Target Markets: Why They Aren't Just for Marketers [A Quick Guide]
Published: August 08, 2022
Sales teams and entrepreneurs need to know their target market. You can get there by asking yourself, "Who is the ideal fit for my offering? What are their interests and priorities?"
Answering these questions can help you prioritize the deals you're most likely to win. But how can you really understand the ins-and-outs of your target market?
Let's take a closer look at what a target market is, go over how to conduct a target market analysis, see some helpful examples, review target market segmentation, and look into how sales teams can leverage target markets.
Table of Contents
How to analyze your target market, target market analysis example, target market examples, target market segmentation.
How Sales Teams Can Leverage Target Markets
What Is a Target Market?
A target market is a group of customers for which your products and services are aimed. First defined by an industry (i.e., healthcare, travel, technology, etc.), it represents a specific subset of the broader market the industry covers. It's usually based on factors like behavioral tendencies, geographic location, and demographic characteristics.
Let's say you've created a B2B software product that helps remote construction teams. In that case (and to state the obvious), you'd probably focus on companies within the construction industry. But defining your target market doesn't stop there.
You know your industry, but there's no one-size-fits-all mold for the businesses within it. If you were pinning down a target market for your product, you'd have to start with business characteristics — for instance, scale would be a good place to begin.
Your product will suit certain companies better than others, and selling to a Fortune 1000 company isn't the same as a small construction business with less than 100 employees.
In this case, you'd want to pin down the size of your ideal customer's business — and this number would be the start of a target market analysis.
Let's take a closer look at what that process looks like.
- Analyze your product or service.
- Check out the competition.
- Choose criteria to segment by.
- Perform research.
- Track and evaluate your results.
As the name implies, target market analysis is the basis for identifying your target market. Here are the five steps you can take to do one of your own.
1. Analyze your product or service.
Take a look at what you're selling to understand which consumers would get value from your product. The questions below will help with the brainstorming process:
- "What need does your product or service fill?"
- "Are there any problems or pain points it solves for?"
- "Who would benefit most from your product or service?"
Once you've answered these questions, you might want to consider getting feedback from current customers. Conduct a focus group or ask your service department about their common problems.
Analyzing your product or service in this way will help you better understand your target market. In fact, you might learn that your current customers aren't the people you're trying to target. If you notice a disconnect in this process, you'll want to better align your target market with your actual marketing goals so you can realign.
2. Check out the competition.
Perform an analysis of your competitors to see who they're targeting. Take a look at their customer base, and see if you can find an area of the market you could focus on that they might be missing.
The best way to do this is to conduct a competitive analysis . This entails researching who your competitors are, what they offer, and even review their sales tactics.
Looking at your competitors will even help you identify target market gaps that you can fill. Are there any target markets they do not focusing on?
This could lead you to expand into new markets geographically or develop new products to target a different market.
3. Choose criteria to segment by.
A target market can be segmented by a few different variables. Consumers can be split by demographic, geographic, and behavioral factors.
This is essentially the process of creating a buyer persona . You'll divide your target market into several target customers — also known as (you guessed it) buyer personas.
For example, perhaps your target market is midsized companies looking to purchase marketing automation software. You could divide your target customers into several groups, including marketing department leaders, sales leaders, founders, or CEOs.
Here are some of the most common ways to segment a target market:
4. Perform research.
As you begin narrowing your market, the research phase doesn't end there. What marketing strategies should you use to reach your potential target market? Is the target market large enough for your product or service? Market research will help you learn more about your target market.
Picking the right target market can tell you a great deal about your business. Are you looking to become a true velocity business, or do you see yourself as a steadier flow of pipeline with enterprises and consumers?
5. Track and evaluate your results.
Target market analysis should never be static — you don't just conduct one, be immediately content with the results, and stop there. It's an ongoing process. You need to continuously track your results, evaluate what you see, and iterate on the conception of your target market to more effectively appeal to it.
Let's imagine a company that sells inexpensive, "function-over-form" athletic footwear that stresses comfort and arch support instead of trendy aesthetics.
1. Analyze the product or service.
When conducting its target market analysis, the business in question would have to start by taking a thorough, objective look at its product to get a solid grip on its value and differentiating factors.
The company would likely find that its shoes are better suited for day-to-day wear instead of legitimate athletic competition, lack trendy appeal, and can help with sore feet while standing.
This initial insight can help shape the personas that the company will ultimately target. It would have a better picture of how to construct its value proposition. In this case, the business might find that suburban men over 50 who don't exercise regularly appear to be the most likely to buy its shoes.
Next, the company would dig into its competitor's products, how they were selling them, and any noticeable gaps in their potential target markets. After conducting a competitive analysis, the company might find that its competition was ignoring some geographical trends embedded in its target markets.
Let's say its competitors' retail locations and store placements were primarily in cities — ignoring locations like suburban strip malls and local "mom and pop" retail stores. With that information in mind, the company in question could have a starting point for appealing to a target market its competition is ignoring.
Here, the company would begin to string more detailed personas together. Again, it would base its segmentation criteria on its product analysis and refine it according to its competitive analysis.
In this case, a significant portion of the criteria would revolve around age, social class, location, and interests — making one of its personas older, working class, suburban consumers who prioritize function over form.
After creating its target persona, the company would conduct a market analysis, survey consumers that fit its target market bill, potentially employ more direct tactics like hosting focus groups, and take any other strides it sees fit to ensure that it has a thorough understanding of its target consumers.
From there, it can shape a thoughtful value proposition that will guide its sales messaging, outreach strategies, pricing structure, and other crucial sales-related factors that influence how it reaches consumers.
5. Track and evaluate results.
Once the other steps have been covered, the company would continue to monitor how its efforts resonate with its target persona. If sales aren't where they need to be — or it appears the company might have other personas it can cater to — it might restart this process and shift gears on its messaging, strategies, or target market as a whole.
Let's look at some of the best-in-class companies — both B2C and B2B — to see how they set up their target markets.
1. Atlassian Target Market
Atlassian offers a suite of collaboration tools designed to help developers and product leaders take their projects from concept to completion.
Like most larger companies, Atlassian uses target market segmentation to look at different markets and break up its unique value propositions, terminology, and values.
By diving into one segment, like retail, we see they're working with several large companies — especially with their support-related products.
This tells us that while Atlassian can work with almost anyone doing software development, it recognizes how its value proposition changes depending on the market segment in question.
Even the same product for two different customer types creates different levels of value.
2. Nike Target Market
Nike offers products to athletes and other consumers who want to exercise regularly. They offer apparel, equipment, shoes, and accessories.
They work with athletes and a fitness-minded audience, but we know a good target market definition can't be that broad. Let's break two of their segments down:
- Young athletes — Kids who get frequent exercise and play sports growing up are a huge, growing category for Nike. Nike engages with this market through sports leagues and associations and with endorsements from popular sports stars like LeBron James.
