Defining the Customer Profile and Identifying Target Markets

Segmenting the Marketing Into Target Markets

“Mass marketing” refers to the treatment of the market as one homogeneous group by offering the same marketing mix – product, price, promotion, delivery system – to everyone. There are advantages to this kind of marketing: it’s simple and can achieve economies of scale quickly because you only have to write one flyer, buy one ad, build one type of home, etc. The downside is that customer needs and preferences differ and the same offering is unlikely to be seen as ideal by everyone.

“Target marketing,” on the other hand, recognizes the diversity of customers and doesn’t try to appeal to all of them with the same offering. “Target markets” describe subgroups of people with like characteristics. The overall intent of market segmentation is to identify groups of like customers, prioritize the groups to address, understand their interests and behavior and respond with appropriate marketing strategies that satisfy each chosen segment’s different preferences.

Target markets may be demographic, geographic, psychographic or referral.

Demographic
Some demographic variables around which marketers may create target markets include:

  • Income
  • Family size
  • Family life cycle
  • Religion
  • Race and ethnicity
  • Gender
  • Nationality
  • Generation (Millenials, Baby Boomers, Gen-X, Gen-Y)
  • Occupation

Several of these demographic characteristics are protected classes under the federal Fair Housing Act, which was created to protect against discrimination in housing. It is critical that you understand both the obvious and subtle ways in which advertising messages and strategies can violate the rights of protected classes under the act before you finalize your target market list. To be sure that you are not excluding anyone, you should complement your targeted marketing strategies with mass marketing strategies. We’ll talk more about the Fair Housing Act later in this chapter.

Geographic
Members of a geographic target market have something in common about where they are. For example:

  • Neighborhood
  • School district
  • City or county
  • Urban, suburban, rural area
  • Employer

Psychographic
Members of psychographic target markets are grouped according to their lifestyle – things they have in common such as interests, opinions, activities, attitudes, values, etc.  Some examples:

  • Pet owners
  • Empty nesters
  • Musicians and artists seeking an urban lifestyle
  • Employees of social service agencies
  • Friends and family of current homeowners in your neighborhood

Referral
Referral target markets are groups of people who interact with potential customers in your buyer profile. For example:

  • Mortgage loan officers
  • Real estate agents
  • Homebuyer educators
  • Neighbors near your home who could refer others

It can be very useful to be sure that these referral markets are aware of your homes and have everything they need to easily refer someone to you. The National Association of Realtors’ 2011 Survey of Buyers and Sellers reports that, when buyers were asked about the first step they took toward buying a home, “contacted a real estate agent” and “contacted a bank or mortgage lender” were among the top five most common responses. “Looking online for properties for sale” was the top response.

Possible Target Markets for Affordable Homeownership Programs

The table below provides examples of different types of target markets that affordable home developers might be interested in:

