I write a lot about target markets and choosing a good one (the success of your business relies on it…IMO). And I recently wrote an article about the worst-selling Etsy shops, which discusses the downside of creating a product that is too original, which is, there won’t be a big enough market for your products.
So I want to shed a little light on how to know if the market you’re targeting is big enough for you to make the sales you want.
If you’re not reaching your sales goals, there’s a good chance your target market isn’t big enough.
This also acts as a bit of a test to see if you’re properly defining your target market or choosing an appropriate one.
I’m not a big numbers gal, and I know a lot of my readers aren’t either. But the calculations explained in this article are the best way to explain why you can’t go after some obscure audience or a target market you’ve made up (e.g. “people who love quirky items” that is NOT a target market).
How big does a target market have to be?
How big a target market needs to be will depend on your financial goals.
I find it’s best to start with a sales goal, then work backward from it.
Let’s say your goal is 1000 sales/month
The average conversion rate of an online store is 1% – 2%, but let’s use 1% – 5% to be generous.
1% conversion rate means out of 100 people who visit your online shop, on average, 1 person will buy.
If you want 1000 sales/month, based on a 1% – 5% conversion rate, you need approximately 20,000 (for a 5% conversion rate) – 100,000 (for a 1% conversion rate) people visiting your online store each month.
Cross multiply and divide to find these numbers
1000 (sales) 5 (% conversion rate)
? 100 (%)
1000 (sales) x 100 = 100,000
100,000 divided by 5 = 20,000
If I have a 5% conversion rate in my Etsy shop, that means I need 20,000 people to visit my shop to make 1000 sales.
20,000 – 100,000 is a lot of people and gives you an idea of a required target market size to make 1000 sales.
But it doesn’t stop there.
You need your target market to be made up of many more people than that.
You must consider, you need to get 20,000 – 100,000 people to your shop.
>> sees your listing in an Etsy feed
>> has your Instagram post appear in their feed
>> receives your email in their inbox
…won’t click to visit your shop/listing.
Marketing conversion rates (i.e. of ads, newsletters, social media, organic searches, etc.) vary, but 1% – 10% is average.
>> 1% – 5% is an average sales conversion rate
>> 1% – 10% is an average marketing conversion rate
So let’s cross multiply and divide again.
Let’s say my shop’s sales conversion rate is 5% and I need 20,000 people to visit my Etsy shop each month to make 1000 sales.
To get 20,000 people to visit my online shop, based on a 1% – 10% marketing conversion rate, my marketing must reach 200,000 (based on a 10% conversion rate) – 2,000,000 (based on a 1% conversion rate) people.
Most businesses will accumulate a following on social media, grow their newsletter subscribers, and have repeat shoppers. So the longer you’re in business, the easier it will be to reach your audience.
Even so, building a newsletter that has 200,000 subscribers isn’t easy and won’t happen overnight. So get your newsletter started now (here’s a quick 10 minute guide), as it has some of the highest conversion rates among other marketing channels (e.g. social media).
A platform like Etsy will bring a lot of shoppers to you. They have millions of visitors per month. However, that doesn’t mean you can skip marketing and rely on Etsy to bring people to your shop.
Of the millions of shoppers Etsy attracts each month, many will be shopping for a different category of product than what yours fall under.
Your listings must also appear on the first few pages of results when someone shops under a category or subcategory (e.g. jewelry -> earrings) or uses the search bar.
If you want to capitalize on more of Etsy’s shoppers, you must work on your Etsy SEO.
NOT JUST ANY PEOPLE
The other thing you must keep in mind is, if you need to reach 200,000 people/month to get 20,000 of them to your Etsy shop, and for 1000 of them to buy, it can’t just be any 200,000 people you reach.
To match the average marketing and sales conversion rates, you should be reaching 200,000 people who are a fit for your products.
Your products must be for a specific type of person (a target market).
If you’re simply making jewelry for “women”, or candles for “people”, or toys for “children”, you’re likely experiencing how hard it is to make sales.
You need a more specific target market.
If I make jewelry and I say my target market is “women”, it becomes much easier to reach 200,000 women in a month. I can run a Facebook ad that only targets women and quickly reach 200,000 of them.
However, just because someone is a woman does not mean they’ll like the jewelry I’m selling.
I’m also competing with almost every other jewelry business out there.
Therefore, my conversion rates will be much lower than average, and I’ll have to reach more than 200,000 women.
If you want to hit those average conversion rates, you must be reaching people who are a really good match for your products.
For example, if I make yoga mat bags, I must reach 200,000 people who practice yoga or have an interest in yoga.
Of those people:
>> some will already have a yoga mat bag
>> some won’t like the style of my yoga mat bags
>> some won’t be interested in handmade products or be able to afford my prices
>> some won’t have time to look at my bags when they see my ad/social media post/email and will forget to do so later
That’s why conversion rates are typically between 1% – 10% for marketing and selling.
Everyone who sees your marketing message will not be interested/ready/have time/etc. to shop your products.