- Runners — With a focus on new types of shoes, Nike shows it targets consumers based on both demographic information and lifestyle. Nike launches shoes and apparel designed to help the avid runner stay on the road a bit longer.
3. Starbucks Target Market
Next time you're sipping your cold foam Cascara cold brew, ponder the target market of the top coffee destination in town: Starbucks .
Many of their locations have been remodeled and offer a hip, contemporary look. Not that surprising since about half of their customers are between the ages of 25 and 40.
If you spend more than five minutes sitting and drinking your coffee, you'll probably hear a barista shout, "mobile order!" The mobile process now accounts for 24% of Starbucks' transactions which shows they're catering to a tech-savvy crowd.
The next clue we have on their target market is the location of their shops. By positioning its locations in heavily urban areas, Starbucks is attracting on-the-go professionals. To recap, here are a few of Starbucks' target markets:
- 25 - 40-year-olds — Remodeled locations accommodate their largest demographic base.
- Tech-savvy adults — Their mobile app has caught on and lends itself to a forward-thinking crowd.
- Working professionals — Their urban focus tells us the type of lifestyle they're catering to.
4. Apple Target Market
What about a company that occupies both the B2B and B2C spaces? How can it develop a target market with such a broad set of customers? Apple is the textbook case for innovation and product design.
But how does that apply to finding a target market? With its wide array of product offerings, Apple has a little something for everyone. Here are two of their target markets:
- Tech enthusiasts — A customer category that launched Apple's brand decades ago, technology enthusiasts still get attention from the company. With launches of new tech categories (including wearables, Apple TVs, and HomePods), Apple has shown it's still creating value for this segment. There is also a tremendous ecosystem where owning a suite of Apple products enables better interoperability among your tech.
- Healthcare — One market Apple has its eyes on is healthcare. By focusing on the appeal of having information right at your fingertips with mobile and the iPad, they've positioned healthcare workers to more conveniently communicate with patients.
Apple doesn't seem to exclude many people from its target market and has positioned itself to benefit both consumers and businesses — even with the same products like the iPad.
Its success has been more about understanding the value of its different segments rather than excluding people from them.
5. McDonald's Target Market
McDonald's target market is broad and encompasses a wide variety of customer personas. Younger professionals represent one of the chain's more prominent target market segments — and that trend is reflected in many of the company's location remodels. Several McDonald's franchises have been revamped to look sleeker, more modern, and better suited for millennials.
Image Source: Community Impact
"Full nest" families with children over six represent another key base for the chain. The franchise takes many strides to appeal to this specific segment, primarily reflected in its Happy Meal options.
But there's another factor that underscores virtually every target market McDonald's tries to appeal to — social class. The chain makes a conscious effort to resonate with lower, working, and middle-class patrons.
Pricing is the basis of McDonald's value proposition. It tries to bill itself as an affordable alternative to more expensive options in the spaces it attempts to sell in. For instance, when promoting its McCafe line, the chain stressed the brand's particularly low price points as a major selling point.
Image Source: McDonald's
Ultimately, the franchise's target market isn't singular and clear-cut in terms of most demographics — but it is specific in terms of its various personas' economic circumstances. Its value proposition fundamentally rests on the fact that its food is inexpensive.
A target customer is an individual that's most likely to buy your product. And it's a subset of the broader target market. For example, if your target market is female athletes between the ages of 13 to 25, a target customer could be female athletes in the specific age range of 13 to 16.
You need to have a firm grasp of your target customers if you're going to develop pointed, effective value propositions. The success and viability of your sales messaging, prospecting efforts, and broader sales process rests on your knowledge of who's buying your product or service and the mindset that makes them do it.
That starts with target market segmentation.
Target market segmentation is the process of partitioning your target audience into more focused, identifiable, and approachable groups (or segments). It's a broad concept that can take on a lot of forms, including:
- Geographic segmentation — Dividing your target market based on geographical boundaries
- Firmographic segmentation — A practice specific to B2B sales where firms are divided based on characteristics like company size or number of employees
- Behavioral segmentation — Dividing your target market based on behavioral tendencies and decision-making patterns
- Demographic segmentation — Dividing your target market based on factors like income, education, race, gender, or occupation
- Psychographic segmentation — Dividing your target market-based elements like personality traits, values, and opinions
How you elect to segment your target market will be specific to your company's needs and interests. In many — if not most — cases, you'll employ more than one of the segmentation methods listed above when defining a target market.
When you identify the customers you want to serve — and the ones you don't — ask:
- "Do my target customers have different problems they're solving with my product?"
- "Do my target customers get different value from my product?"
- "Are either of these things related to demographic, geographic, or lifestyle components?"
In order to segment effectively, you must have a decent way of measuring the value you provide to the market. Then, identify if certain groups are getting more value than others.
This will power the positioning of your product. Suddenly, you can pinpoint pain for your customers while speaking their language.
This helps you refine your position in the market and connect on a deeper level with your customer. Having a target market (or target customer) is all about relevancy and relating to the person on the other side of the cash register.
How Sales Teams Can Leverage Target Markets + Segmentation
Segmentation poses several benefits for sales teams. If you know who will be most receptive to your product or service, you get a leg up when conducting most steps of your sales process.
For one, effective segmentation can be a major asset in prospecting. If your SDRs have a solid picture of the types of customers that show an interest in your offering, cold leads can become a little warmer — letting those reps make more thoughtfully guided use of your sales messaging when connecting with prospects.
Beyond that, segmentation can also help with lead qualification. Knowing whether a lead fits the bill of a class of high-converting customers gives reps a head start during that stage.
You need to have some kind of criteria that can immediately distinguish a prospect who needs your product or service from one that lacks the decision-making tendencies, location, or economic circumstances to actually get something out of it. Target market segmentation gets you there.
Finally, target markets provide sales teams with the necessary information to breach new markets and sell to them effectively. If you're not on top of any emerging markets that might need your product or service, you could hit a wall with your sales potential and lose out on incredibly lucrative business opportunities.
Ultimately, knowing your target markets inside and out is one of the most fundamental tenets of successful sales efforts. If you're not actively analyzing, pursuing, and refining your understanding of your target markets, you're losing out on sales and painting yourself into a corner with your business potential.
Editor's note: This post was originally published in July 2018 and has been updated for comprehensiveness.
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How to Write a Business Plan: Target Market Analysis
The Business Plan and the Importance of Defining Your Target Market
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
Conducting a Market Analysis
Polling your target market, writing the market analysis, online tools for market research, u.s. online market research sources, canadian online market research, local sources of market research, doing your own market research.
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The market analysis is basically the target market section of your business plan . It is a thorough examination of the ideal people to whom you intend to sell your products or services.
