Target Market: Business Plan Basics
The target market section of your business plan must clearly identify the current and prospective buyers of your Company’s products and/or services. Your goal in preparing the target market section is to demonstrate to readers that you clearly understand who your customers are and how your products/services directly meet the needs of the marketplace. Properly identifying your potential customer base also helps to drive overall marketing and sales strategies that you will include within other sections of your business plan.
Although your product or service may meet the needs of a large constituency of potential customers, the goal is to define your customer base as specifically as possible both quantitatively and qualitatively. Consider the follow types of characteristics for inclusion in the target market section of your business plan:
How large is your target market? Are there 1,000 business buyers? 10 million potential consumers ready to purchase your product? Or a small handful of very large target customers?
The demographic traits of your customers often vary based on whether you are focused on serving the consumer or business markets:
- Consumer - Income, Occupation, Gender, Single/Married, Ethnic Group, Education
- Business - Industry, Product/Service, Years in Business, Revenue, Employee Size, Private/Public
Where are your customers located? While technology has made location less of an issue for many companies, it doesn’t mean you should overlook the importance of defining the geographic location of your customers. Clarifying these issues also helps to ensure that your marketing and sales strategies/budgets properly match your goals to capture market share.
What are some of the more subjective traits that define your customers? This might include things such as current buying motivations, perceived shortcomings of other solutions in the market, and trends/purchasing shifts likely to occur within your target market.
Naturally, the more you understand your customers, the better your chances of success. Many times the best approach to answer the target market question - "Who is our customer?” - is to invest time and resources in primary market research. Conduct simple surveys or focus groups. And if feasible, work with a reputable market research firm to guide you through the process.
At the very least, use the Internet and industry groups to locate market research studies and statistics for your business plan. These resources can range from free information available on websites to expensive professional market research studies prepared by experts in the field.
Performing primary research enables you to gather and document the quantitative and qualitative information needed to prepare a solid target market section for your business plan.
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