Every successful business plan includes target market analysis because you have to know who your customer is before your business can succeed. The 6 steps below guide you through the process of conducting target market analysis so you can properly assess the market your company appeals to.
Step 1: Identify Your Target Market
When you identify your market, you ask yourself a series of questions about your potential customers. When you think about who will buy your product, decide on their:
- annual income
- what they do for a living
- what they do in their leisure time
- whether are not they have children
Then, get more specific to your product. Find out how many of your type of product they already own or tend to own and how often they replace the product.
Step 2: Divide Your Markets
Your target market may include several different segments in terms of:
- geographic location
- attitudes and beliefs
- purchasing trends
If this is the case, divide your target markets along these lines in order to reach them more effectively.
Step 3: Conduct Market Research
You can use printed information collected by the federal government at practically no cost including the U.S. Census or the annual Statistical Abstract of The United States, published by the U.S. Department of Commerce. Given the sheer volume of information in these publications, though, it may be more practical to choose an online database vendor like www.dialog.com, where you can purchase national, as well as local demographics reports to conduct your market research.
A third way to research your market is to conduct surveys with your current customers. Ask them questions like why they bought your product, how they will use it and what they like and dislike about it. Then, give them some incentive to complete the survey like a coupon, free gift or, at the very least, a postage paid return envelope.
Step 4: Choose Which Markets to Serve
Though one market may be stronger than another, you may choose more than one so you do not become too heavily reliant on one demographic, geographic location, set of beliefs, attitudes and buying habits. Other considerations include which markets your competitors are already selling to and your financial ability to advertise to your chosen market segments.
Step 5: Target Market Projections
Use your market research information to make projections about who will buy your product and how much they will buy. Also, consider the likelihood of repeat customers and how economic shifts might affect your target market and your sales.
Step 6: Write the Target Market Analysis
Now that the information is compiled, write a concise target market analysis using short paragraphs to include with your business plan. Distinguish between different markets and provide sources to back up your statistical data.
Conducting target market analysis is vital to the success of your business. Target market analysis includes demographic and geographic information, as well as statistical information about people's beliefs and buying habits based on market research.