Even if you intend on selling a product or service only in your community, you won't be selling that service to everyone who lives there. Knowing exactly what type(s) of people might be interested in buying your product or service and how many of them reside in your projected area or region is fundamental in creating your market analysis.
Once target market data has been established, you'll also work on sales projections within specific time frames, as well as how prospective sales might be affected by trends and policies.
Research is key and cornerstone of any solid business plan .
Don't Skip This Step!
Don't skip market research; otherwise, you could end up starting a business that doesn't have a paying market.
Use these general terms as linchpins in research data for the market analysis section of your business plan, and to identify your target market:
But don't stop here. To succinctly define your target market, poll or survey members of your prospective clients or customers to ask specific questions directly related to your products or services. For instance, if you plan to sell computer-related services, ask questions relating to the number of computing devices your prospective customers own and how often they require servicing. If you plan on selling garden furniture and accessories, ask what kinds of garden furniture or accessories your potential customers have bought in the past, how often, and what they expect to buy within the next one, three, and five years.
Answers to these and other questions related to your market are to help you understand your market potential.
The goal of the information you collect is to help you project how much of your product or service you'll be able to sell. Review these important questions you need to try to answer using the data you collect:
- What proportion of your target market has used a product similar to yours before?
- How much of your product or service might your target market buy? (Estimate this in gross sales and/or in units of product/service sold.)
- What proportion of your target market might be repeat customers?
- How might your target market be affected by demographic shifts?
- How might your target market be affected by economic events (e.g. a local mill closing or a big-box retailer opening locally)?
- How might your target market be affected by larger socio-economic trends?
- How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?
One purpose of the market analysis is to ensure you have a viable business idea.
Find Your Buying Market
Use your market research to make sure people don't just like your business idea, but they're also willing to pay for it.
If you have information suggesting that you have a large enough market to sustain your business goals, write the market analysis in the form of several short paragraphs using appropriate headings for each. If you have several target markets, you may want to number each.
Sections of your market analysis should include:
- Industry Description and Outlook
- Target Market
- Market Research Results
- Competitive Analysis
Remember to properly cite your sources of information within the body of your market analysis as you write it. You and other readers of your business plan, such as potential investors, will need to know the sources of the statistics or opinions that you've gathered.
There are several online resources to learn if your business idea is something worth pursing, including:
- Keyword searches can give you an overall sense of potential demand for your product or service based on the number of searches.
- Google Trends analysis can tell you how the number of searches has changed over time.
- Social media campaigns can give you an indication of the potential customer interest in your business idea.
The U.S. Small Business Administration (SBA) has information on doing your market research and analysis , as well as a list of free small business data and trends resources you can use to conduct your research. Consider these sources for data collection:
- SBA Business Data and Statistics
- The U.S. Census Bureau maintains a huge database of demographic information that is searchable by state, county, city/town, or zip code using its census data tool . Community, housing, economic, and population surveys are also available.
- The U.S. Department of Commerce Bureau of Economic Analysis (BEA) has extensive statistics on the economy including consumer income/spending/consumption, business activity, GDP, and more, all of which are searchable by location.
The Government of Canada offers a guide on doing market research and tips for understanding the data you collect. Canadian data resources include:
- Statistics Canada offers demographic and economic data.
- The Business Development Bank of Canada (BDC) offers market research and consulting with industry experts.
- The Canada Business Network provides business information to entrepreneurs by province/territory, including market research data.
There are also a great many local resources for building target market information to explore, including:
- Local library
- Local Chamber of Commerce
- Board of Trade
- Economic Development Centre
- Local government agent's office
- Provincial business ministry
- Local phone book
All of these will have information helpful in defining your target market and providing insights into trends.
The above resources are secondary sources of information, in which others have collected and compiled the data. To get specific information about your business, consider conducting your own market research . For instance, you might want to design a questionnaire and survey your target market to learn more about their habits and preferences relating to your product or service.
Market research is time-consuming but is an important step in affording your business plan validity. If you don't have the time or the research skills to thoroughly define your target market yourself, hiring a person or firm to do the research for you can be a wise investment.
Small Business Administration. " Market Research and Competitive Analysis. " Accessed Jan. 13, 2020.
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How to Write a Marketing Plan
Marketing starts with your customers.
Your marketing plan details how you intend to meet your customers’ needs and communicate the benefits of your products or services to them. When deciding about market positioning, pricing, promotions, and sales, your customers should be top of mind.
The Four Key Components of Your Marketing Plan
Your marketing plan should describe how you will segment your target market, how you will position your products or services compared to your competition, what your pricing strategy will be, and how you will effectively reach and influence your customers.
The Target Market
Your target market is a group of customers that has a similar need for a product or service, money to purchase the product or service, and willingness and ability to buy it.
To identify your target market and best serve your market, you need to:
- Know your customers
- Understand what your customers need
- Why they buy
Because you have limited time, resources, and budget, you cannot be everything to everyone. To effectively reach customers, you need to segment your target market into one primary market on which you focus most of your energy, and at most three secondary markets.
You can segment your target market along four key characteristics:
Demographic: Who are your customers? Include information such as:
- Family size
- Family life cycle (single, married with or without kids, divorced)
Geographic: Where do they live? Include information such as:
- Their country
- Region (e.g. Pacific, Prairies, Eastern seaboard)
- City and density (rural, urban)
Psychographic: Why do they buy? Include information such as:
- Social class (lower, middle, upper)
- Lifestyle (leisure activities, exotic vacationer, saver)
- Personality (gregarious, authoritarian, ambitious)
Behaviouristic: How do they buy? Include information such as:
- The purchase occasion (household staples, special occasion)
- Benefits sought (quality, service, economy)
- Consumption status (from never having tried your product to frequent purchaser)
- Usage frequency (light, medium, heavy)
- Loyalty (not, somewhat, devout)
- Readiness to buy (unaware, aware, informed, interested, desirous, intending to buy)
- Attitude toward product (enthusiastic, positive, indifferent, negative, hostile)
Positioning is the image of your product or service that you create in the mind of your target market. Your goal is to create an image that’s unique, differentiated, and definable in the mind of your customers. To position your product or service, try the following:
It’s essential that all of your marketing materials support the position or image you are creating.
It’s also critical for you to know your present and potential competitors, both direct and indirect. Examine their strengths and weaknesses relative to yours. This will help you select a market position that provides a competitive advantage.
Your overall position should emphasize those factors that your customers value most, and those which make you stand out from your competition.
Price is a very important factor in your marketing plan. It affects:
Key factors that affect your pricing strategy include:
- Perceived value of your product
- How much it cost to develop
- Broader economic trends
- Level of market demand
- Income range of target market
Promotion is the activity of informing, persuading, and influencing your customers’ purchase decisions.
