Target Market

Effectively identifying your potential customer base helps to drive overall marketing and sales strategies that you will include within other sections of your business plan. Consider the follow types of characteristics for inclusion in the target market section of your business plan:
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 market place. 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. Size 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? Demographics The demographic traits of your customers often vary based on whether you are focused on serving the consumer or business markets:
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Other Characteristics 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.

Consumer - Income, Occupation, Gender, Single/Married, Ethnic Group, Education Business - Industry, Product/Service, Years in Business, Revenue, Employee Size, Private/Public

Mistakes to Avoid Here are some of the "don'ts" to avoid when writing the Target Market section of your business plan:
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Geographic 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.
Copyright 2004 Rob McLeod

Don't assume that everyone is a buyer of your product/service. Don't be unclear about the characteristics that define who your target customers are. Don't assume you must have a "huge" target market - a well-defined target market that your company can serve is far better.

The matters covered in this publication are intended as a general overview and discussion of the subjects dealt with. They are not intended, and should not be used, as a substitute for taking legal advice in any specific situation. The Scottish Institute for Enterprise and the author will accept no responsibility for any actions taken or not taken on the basis of this publication. If you would like further information, please contact your university SIE Commercialisation Practitionner or call the SIE core team on 0141 330 8789.

For example. If your customers want to purchase red shoes. You may have a great product. Don't try to attack too many markets at once particularly if you are a startup or early-stage company. radio stations and television stations can provide excellent demographic characteristics on their audience. how many do you suspect you will sell? If your customer believes that the speed of your service is more important than its quality. please contact your university SIE Commercialisation Practitionner or call the SIE core team on 0141 330 8789. just that you won't be advertising to all the millions of people who clearly have no interest in your product. Most marketing mediums. The more narrowly you can define your customer. your marketing efforts will be unsuccessful. such as newspapers. the more focused your marketing efforts become. These characteristics define a target market . you can determine with more accuracy which marketing mediums and channels will be most effective in reaching them. Demographic characteristics are specific. features.sell a specific product/service to a specific group. and too little on what the customer truly wants and needs. which distinguish them from everyone else. This doesn't mean that your customer won't read the Sunday Times. Why can failing to answer such a simple question have such a devastating impact on your business? Unfortunately. . your understanding of your ideal customer will improve. with more neat gadgets. They are not intended. then advertising in a print industry magazine is a far more effective use of £1million than placing an ad in the Sunday Times. a children's clothing store located in the mall might have a customer profile like this: Children between the ages of 3 to 8 years old. and you maintain accurate records of who actually purchases your product or service. when you understand who your customers is. and observable characteristics that your target customers share. and the more your marketing dollars will work for you. isn't that information you need to know? Secondly. how can you tailor your product or service to best meet their needs? One key to business success is the ability to provide products and services that meet the needs and wants of your customers. For example. magazines.and a central set of characteristics for potential customers for children's clothing. yet the inability to answer it has possibly caused more ?going out of business' sales than any other.• • • Don't jump to conclusions about why your target market needs you . So why focus on your target customer? Firstly. as a substitute for taking legal advice in any specific situation. Don't underestimate the value of focus . but does your customer care? And how do you know they care? The first place to start is by defining exactly who would be interested in buying your product or service. and benefits that your competition offers. if you want to sell print shop owners a product. objective.000 a year. General demographic characteristics include: • • • • • • • • • • • • • • Useful tips A popular and critical question posed to business owners and entrepreneurs by lenders and investors is "Who is your customer?" It's such a simple question. The Scottish Institute for Enterprise and the author will accept no responsibility for any actions taken or not taken on the basis of this publication. because many business owners place too much emphasis on their products and services.instead explain how you meet their needs. This is your target market. and whose parents earn over £40. 65% female and 35% male. your target market may be less tangible than the target market for a company with years of operational history and customer files. and you advertise on a local station. If you're in the start-up phase. If your potential customer only listens to national stations. and all you sell are blue shoes. located within 10 miles of the mall. and should not be used. Age or age range Gender Income Level Family Life Cycle Occupation Education Race/Ethnic Group Social Class Industry Product/Service Sold SIC Code Years in Business Revenues Number of Employees Copyright 2004 Rob McLeod The matters covered in this publication are intended as a general overview and discussion of the subjects dealt with. if you don't understand who they are. defined as the group of the population sharing a common set of traits. If you would like further information. But as you gain experience running your business.

Are they in the urban areas or do they reside in the rural areas? Are they in Montana or New York? Correctly deciding whether to run an advertisement in the New York Times or the Los Angeles Times. and how does this translate into sales? Consider these consumer / behavioral traits for your target customer: • • • • • Usage Ratio Benefits Sought Method of Usage Frequency of Usage Frequency of Purchase Copyright 2004 Rob McLeod The matters covered in this publication are intended as a general overview and discussion of the subjects dealt with. and help you generate more effective marketing results. Seriously . and computer databases to help you find the information you need. customers change their use of your product or service? So you ask.Geographic characteristics are based on the location(s) where your target customer can be reached. These traits have more to do with a person's psychological characteristics such as attitudes. Do they use similar products such as yours. . will you be able to capture enough customers to make a sufficient profit? Market Trends Once you define your customer. and how often do they use them? What are the benefits people desire in your service. and how will. Conduct surveys. and figure out who your target customer is. The Scottish Institute for Enterprise and the author will accept no responsibility for any actions taken or not taken on the basis of this publication. operational. as a substitute for taking legal advice in any specific situation. Try to identify your customer based on the following geographic characteristics: • • • • • • Country / Region State City / Town Size of Population Climate Population Density Market Size Once you determine who your customer is. please contact your university SIE Commercialisation Practitionner or call the SIE core team on 0141 330 8789. collect information. research journals. fears. prejudices. and how you will reach them effectively. magazines. what growth rate can be expected for your target market? What changes are taking place in the makeup of your market. though less tangible. and marketing factors that are important in your industry. If too small. Essentially. and what they want and need. Visit your competitors disguised as a consumer. look around. reference guides. Ask the librarian for help. it's important to identify the size of your customer base. It's rich with books. talk to as many of the people in your target market as possible. it's a good idea to research the trends of your market. and are highly dependent on your customers' self-image and their perceptions of your industry or product. Trying to reach and sell a large target market is difficult and costly.just talk to them and ask questions. Psychographic traits include such things as: • • • • • • • • Social Class Lifestyle Leader / Follower Extrovert / Introvert Independent / Dependent Conservative / Liberal Traditional / Experimental Socially conscious / Self-centered Consumer / Behavioral characteristics are those relating to the purchasing and usage traits of your customers. will save you money. Is it large or is it small? If it's too large. or if you have the money. use your own eyes and ears to discover valuable details about your target market and their buying habits. Discover what they like and dislike. Lastly. They are not intended. What is the most important factor in their purchase decision? Facilitate a focus group. "How do I find all this information?" A few suggestions: First. Over the next few years. we always find them extremely helpful in locating specific sources quickly. don't forget the local library. beliefs. hopes. Second. consider narrowing it down and focusing on a particular niche. and should not be used. consider working with a market research firm. and determine their total numbers in the population. get organized. Psychographic characteristics. Hang out in a store related to the product or service you sell and take it all in. needs or desires. are still important to identify and understand. and how will they change in the future? How are. If you would like further information. Request annual reports and marketing information to find out about the financial. especially if it's populated by well-financed competitors who will force you to incur significant costs to achieve a sizable market share.

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