make things that are very wearable but chic to go with her persona.”

Constantly Study and Apply Consumer Data

Just pinpointing the right customer is not enough. In today’s digital landscape, brands have more opportunity than ever to learn about who their customers are and what they want. For instance, brands can use information about customers’ prior purchases to create personalised emails for them, as well as identifying the best-selling products and being able to craft better marketing strategies based on what resonates the most — or least — with shoppers.

Making the most out of customer data entails having a digital infrastructure to collect and accumulate transaction details and feedback, either through an in-house team of analysts or customer insight services.

For footwear start-up M.Gemi, customer feedback not only dictates how the brand markets to people but also drives decision-making in the supply chain.

The company feeds its customer data to its sourcing team, according to chief executive Cheryl Kaplan. “We had a heel in a 105 [millimetre height], for instance, and our customer loved it but many of them said, ‘Can you do it in 90 millimetres?’ So 30 days later, we had the 90 millimetres.”

This dynamic customer could be a mother and chief executive, and also be into fitness and health.

By constantly integrating suggestions and concerns for consumers, M.Gemi has been able to achieve a customer return rate of four times per year, according to Kaplan, meaning that an average customer makes four purchases every year.

Footwear brand Tamara Mellon also uses customer feedback to inform product decisions. "Your ability to deal with that feedback is why direct-to-consumer [channels] can grow so quickly," said Jill Layfield, the chief executive of the shoe label. The brand routinely uses email campaigns to A/B test certain functions, such as online product pages.

Make Sure Your Concept Matches Reality

No matter how carefully you pore over demographic data or how elaborate a consumer profile you dream up, the actual customer your start-up attracts may be surprising.

For McDavid and Burnett, the number of younger women who made sizable purchases was not foreseen. Clement Kwan, co-founder of luxury cannabis brand Beboe, imagined customers would be like him — young or middle-aged men and women “shopping on Net-a-Porter, buying Dolce and reading Vogue.” Many were, but Beboe also attracted a surprising number of older women because the brand’s luxury trappings and low dosage made them feel comfortable smoking in public, he said.

Many brands capitalise on these unexpected customers to expand into new markets. For example, Zak had built ThirdLove — now estimated to be worth $750 million according to Forbes — over the past six years by targeting millennials. But she recently noticed that plenty of customers fell outside that age bracket.

“We found that our age demo was far wider than we had originally anticipated. We have customers in their teens and 20s, but also in their 70s and beyond,” Zak said.

All the women in our 'tribe' were being our ambassadors.

Last year, one of her older consumers sent the company an email with a selfie attached of her wearing ThirdLove’s signature 24/7 bra. She wrote that while she loved the brand, she had noticed that no one in the catalogue was over 30. This inspired the company’s latest campaign, including its first national television ad, featuring real-life ThirdLove customers of all ages and sizes in every-day moments such as breastfeeding and doing yoga.

Showcasing women in their 60s and 70s, in fact, was especially well-received among ThirdLove’s younger customers. “I call it the RBG effect,” Zak said, referring to the 86-year-old US Supreme Court Justice Ruth Bader Ginsburg, who has in recent years become an icon among millennial feminists.

Social media can also be a powerful tool to mould a brand’s identity. For instance, when Nicolaj and Ditte Reffstrup took over cult Danish brand Ganni in 2009 they had a clear idea of the girl they wanted to dress, but savvy relationships with influencers helped turn that concept into its own hashtag, crystalising the idea of the “Ganni Girl.”

Wholesale partnerships can also expose a brand to new audiences. Burnett’s initial deal with Net-a-Porter, for instance, gave the founders a deeper understanding of what their customers wanted based on best-selling items. “[Net-a-Porter] has a lot of data that it shares, so it’s helpful for us too, to understand what people are gravitating to,” McDavid said.

Ultimately, the most coveted form of marketing is also free — word-of-mouth.

And to ensure word-of-mouth marketing, it comes back to two things, the product and customer service.

“As the company grew, word-of-mouth also got bigger. All the women in our ‘tribe’ were being our ambassadors,” Cornejo said. “Products speak for themselves and we also have an amazing relationship with our clients, especially in stores. It’s very much based on reality and not hype.”

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