The type and scope of promotional activities that you need to undertake will depend on what the promotion is intended to do, and what goals and objectives you want to achieve. There are four general types of promotional activities:
- Sales promotion
- Publicity and Public Relations
- Personal Selling
No matter what stage of business, or what problem you face, Small Business BC offers a range of webinars , our on-demand E-Learning education , and one-on-one advisory sessions to suit any business.
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Target Market: Examples, What it is & How to Define it
What is a target market?
What is a target audience, why define your target market , how to define your target market: , target market examples, target marketing plan example, summary .
Every business that’s ever existed dreams of a huge customer base and constant sales with a bottom line that wows… But if you’re continuously falling short of your sales and growth targets, then it might be time to check if you’re selling and marketing your products or services to the right people.
Rather than falling into the trap of thinking you can appeal to everyone all at once (spoiler alert: you can’t), having a narrow target market and audience ensures your products, services, and brand attract and maintain the customers who are going to be interested and (hopefully) make lots of purchases.
In this article, we’re going to help you finally make those profits you’ve dreamed of by clarifying exactly what is meant by “target market” and “target audience.” With this information, you’ll be able to build the right buyer personas for your products and services, so you can build your small business into the empire you deserve.
First things first, “target market” is a phrase you’ll hear almost daily in the business world. But what does it really mean?
Well, your target market is the people who are going to be buying your products or services. By establishing your target market early on, you can tailor your products accordingly and ensure you’re only spending your precious advertising budget marketing to people who will actually benefit from what you’re selling.
Target markets are usually defined by three aspects:
- Demographics: Things like the age, gender, income, marital status, ethnicity, employment status, etc., of your buyers.
- Geographics: Where your customers are located (this can be as wide as entire continents, or even just a single neighborhood or street).
- Psychographics: What drives your customers? What are their likes and dislikes? What problems do they face in their lives?
By figuring out who your customers are, you’ll be in a better place to market your products… And you could even use this information during upgrades to ensure you’re continuously providing a valuable benefit.
Target markets and target audiences can frequently get confused and overlap, but they relate to different people, and it’s essential to have a clear distinction between the two.
While your target market is the end consumer, your target audience is who your brand should be focusing on when advertising.
A good example of this would be for a child-aged target market. Let’s use McDonald’s Happy Meals as an example…
While the Happy Meals are clearly made for kids, the target audience for this product would be the adults responsible for the children. These adults are the ones who choose what the kids eat and will usually be the ones buying the Happy Meals.
You can do it too.
Because McDonald’s has clearly identified their target market vs. target audience, you’ll notice adverts for Happy Meals tend to focus on aspects that the target market (kids) wouldn’t be that interested in… Like the nutrition value of the meals, for example.
Another brilliant example of a target market vs. a target audience is the 2010 Old Spice advert, The man your man could smell like . When trying to appeal to a younger audience, Proctor & Gamble (the advertising team behind this campaign along with Nike’s Just Do It ) discovered around 60% of men’s body washes and deodorants were purchased by women.
Taking advantage of this information, P&G decided to aim subsequent Old Spice marketing efforts at women with the famous ad featuring Isaiah Mustafa. Like McDonald’s, they successfully identified a difference between their target market (men aged 18 – 35) and their target audience (the wives and girlfriends of these men).
In other words, your target market is whom you’re selling to. Your target audience is whom you’re advertising to.
So, now we know what the difference is between a target market and a target audience… But the question still remains, why bother? Surely, marketing to everyone is casting a wider net, and you’ve got more chances of gathering customers?
Any angler will be able to tell you that a wide net isn’t all it’s cracked up to be when catching fish. Sure, you might get one or two valuable catches in a large net, but you’re more likely to end up with a barrel of fish nobody wants.
To really catch fish, you need the right bait, the right equipment, and to be fishing in the right places.
And suddenly, the metaphor of casting a large net continues to be 100% applicable to the world of marketing.
In other words, if you aspire to make everyone a potential customer, you’re less likely to gain attention from people who will actually benefit from and buy your products and services. Instead, focus your marketing efforts on a clearly defined section of the market, and you’ll attract more valuable customers who will help your business grow.
In addition to attracting the right people, defining your target market and audience early on will allow you to:
- Develop the product line by solving specific needs
- Set the right prices
- Determine the perfect marketing channels
- Find the best features to highlight
- Determine the right keywords and SEO criteria
- And much more.
A narrow, specific target audience and market also ensures you’re not spending too much time/money casting a wide net… Enabling you to convert far greater numbers of potential customers with considerably lower overheads.
When it’s time to define your target market, you might struggle to know where to start at first. But figuring out the right market segment to advertise to doesn’t need to be difficult if you break it down.
Remember, by marketing to a specific group of people, you can focus on getting the language, tone of voice, and content just right. This enables your message to get across more clearly and will make your audience more likely to buy your product or service.
In addition, having well-defined target customers enables you to start a more genuine and compelling conversation with that group of consumers. And once you’ve cultivated a genuine relationship, you’re more likely to benefit from loyal customers and word-of-mouth recommendations.
To get started building a definition of your target customers, think about the following:
1. Identify the key benefits of your business
Once you’ve established the critical benefits of your business, you’ll probably find your target market becomes clear fairly quickly.
As marketer Philip Kotler said, “authentic marketing is not the art of selling what you make but knowing what to make. It is the art of identifying and understanding customer needs and creating solutions…”
Theodore Levitt elaborates on this with… “people don’t want to buy a quarter-inch drill. They want to buy a quarter-inch hole.”
As Kotler and Levitt identify, it’s not the features of your product or service that will sell… It’s the benefits these provide. For example, if you’re selling exercise equipment, the benefits might include improving customers’ self-image, physical health, mental wellbeing, confidence, and empowerment. These benefits will be more compelling to most target customers than a list of specs.
To identify the key benefits of your product or service, ask yourself the following questions:
- What problem(s) do you solve for people?
- What need(s) do you meet?
- What desire(s) are you fulfilling?
2. Identify who will benefit most from the above.
Once you’ve identified the key benefits of your product or service, you can start thinking about who would benefit most from these features and who would be most likely to buy. This will help you narrow down the demographics for your target market.
For example, if you’re selling at-home exercise equipment, the people who will benefit most from this could be middle-aged, overweight men who don’t have time to go to the gym or young women who don’t feel comfortable in a standard gym.
Think about who your product or service helps the most, and start narrowing them down.
Consider the age, location, gender, income, and any other critical demographics of the market segment you’ve identified and make a note of these.
3. Refine your target market
Once you’ve established the key demographics of the group of consumers who are most likely to benefit from your products or services, it’s time to define your target market even further by building user personas for your customers.
These personas will include the demographics like age range, location, etc., that you defined in step 2 but adds in psychographics.