Based on your sales goals, can you reach enough people each month who fit the description of your target market?
This is where having a good target market is important.
>> Check out How to Find a Goldmine of Customers if you need help choosing the right target market.
If I choose a bad target market, such as “people who love quirky styles”, where am I going to find 200,000 people who “love quirky styles”? It’s almost impossible to find and target those people.
“People who practice yoga” on the other hand, are much easier to find.
Don’t Need 1000 Sales / Month?
You can use my calculations or do your own based on how many sales you’d like to make in a month and what your conversion rates are.
You can gather your conversion rate from your Etsy stats, found under Shop Manager. Or, gather numbers from Google Analytics to calculate the conversion rate of your website.
Social media platforms and email marketing services should also provide stats so you can determine the conversion rates of your marketing efforts.
Marketing conversion rate is calculated by dividing the number of people who click to visit your shop by the total number of people who see your Facebook post / receive your newsletter / see your ad / etc. Then multiply that number by 100 to get a percentage.
The same idea applies to find the conversion rate of your online store. Divide the number of people who visit your Etsy shop or website by the number of sales you have (within a certain period of time, e.g. a month). Then multiply that number by 100 for your shop’s conversion rate percentage.
For example, let’s say my Facebook post reaches 1000 people and 40 people click the link to visit my shop.
40 divided by 1000 = 0.04 x 100 = 4%
My Facebook post has a 4% marketing conversion rate.
Looking at my online shop, I may see that 1000 people visited my shop last month but I only made 2 sales.
2 divided by 1000 = 0.002 x 100 = 0.2%
My shop’s sales conversion rate is 0.2%; way below average.
Conversion rates can also point out problem areas.
For example, if my Etsy shop’s conversion rate is below average, it tells me something in my shop is turning shoppers off. It could be my photos, product selection, prices, etc. I’m getting people to my online store, but they’re not liking what they see.
On the other hand, if my conversion rate is really high, it may indicate my shop and products are great, but I need to work on marketing.
I’d have a 50% conversion rate if only 10 people visit my store in a month and 5 people buy.
The conversion rate number is impressive. But 5 sales and 10 site visits for the month is very low.
Are There Enough Buyers for your Products?
Once you have a general idea of how many targeted people you must reach in a month, you can research your target market.
For example, depending on my target market, I might Google:
- How many people practice yoga?
- How many people own dogs/cats/guinea pigs?
- How many people ride bikes?
- How many people get married each year?
I may also want to narrow my search by demographics to see if I can find more specific information.
For example, if I only sold my yoga-related products within Canada, I may Google:
- How many people in Canada practice yoga?
Based on the information you find, are there enough people in your target market?
You need your target market to be much bigger than the number of people you need to reach each month.
For example, let’s say I sell guinea pig products within Canada and I need to reach 200,000 people per month to make 1000 sales.
I would Google “how many Canadians own guinea pigs”.
Let’s say I find some general information that suggests around 200,000 homes in Canada have guinea pigs as pets. That market isn’t big enough to make 1000 sales per month as a small business with limited reach.
I won’t be able to reach 100% of guinea pig owners in Canada, which is what I would have to do to reach 200,000 people to make 1000 sales.
But if I make cat products and uncover information that suggestions over 8 million cats are household pets in Canada, that’s a large enough target market.
If you can’t find information about your target market, that’s a good sign it’s not big enough, or that you’re not targeting a “proper” target market.
For example, if I search “how many people like quirky products?”, I probably won’t find any information, because it’s not based on a relevant target market.
Don’t base your research on demographics (alone)
Demographics may play a role in who your products are for, but they should not be at the forefront.
Basic demographics such as gender, age, marital status, income, etc. aren’t ideal characteristics/qualities to base a target market on.
Because they don’t help you find the people who are perfect for your products.
One could definitely cheat my system by Google-ing “how many women are there in the US?” and find that there are more than enough people for them to market to each month.
However, demographics are not valuable information here.
If I put any type of product in front of you, would you be interested in it just because it’s made for your gender?
There’s much more important information to base a target market on. I’ll teach you what that is in How to Find a Goldmine of Customers.
Set your goal for how many sales you’d like to make in a month.
That number doesn’t have to be realistic for where your business is right now. In fact, it’s better to look at that pie in the sky goal now, so you know if your business has a chance to grow to the size you want.
Work backward based on how many sales you want and your shop’s conversion rate (or the average 1% – 5% sales conversion rate).
Then, based on how many people you must get to your shop, determine how many people you must reach through your marketing. Use your marketing conversion rate stats or the average of 1% – 10% marketing conversion rate.
The number you end up with is how many people you must reach in a month.
Research how many people make up your target market (e.g. people who practice yoga in Canada) and if you’ll be able to reach a fraction of those people.
If the number of people in your target market is too low to hit your sales goals each month, or you don’t have a clue as to how you’ll reach your target market, it may be time to find a new target market.
I’ll teach you how to do that in How to Find a Goldmine of Customers