A target market definition is a key element for any business plan, and you should research the potential buying audience for your product before you start development. This could range from millions of people if you are starting an online business, to a few thousand individuals if you are opening a retail store in a small town.
If you are catering to the consumer market, narrow your potential customer base to a defined demographic group. By doing so, your business will not only be more attractive to investors, but you will have a much easier time compiling a sales and marketing plan. Answer the question: What is target market? By studying your product or service and determining the most likely consumer. Define the age range, gender, marital status, and income level of the individual most likely to be your customer. Explain the motivations for purchasing your product or service. Is it a necessity or luxury? What value does this product bring? It’s best not to assume or guess. Use surveys, questionnaires, or secondary research to gather your demographic data. All of this helps form your target market definition.
Once you have defined the target market:
- Explain the purchase habits of this demographic group.
- Show how your company will impact those purchase habits.
- Explain the motivation behind this demographic group and how you will help them meet their needs.
- Create and market business advantages to your targets.
- Project future changes in this market.
- Indicate how you will meet their changing needs.
Base your future projections on research and details from your findings. Make projections based on past buying habits, the average purchase amount, and other factors, such as your ability to make the products or services available. The more you know about this target market, the more confidence you will have in your sales projections.
The same need to identify your target audience (business-to-consumer market) will also hold true if you are serving a business market (business-to-business market). You need to determine which companies will benefit from your products or services. Will you meet the needs of a specific industry or several industries? Large or small businesses? Public or privately owned businesses? Define exactly the types of businesses that will buy your product or services and target them through your marketing efforts. This will ultimately help you define targeted marketing for your customers guide you in determining how you will reach your target market, i.e. online, by referral, by cold-calling. For more about learning about the customer you intend to pursue, read Use Demographics to Understand Your Target Market.
Another way to look at a target market definition is to consider how you are positioning your company and your products. Read “What’s Your Position in the Market?” to get the basics of this important but tricky concept.
You can also get a computer assist in creating and refining your business plan; read the AllBusiness.com Buyer’s Guide to Tools that Can Help You Write Your Business Plan.
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