Psychographics include more personal information about your market segment. These will include things like:
- The customer’s likes and dislikes
- Hobbies and interests
- Daily routines
You can collect this information through a variety of means. If you have established customers already, asking them to provide feedback can be invaluable to businesses. Otherwise, surveys, polls on social media, or any other market research will help you establish precisely who you’re selling to.
4. Stay objective
It might surprise you to realize that this is probably the most challenging step in defining your target market and audience… But it’s also one of the most critical.
When researching your potential customers, you must always stay objective and avoid assumptions, particularly when matching your product’s key benefits with a specific group of people.
In fact, CBInsights discovered that approximately 35% of start-up businesses fail due to a lack of market need.
Even if you think your product is fantastic, you’re likely to fail if you don’t accurately identify a need, want, or desire and address that.
Segway is an excellent example of a business failing due to a poorly defined target market and a product that didn’t fulfill a need.
5. Evaluate the segments
It’s critical to remember that just because someone says they would buy your product or service doesn’t mean they actually will .
You need to ensure the market segment you’ve identified is a viable customer group by asking the following questions:
- Is this group large enough to sustain the business?
- Does the market segment have sufficient income to afford the products and services being sold?
- Will these people make multiple purchases, or will you constantly need to be attracting new customers?
- Are other brands targeting the same market segment? Why/why not?
- What separates your brand from similar companies, products, and services?
- How accessible is the target market you’ve identified?
Following any research into this evaluation, it’s vital to create real-life tests to directly engage with your prospective market.
6. Identify who influences the buying decision.
Once you’ve defined your target market, it’s time to turn your attention to your target audience. Remember, your target market is the group of people who might want to buy your product. Your target audience relates to the people who will be making or influencing the purchase decision.
The most obvious example of this is how products for children need to be marketed to parents or guardians, as kids don’t have any buying power themselves. But this can also take into account a far wider group of people as purchase decisions are rarely made in a vacuum.
Consider the friends and family of your target customers. Would a good/bad word from a sibling change your potential customer’s mind about buying? If it’s a big-ticket item, would your customer want to check with their spouse or partner first? How can you convince these ‘influencers’ that your products and services are worth buying?
If you’re providing products and services for B2B clients, this can be even more complicated as purchases may need to be approved by multiple people before they can go ahead.
7. Check your competitors
As part of your marketing strategy, you should have completed a SWOT analysis (strengths, weaknesses, opportunities, threats) of your business. Now, it’s time to ensure you’ve done the same for your competition, starting with the top stores on Shopify and working back to your closer competitors.
Use social media, Google, and customer research to determine what target audiences your competitors are focusing on and whether those individuals align with your business.
If you’re advertising to the same group of people, figure out what these people find great/bad about the competition and use this to guide your own marketing efforts.
Now you know how to define your specific target market, it can be helpful to see how other companies have used targeting research to build a detailed target audience profile. These well-known brands offer a fantastic target marketing plan example that you can use to bring these concepts to life and translate them into your own marketing strategy.
Nike provides an excellent target market demographics example. Once, Nike marketed to professional athletes only but changed its business model to accommodate a broader, more approachable audience with the Just Do It campaign.
As part of the rebranding, Nike considered the benefits of its sports apparel, shoes, accessories, and equipment and who these benefits would most appeal to.
Their targeting includes a young age range, people interested in getting fitter, individuals with some disposable income to spend on high-quality products.
To further narrow down the target market, Nike specifically focuses on aspiring athletes and runners in most advertising campaigns and utilizes an inspiring, motivational, inclusive tone of voice that appeals to a younger audience who are ready to push beyond their limitations.
We know what you’re thinking… “but Netflix targets everyone?!” While this may be partially true, have you ever taken a look at someone else’s Netflix account and noticed how different it looks from your own?
With detailed algorithms and substantial customer research, Netflix intelligently targets individual preferences in its marketing strategy, ensuring each person receives a well-defined and highly tailored experience.
It’s also worth noting that Netflix started as a DVD delivery service, mailing DVDs to rent to its customers. As online streaming took over, Netflix analyzed its customers’ needs and made the switch to provide an online service. Now offering apps and even downloadable, offline shows and movies, still highly tailored to individual preferences.
This cool and quirky footwear brand is another excellent example of target marketing at work. The brand appeals to “misfits and rebels,” with a daredevil outlook that may not attract every shoe-wearing citizen but is sufficiently focused so that rebels worldwide can’t get enough.
Like Netflix, Vans allowed the customers to guide their business decision and utilized highly targeted market research to ensure every product matched their audiences’ desires perfectly.
Before we leave you, we thought it might be helpful to include a detailed target marketing plan example. This fictitious target market for a software company will give you an idea of the demographics you should include when analyzing your customer base, so you can see precisely how to define your target market in a B2B scenario:
- Age range: 35-45 years old.
- Gender: 65% male, 35% female
- Common job titles: Chief financial officer, head of digital, senior accountant
- Values: Job security, affordability, financial growth
- Likes to review all data and complete a full pros/cons analysis before making decisions
- Strives for an improvement to their work/life balance
- Skeptical of any brand that promises to solve all their problems or too-good-to-be-true offers.
Challenges and pain points
- Concerned that their current software can’t keep up with increasing demands and improvements to modern technology.
- Aware that a lack of third-party integration means internal processes cannot be performed efficiently.
- Demands from bosses and/or shareholders create a stressful work environment with little work/life balance.
Preferred communication channels
- Professional social media platforms such as LinkedIn
- Regularly browse the internet for the latest industry news
- White papers with plenty of detail
- Case studies
- News articles
Now you know how to find your target markets, the difference between a target audience and a target market, and some real-life examples of how to write a target market strategy. You should be well on your way to attracting and maintaining a loyal, engaged customer base.
But it’s important to remember that figuring out who your ideal customers are is only the first step. Once you’ve identified the age, location, gender, interests, pain points, and other aspects of your target market sample, it’s vital to focus on the communication channels markets can use to communicate with these segments.
Google Analytics is one of the best tools for determining where your target market/audience hangs out online. Using this information, you can streamline your marketing efforts on relevant social media platforms, email campaigns, or even offline advertising.
Be sure to focus on getting the tone of voice and language just right in any messaging, and have high-quality landing pages that reflect your audience’s interests to retain the best customers and keep them coming back for more.
Once you’ve done this, you’re sure to experience market growth like never before.
How do you define a target market?
A target market is a segment of people who are likely to benefit from the products or services your business is selling. You can narrow this group into as many smaller segments as you like to help your marketers find the perfect methods to get your messaging across.
Target markets are usually defined by key demographics, including age range, gender, income, geographic location, and more. They will be further narrowed down with psychographics, including likes and dislikes, key values, pain points, lifestyle, etc.
How do you define a target market vs. target audience?