Target Market Rationale
Renters in the neighborhood in which the home is located
  • They don’t yet own a home.
  • They are familiar with and probably comfortable with living in the neighborhood.
  • Easy to find and market to: “you don’t have to move out to move up in the old neighborhood.”
Consumers of Spanish-language radio and newspaper in your city
  • Hispanics in general have a lower rate of homeownership than the general population.
  • If your marketing messages are in English only, they may not see/hear them, or may not feel welcomed.
Congregants of neighborhood churches, mosques and other faith institutions
  • Faith-based institutions may have a mission to assist their members in accessing safe and affordable housing, and therefore be willing to give you access.
  • When they are in the same neighborhood as your home for sale, you can market proximity as a benefit.
Families and staff of neighborhood schools near your properties
  • When they are in the same neighborhood as your home for sale, you can market proximity as a benefit: “walk to school”, “walk to work.”
Employees of neighborhood employers who meet your income profile
  • Proximity.
  • Income match.
Friends and family of existing neighborhood homeowners
  • Already visit the neighborhood, may see proximity to friends/family as benefit.
  • Friends and family are trusted advisors and may be an especially credible carrier of your message.
Participants in homebuyer education classes throughout the city or region
  • They are motivated to buy a home in the near future.
  • More likely to be mortgage-ready or working on being mortgage-ready.
  • Typically earn low to moderate incomes so may be a close match to your eligibility requirements.
Renters with pets
  • They have an extra reason to want to own a home – so that their pet can’t be excluded, and they have a yard.
  • They are easy to find (veterinarian offices, dog parks, pet supply stores) and rarely marketed to about housing.
Patrons and employees of neighborhood businesses
  • Proximity to where they like to shop.
Employees of social service agencies
  • Earn modest incomes.
  • May have social justice values and a greater tolerance for a transitional neighborhood.
  • Easy to find and market to: “you work hard every day to help others, now it’s your turn.”
Musicians, artists and other creative people who want an urban lifestyle
  • Higher tolerance for a transitional neighborhood, and risk in general.
  • Often earn modest incomes, so may meet eligibility requirements.
Referrals by mortgage loan officers
  • One of the first points of contact for prospective buyers seeking a pre-qualification.
Referrals by real estate agents who specialize in comparable neighborhoods and price ranges
  • Real estate agents are one of the first points of contact for prospective buyers.
  • Agents whose business tends to include many listings in neighborhoods like yours, are experienced working subsidy programs, and are willing to market modestly priced homes are likely to have buyers that match your profile.
Adult students at nearby Community College
  • Actively seeking to improve their economic status.
  • Proximity.

Although most developers have a clearly defined buyer profile, many have not taken the next step of breaking that profile into target markets. Defining a list of Target Markets allows you to customize your product, marketing messages, incentives and marketing strategies to their interests, and have a greater chance of connecting with them. Focusing on Target Markets also allows you to reduce the number of “wasted exposures” your marketing strategies generate to people who are not qualified for or interested in your product.

How Do You Decide Which Target Markets to Choose?

Generating a list of possible target markets is a good activity for the marketing and sales team. Use questions like these in a brainstorming session:

  1. What institutions (educational, faith, etc.), employers and businesses are within a half-mile radius of the properties you plan to develop? Are there members, employees or customers of those places that would be interested in homeownership and fit your eligibility requirements?
  2. Did your market research reveal any underserved markets (lower homeownership rates, more frequent mortgage denials) for homeownership who might be able to buy with your help?
  3. Did your market research reveal any rapidly growing segments of the population for whom homeownership would be a likely goal, such as 25–34 year-olds (the largest share of the 2011 market), or people relocating to work for a new major employer?
  4. What racial and ethnic minority groups does our population include – can we customize some of our outreach to make our homes more accessible and attractive to them? (The National Association of Realtors’ 2011 Survey of Buyers and Sellers identified 25 percent of all homebuyers as racial or ethnic minorities and 15 percent as foreign-born.)
  5. Do we have relationships with lenders, homebuyer educators, other nonprofits or others with whom we could partner on marketing? Can we build those partnerships?
  6. Do the neighborhoods in which our homes are located have strong neighborhood associations through which we could market to renters and to current homeowners who might refer a friend or family member?
  7. Does our local government require employees to live in our city, and could we partner on marketing to their employees?
  8. Can our real estate agent describe any common characteristics of potential buyers who have looked at homes like ours or in our neighborhoods? Who has bought recently?

After fleshing out this list with your real estate agent and other members of your team, you’ll want to assemble some information about each group’s preferences and where they can be reached with marketing messages. After that, prioritize and select the number of target markets you feel you have the capacity to work with.

To prioritize, consider the following:

  • Which groups make the closest match to our eligibility and qualification requirements?
  • Which groups have the greatest reason to want to buy a home right now?
  • Which groups are most likely to appreciate the benefits of the neighborhoods in which we have homes and/or the features of the homes we are building or rehabbing?
  • For which groups would it be easiest to customize and deliver messages?
  • Do we have a priority group of target markets that represents all protected classes under the Fair Housing Act, and in no way discourages or puts up barriers to a protected class that might want to buy our home?