Target Market Analysis: Why It’s Important and How to Apply it
If you’re ready to forge your own path and let your entrepreneurial spirit run free by establishing your own business, one of the essential components to your success will lie in the establishment of a solid business plan. Of course, knowing how to write up your business plan is the first step in the entire process. A good plan will include background information on your company and its team, as well as the goals you’re setting and the timeframe in which you aim to accomplish your goals and how you’ll effectively keep track of your progress through the use of business analytics along the way.
As you can imagine, your business plan will be a living document in the sense that it will continue to change and evolve along with your business and the market you fit into. Once your first set of short-term and long-term goals are met, it’s your duty to then set forth new goals that will continue to drive your company into the future and towards even more success. Otherwise, your brand will stagnate and the competition will take over and push you out of the market entirely. And if you realize that certain plans are unattainable after all, you can choose to revise them or eliminate them along the way in order to save time, money, and resources. Therefore, there’s no need to feel that what you write in your original business plan is 100% set in stone, as you’ll need to be flexible as a business owner in order to succeed.
One of the most important components of a good business plan is a description of your target market and how you’ll cater to that market and promote your products and/or services to them. In order to get all of that information, though, you first have to complete a target market analysis.
What is a Target Market?
Put simply, your target market is your niche, or the customer base that you’ll be targeting directly with your products and/or services. These are the consumers who have a need for whatever it is that your business has to offer, so it only makes sense to figure out ways of appealing to these customers by letting them know that you recognize their needs and you have the perfect solution.
But sometimes your target market doesn’t even yet realize that they have a need for your product or service. In that case, you have to work even harder to make them realize that something is missing in their lives and that they would greatly benefit from making a purchase from you.
Why is Target Market Analysis So Important?
As an ambitious business owner, you may be tempted to market your products to anyone and everyone, but this will only waste your resources and time because you’ll be marketing to consumers who either aren’t interested in what you have to offer or who wouldn’t benefit from what you’re trying to sell them. However, by marketing directly to your target market only, you can determine how much your customers are willing to spend on your offerings, how often they’ll need to make purchases, and what you’ll need to do to keep up with changing trends in the future. To learn about the other benefits of segmenting your market, read this blog post.
Target market analysis also ensures that the products or services your company will offer will actually be profitable. The last thing that you’d want to do as a business owner is dive headfirst into the production process for a product, or into the logistics involved with offering a service to the public, only to find out later on that it was all for naught because the consumers you thought would be interested in what you’re doing really aren’t at all intrigued.
To guarantee the success of your company and to avoid wasting valuable time and resources, you need to perform target market analysis. Doing so will ensure you’ve gathered more than enough detailed information on your target demographic. You’ll determine whether or not your demographic is correct or if you should be targeting another segment of the population. And you’ll also be able to determine how your products and/or services should be marketed before you even begin to offer them. Once again, it’s all about establishing the fact that you have an audience for what your business has to offer before diving in only to have regrets later on. Once you have your target market in place, you can rest assured that they’ll be receptive to what you have for sale.
If you fail to perform a target market analysis prior to launching your product, your target audience may never even know about your business because you won’t know how to target your marketing campaign to your intended audience. Plus, by learning about your target audience’s unique needs and expectations, you can tailor your offerings before the launch so that you don’t need to worry about working backwards and tweaking your product or service after it’s already been launched. This will ensure that every minute and every cent that you spend on your small business marketing plan will be well invested and worthwhile.
What are the Steps Involved in Target Market Analysis?
In order to successfully target your audience, you’ll need to learn everything that you can about them. To do so, follow the tips below:
1. Establish Who Will Be Interested in Your Product or Service
The first step involves establishing who you think your target audience will be and who you’ll be directing your marketing efforts towards. Consider the age, gender, salary, location, and occupations of the members of the public who would benefit most from your products and/or services. For example, will you be offering something that parents with young children will be interested in? Or will your company cater to the needs of teens or the elderly? Or do you have a special product or service in mind for pet owners?
Think about whether your product is unique or if it’s something that these people already utilize in their daily lives. How often will they use your product and how often will it need to be replaced? How much money do they have to spend on your product, based upon their income, and how willing would they be to spend their hard-earned money on what you’re selling?
You may need to divide your target audience into different segments into order to make them more accessible and to understand their needs and expectations better. For example, based upon where they’re located geographically, you may need to market your goods differently or you may need to change your pricing options. Different segments of the marketplace will have different trends that they follow and different attitudes about their purchases.
2. Conduct Market Research to Learn Even More
In step 1, you’re making a lot of assumptions, but in step 2, you’re using actual research to be certain your assumptions are correct. You can find free demographics reports or purchase those that you specifically need. This will allow you to tap into details and information about consumers that has already been compiled by someone else.
But, in addition to using research that’s already out there, you should take advantage of surveys to get in touch with your potential consumer base and get to know them even better. Offering an incentive to complete a survey by mail or online is a great way to get people to fill it out. You may want to find out what their current needs are and how they are meeting those needs with products or services offered by your competitors. Then you can use this information to target your products to them while offering something fresh and different from the competition that will make you stand out from the crowd.
3. Choose the Markets You’ll Target
Based upon your research and the information you’ve gathered directly from consumers, you should be able to find your target audience. You may even opt to market your products or services to more than one demographic so that you can guarantee your company’s success even if one market doesn’t respond as you anticipated. Or you may find that the market you thought you would sell to really isn’t the best option for your business after all. Perhaps there’s too much competition or consumers aren’t interested in what you have to offer.
Once you decide upon the markets that you’ll target, you can also go a step further and make projections about consumer buying habits, as well as challenges you might face along the way, in order to do your best to be successful.
4. Include Your Target Market Analysis in Your Business Plan
Once you and your team have reached a conclusion with regards to your target market, it’s time to write all of the information in a clear and concise fashion into your business plan. Be sure to include a description of the industry you’ll work in and the customers you’ll cater to, as well as detailed information about your target market, your pricing structure, and your anticipated gains.
Target market analysis is a necessary step in establishing a successful business. It takes time to gather all of the information you’ll need, but it will definitely be worth it, as it will guide you in making the best decisions for your company. If you find yourself struggling with the process, though, consider taking a course in market research to gain valuable insight and tips that will make things easier and answer all of your questions.
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