Target markets take into account the people you’re selling to at market. However, a target audience will be the person or people who make the purchase decision and are the ones you’re advertising to.
A good example of the difference between these two aspects is a product for children. While kids aged 3-4 might be the target market, the target audience would be the parents or guardians, as these are the ones who make the purchase decision.
Old Spice is another good target market vs. target audience profile example. Although the product is for men, the man your man could smell like campaign utilized messaging for the end-users’ wives, girlfriends, and partners. The market was men; the audience was the women buying the product on their behalf.
How do I identify my target market?
Plenty of research is required to accurately identify the right target market for your products or services. Conversations with any customers you already have are invaluable. You can utilize things like social media polls, surveys, or even email research to help you determine your target market and existing customers.
Google Analytics is also an incredibly valuable tool when establishing your target market. This will help you see where your audience spends their time and what keywords they’re searching for that might be relevant to your messaging.
Suppose Facebook is an appropriate channel for your marketers to use. In that case, Facebook’s custom audience tools can also be handy for your market research and to aid you with narrowing down your market segments.
How do you write a target market statement?
Take a look at our target market statement examples above for an overview of the things you should include in a target marketing strategy. As a summary, you should be looking to include aspects such as:
- Geographical location
- Current challenges
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How to Define Your Target Market
4 min. read
Updated October 27, 2023
One of the most powerful tools of small business marketing strategy is defining and addressing your target market—the audience that you think is most likely to buy your product or service. The key to identifying this customer base is market segmentation, or figuring out the demographics of your specific market.
Common sense makes it seem obvious from afar. You can’t (and shouldn’t) try to sell your product to everyone in the world. You’d waste a lot of money and resources very quickly.
But how do you figure out who your target audience is? Who or what should it be? How would you know? Here are five tips to help you figure it out.
- 1. Don’t try to please everybody
Strategy is focus. Say you’re planning to start a restaurant ; which of these three options is easier?
- Pleasing customers 40 to 75 years old, wealthy, much more concerned with healthy eating than cheap eating, appreciating seafood and poultry, liking a quiet atmosphere.
- Pleasing customers 15 to 30 years old, with limited budgets, who like a loud place with low prices and fast food.
- Pleasing everybody.
I really hope you chose one of the first two, and not the third. This is the essence of target marketing—divide and conquer. Different groups of people have different pain points and different desires. Most of the time, efforts to please everyone end up pleasing no one.
- 2. Learn market segmentation
It’s about segments, like pie segments or orange segments—except that in this case, it’s segments of a total market, or TAM .
In my “divide and conquer” example above in the first point, the specific age ranges, wealth, and atmosphere preferences describe particular market segments.
In the illustration here below, U.S. census data divides the population into demographic segments. Demographics are the old standards like age, gender, and so on.
You’ve seen market segmentations referred to frequently in business articles, interviews, and discussions. People will appeal to certain age groups, genders, income levels, and so forth. Divide and conquer is a simple concept; market segmentation is how you make it practical for your business.
Let’s say you think your target market is age 40 to 75 years old, wealthy, and interested in healthy eating. How do you validate your assumption that that demographic will be your ideal target customers? That’s where market research comes it. Talking to customers and potential customers is one of the best ways to do this kind of research, but there are many approaches.
What’s your biggest business challenge right now?
- 3. Use segmentation creatively
Don’t limit your target market strategy for market segmentation by age, gender, and economic level.
For example, when I was consulting for Apple Computer, we divided the market into user groups:
- Small business
- Large business
I also liked a shopping center segmentation that divided its market into so-called psychographic market segmentation:
- Kids and cul-de-sacs were affluent upscale suburban families, “a noisy medley of bikes, dogs, carpools, rock music, and sports.”
- Winner’s circle were wealthy suburban executives, “well-educated, mobile executives and professionals with teen-aged families. Big producers, prolific spenders, and global travelers.”
- Gen X and babies were upper-middle income, young, white-collar suburbanites.
- Country squires were wealthy elite ex-urbanites, “where the wealthy have escaped urban stress to live in rustic luxury. Affluence, big bucks in the boondocks.”
I knew a business that segmented its business customers into decision-process types as well:
- Decision by committee
- Decision by functional manager
- Decision by owner
And I call this final example, for lack of a formal definition, strategic intersection.
In the diagram here, the social media services that Have Presence offers are targeted to small business owners who:
- Want outside help with their social media; and
- Value business social media; and
- Have a budget to pay for the service.
Any of these creative segmentations can help you set a target market, and can also be a jumping off point for putting together a user or buyer persona —another useful tool for understanding your target audience and developing better marketing messaging.
- 4. Consider your own unique identity too
Your business probably reflects who you are and what you like to do, as well as what you do best. Marketing to people you like as the target market is an advantage. If you like the feel of small business better than the big corporate giants, then you’re probably better off setting the small business as a target market.
As Palo Alto Software, the host of Bplans, grew up and grew our business plan software, its founder (that would be me) was more comfortable with the do-it-yourself entrepreneur and business owner than the high-end consultants, so we ended up targeting the do-it-yourselfers in business.
So, somebody who loves fine food, tastefully prepared and served, is probably more comfortable with an upscale target market than with price-sensitive young families.
- 5. Define your target market early and revise as needed
Do it well as soon as you can, and keep reviewing and refreshing as you go along. You shouldn’t think of your target market as set in stone. As you learn more about your customers, how you define your target market will probably change.
The right target market increases your chances of success because you can communicate better with a well-defined group, and that holds expenses down and makes results better.
See why 1.2 million entrepreneurs have written their business plans with LivePlan
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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What Is a Target Market?
- Defining a Product's Target Market
- 4 Target Markets
Why Are Target Markets Important?
What are market segments, target market and product sales.
- Target Market FAQs
The Bottom Line
- Marketing Essentials
Target Market: Definition, Purpose, Examples, Market Segments
Investopedia contributors come from a range of backgrounds, and over 24 years there have been thousands of expert writers and editors who have contributed.
Investopedia / Mira Norian
A target market is a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics, such as age, income, and lifestyle.
Identifying the target market is a key part of the decision-making process when a company designs, packages, and advertises its product.
- A target market is a group of customers with shared demographics who have been identified as the most likely buyers of a company's product or service.
- Identifying the target market is important in the development and implementation of a successful marketing plan for any new product.
- The target market also can inform a product's specifications, packaging, and distribution.
How Do I Define My Product's Target Market?
Part of creating a new product is envisioning the consumers who will want it.
A new product must satisfy a need or solve a problem, or both. That need or problem is probably not universal unless it reaches the level of indoor plumbing. More likely, it is needed by a subset of consumers, such as environmentally-conscious vegetarians, or science nerds, or outdoor enthusiasts. It may appeal to a teenager or a middle-aged professional, a bargain-hunter or a snob.
Envisioning your likely target market is part of the process of creating and refining a product, and informs decisions about its packaging, marketing, and placement.
What Are the 4 Target Markets?
Marketing professionals divide consumers into four major segments:
Demographic: These are the main characteristics that define your target market. Everyone can be identified as belonging to a specific age group, income level, gender, occupation, and education level.
Geographic: This segment is increasingly relevant in the era of globalization. Regional preferences need to be taken into account.
Psychographic: This segment goes beyond the basics of demographics to consider lifestyle, attitudes, interests, and values.
Behavioral: This is the one segment that relies on research into the decisions of a company's current customers. New products may be introduced based on research into the proven appeal of past products.
What Is an Example of a Target Market?
Each of the four target markets can be used to consider who the customer for a new product is.
For example, there are an estimated 100,000 Italian restaurants in the U.S. Clearly, they have enormous appeal.
But a corner pizza joint might appeal mostly, although by no means entirely, to a younger and more budget-conscious consumer, while an old-fashioned white tablecloth place might be dominated by older folks and families who live in the neighborhood. Meanwhile, a newer place down the street might cater to an upscale and trend-conscious crowd who will travel a good distance for the restaurant's innovative menu and fancy wine list.
In each successful case, a savvy business person has consciously considered the ideal target market for the restaurant and has tweaked the menu, decor, and advertising strategy to appeal to that market.
Few products today are designed to appeal to absolutely everyone. The Aveda Rosemary Mint Bath Bar, available for $23 a bar at Aveda beauty stores, is marketed to the upscale and eco-conscious woman who will pay extra for quality. Cle de Peau Beaute Synactif Soap retails for $110 a bar and is marketed to wealthy, fashion-conscious women who are willing to pay a premium for a luxury product. An eight-pack of Dial soap costs under $5 on Amazon, and it is known to get the job done.
Part of the success of selling a good or service is knowing to whom it will appeal and who will ultimately buy it. Its user base can grow over time through additional marketing, advertising, and word of mouth.
That's why businesses spend a lot of time and money in defining their initial target markets, and why they follow through with special offers, social media campaigns, and specialized advertising.
Dividing a target market into segments means grouping the population according to the key characteristics that drive their spending decisions. Some of these are gender, age, income level, race, education level, religion, marital status, and geographic location.
Consumers with the same demographics tend to value the same products and services, which is why narrowing down the segments is one of the most important factors in determining target markets.
For example, people who fall into a higher income bracket may be more likely to buy specialty coffee from Starbucks instead of Dunkin' Donuts. The parent companies of both of these brands need to know that in order to decide where to locate their stores, where to stock their products, and where to advertise their brand.
A business may have more than one target market—a primary target market, which is the main focus, and a secondary target market, which is smaller but has growth potential. Toy commercials are targeted directly to children. Their parents are the secondary market.
Identifying the target market is an essential part of a product development plan, along with manufacturing, distribution, price, and promotion planning. The target market determines significant factors about the product itself. A company may tweak certain aspects of a product, such as the amount of sugar in a soft drink or the style of the packaging, so that it appeals more to consumers in its target group.
As a company’s product sales grow, it may expand its target market internationally. International expansion allows a company to reach a broader subset of its target market in other regions of the world.
In addition to international expansion, a company may find its domestic target market expands as its products gain more traction in the marketplace. Expanding a product's target market is a revenue opportunity worth pursuing.
How Detailed Should a Target Market Be?
It depends. Broadly speaking, a product may be designed for a mass market or a niche market, and a niche market can be a very small group indeed, especially in a product's early introductory phase.
Some carbonated beverages aim for a practically universal market. Coca-Cola had to branch out to 200 markets abroad to continue growing its customer base. Gatorade is owned by Pepsi Cola, but the brand is positioned as a drink for athletes. The soda brand Poppi, which is branded as a "Healthy, Sparkling, Prebiotic Soda with Real Fruit Juice, Gut Health, and Immunity Benefits," is clearly aimed at a younger, healthier, and more trend-conscious target market.
Consider a casual apparel company that is working to build its distribution channels abroad. In order to determine where its apparel will be most successful, it conducts some research to identify its primary target market. It discovers that the people most likely to buy their products are middle-class women between the ages of 35 and 55 who live in cold climates.
It's reasonable for the company to focus its advertising efforts on northern European websites that have a strong female audience.
But first, the company may consider how its apparel can be most attractive to that target market. It may revise its styles and colors and tweak its advertising strategy to optimize its appeal to this new prospective market.
What Is the Purpose of a Target Market?
A target market defines a product as well as vice versa.
Once a target market is identified, it can influence a product's design, packaging, price, promotion, and distribution.
A product aimed at men won't be packaged in pink plastic. A luxury cosmetic won't be sold in a pharmacy. An expensive pair of shoes comes with a branded cloth drawstring bag as well as a shoebox. All of those factors are signals to the target audience that they have found the right product.
Identifying the target market is part of the process of creating and refining a new product.
A target market can be translated into a profile of the consumer to whom a product is most likely to appeal. The profile considers four main characteristics of that person: demographic, geographic, psychographic, and behavioral.
University Lab Partners. " 4 Key Types of Market Segmentation: Everything You Need to Know ."
National Geographic. " How Italian Cuisine Became as American as Apple Pie ."
Aveda. " Rosemary Mint Bath Bar ."
Cle de Peau. " Synactif Soap ."
Amazon. " Dial Antibacterial Bar Soap, Gold, 4 Ounce (Pack of 8) ."
Chron. " What Is a Secondary Target Audience? "
Coca-Cola Australia. " Coca-Cola: From Start-Up to Global Enterprise ."
Pepsico Partners. " Gatorade ."
DrinkPoppi. " Home ."
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Business Plan Section 5: Market Analysis
Find out the 9 components to include in the market analysis portion of your business plan, plus 6 sources for market analysis information.
This is the part of your business plan where you really get to shine and show off that awesome idea you have. Of course, your product or service is the best! Now, let’s talk about how you know it’s a hit. Be prepared to show you know your market AND that it’s big enough for you to build a sustainable, successful business .
In writing up your market analysis, you’ll get to demonstrate the knowledge you’ve gained about the industry, the target market you’re planning to sell to, your competition, and how you plan to make yourself stand out.
A market analysis is just that: a look at what the relevant business environment is and where you fit in. It should give a potential lender, investor, or employee no doubt that there is a solid niche for what you’re offering, and you are definitely the person to fill it. It’s both quantitative, spelling out sales projections and other pertinent figures, and qualitative, giving a thoughtful overview of how you fit in with the competition. It needs to look into the potential size of the market, the possible customers you’ll target, and what kind of difficulties you might face as you try to become successful. Let’s break down how to do that.
What Goes Into A Business Plan Market Analysis?
Industry description and outlook.
Describe the industry with enough background so that someone who isn’t familiar with it can understand what it’s like, what the challenges are, and what the outlook is. Talk about its size, how it’s growing, and what the outlook is for the future.
Who have you identified as your ideal client or customer ? Include demographic information on the group you’re targeting, including age, gender and income level. This is the place to talk about the size of your potential market, how much it might spend, and how you’ll reach potential customers. For example, if women aged 18 to 54 are your target market, you need to know how many of them there are in your market. Are there 500 or 500,000? It’s imperative to know. Similarly, if your product or service is geared toward a high-end clientele, you need to make sure you’re located in an area that can support it.
What factors influence the need for your product or service? Did the need exist before or are you trying to create it? Why will customers want to do business with you, possibly choosing you over someone else? This is where you can briefly introduce the competitive edge you have, although you’ll get into that in more depth in following sections. Focus on how the product or service you’re offering satisfies what’s needed in the market.
While no one can predict the future, it’s important to get a possible idea of what business may be like down the road and make sales projections. Have the number of people in your target market been increasing or decreasing over the last several years? By how much per year? To make an intelligent forecast, you have to start with current conditions, then project changes over the next three to five years.
You need to take a look at trends the same way you look at population and demographics. Is there a shift to more natural or organic ingredients that might impact your business? How might energy prices figure in? The easy availability of the internet and smartphone technology? The questions will be different for every type of business, but it’s important to think about the types of changes that could affect your specific market. In this section, you can cite experts from the research you’ve done-a market expert, market research firm, trade association, or credible journalist.
Market Research Testing
Talk about what kind of testing and information gathering you’ve done to figure out where you stand in the market. Who have you spoken to about the viability of your product? Why are you confident of its success? Again, if you can, cite experts to back up your information.
There’s no way to succeed unless you’ve examined your competition. It might be helpful to try analyzing your position in the market by performing a SWOT analysis. You need to figure out their strengths and the weaknesses you can exploit as you work to build your own business. You do need to be brutally honest here, and also look at what the potential roadblocks are-anything that might potentially stand in your way as you try to meet your goals and grow your business.
Barriers to Entry
Lenders and investors need to have a reasonable assurance they’ll be paid back, so they’ll want to know what would stop someone else from swooping in, doing what you do, and grabbing half the available business. Do you have technical knowledge that’s difficult to get? A specialized product no one else can manufacture? A service that takes years to perfect? It’s possible your industry has strict regulations and licensing requirements. All of these help protect you from new competition, and they’re all selling points for you.
As we touched on above, you should cover regulations as a barrier to entry. If your field is covered by regulations, you do need to talk about how they apply to your business and how you’ll comply with them.
Six Sources for Market Analysis Information
The Market Analysis section of your business plan is far more than a theoretical exercise. Doing an analysis of the market really gives YOU the information you need to figure out whether your plans are viable, and tweak them in the early stages before you go wrong.
So, where do you start? Research is the key here, and there are several sources available.
1. The Internet
Some of the first information you need is about population and demographics: who your potential customers are, how many there are, and where they live or work. The U.S. Census Bureau has an impressive amount of these statistics available. USA.gov’s small business site is another good source for links to the U.S. Departments of Labor and Commerce, among others.
2. Local Chamber of Commerce
A lot of local information can be gotten from the chamber of commerce in the area where you plan to operate. Often, they can provide details into what the general business climate is like, and get even more specific about how many and what type of businesses are operating in their jurisdiction.
3. Other Resources
When actual statistical information isn’t available, you’ll often be able to put together a good picture of the market from a variety of other sources. Real estate agents can be a source of information on demographics and population trends in an area. Catalogs and marketing materials from your competition are useful. Many industry associations have a great amount of relevant information to use in putting your analysis together. Trade publications and annual reports from public corporations in your industry also contain a wealth of relevant information.
4. Customer Mindset
Take yourself out of the equation as the owner and stand in your customer’s shoes when you look at the business. As a customer, what problems do you have that need to be solved? What would you like to be able to do better, faster, or cheaper that you can’t do now? How does the competition work to solve those issues? How could this business solve them better?
5. the Competition
If you have a clothing store, visit others in your area. If you’d like to open a pizzeria, try pies from surrounding restaurants. If you’re a salon owner, park across the street and see what the store traffic is like and how customers look when they come out. Check out websites for pricing and other marketing information. Follow their Facebook pages. If you can’t be a customer of the competition, ask your customers and suppliers about them. Always be aware of what’s going on in the market.
6. Traditional Market Research
While you can gather a lot of data online, your best information will come from potential customers themselves. Send out surveys, ask for input and feedback, and conduct focus groups. You can do this yourself or hire a market research firm to do it for you.
What to Do With All That Data
Now that you’ve gathered the statistics and information and you’ve done the math to know there’s a need and customer base for your product or service, you have to show it off to your best advantage. You can start the market analysis section with a simple summary that describes your target customers and explains why you have chosen this as your market. You can also summarize how you see the market growing, and highlight one or two projections for the future.
If your information is dense with numbers and statistics, someone who reads your business plan will probably find it easier to understand if you present it as a chart or graph. You can generate them fairly easily with tools built into Google docs and free infographic apps and software .
Don’t assume that your readers have an understanding of your market, but don’t belabor simple points, either. You want to include pertinent, important information, but you don’t want to drown the reader in facts. Be concise and compelling with the market analysis, and remember that a good graphic can cover a lot of text, and help you make your point. It’s great to say you project sales to increase by 250% over the next five years, but it makes an even bigger wow when you show it in a graphic.
Always relate the data back to your business. Statistics about the market don’t mean much unless you describe how and where you fit in. As you talk about the needs of your target market, remember to focus on how you are uniquely positioned to fill them.
Don’t hesitate to break down your target market into smaller segments, especially if each is likely to respond to a different message about your product or service. You may have one market that consists of homes and another of small businesses. Perhaps you sell to both wholesale and retail customers. Talk about this in the market analysis, and describe briefly how you’ll approach each. (You will have more of an opportunity to do this in detail later in the plan.) Segmentation can help you target specific messages to specific areas, focusing in on the existing needs and how you fill them.
Remember to tailor your information to the purpose at hand. If your business plan is for internal use, you may not have to go into as much detail about the market since you and your team may already know it well. Remember, however, that the very act of doing the research may help you learn things you didn’t know, so don’t skimp on doing the work. This is a great opportunity to get information from outside that might affect your business.
It’s not about your ability to do professional-level market research; a plan intended for a bank or other lender needs to show your understanding of where your business fits into the grand scheme of things. Yes, you need to detail the information, but your main goal is to show how you’ve incorporated that knowledge into making solid decisions about the direction of your company. Use this section of your business plan to explain your understanding of your industry, your market and your individual business so that lenders and investors feel comfortable with your possibility for success.
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