A target market in a business plan is a section that defines the specific group of people with shared characteristics to whom the business intends to market its products or services. Businesses are known to use this section of the business plan to understand their potential customers and also develop well-structured marketing strategies to help them attain their business and marketing objectives.
Indeed, target market definition is an important element of any business plan, and you will have to extensively research the potential buying audience for your product before you start development. This could include multitudes of people if you are an online business or a few thousand individuals if you are looking to open a retail store in a little town.
According to experts, having a clear understanding of your target market ensures that you develop well-structured marketing campaigns that will appeal to your customer base. There are numerous ways to define a target market in a business plan, including demographics, psychographics, firmographics, and customer behavior.
Experts note that thoroughly defining your target market when developing a business plan can help you prepare a formidable market strategy. Note that your target market is quite different from the buyer persona.
Although the target market outlines the type of person your buyer is in general, the buyer persona is a more comprehensive but hypothetical individual. Have it in mind that the buyer persona can help narrow down an advertising strategy for B2B businesses depending on who they speak to when selling or marketing within their target market.
Factors That Help You Define the Target Market in a Business Plan
There are vital factors to take into consideration when looking to define your target market in a business plan. Those factors may also ensure you reflect on your product or service’s distinguishing features when you analyze your consumers. The factors include;
When looking to define your target market, it is recommended that you first list the features of your product or service. Next to each feature, create a list of benefits it provides (and the benefits of those benefits). For instance, an advertising company offers result-oriented marketing strategies.
The benefit of these services is a professional company image. A professional image will most definitely draw in more customers for the business since they see the company as professional and trustworthy. Owing to that, the benefit of result-oriented marketing strategies is gaining more customers and generating more money.
Once you have your benefits listed, try to create a list of people who have a need that your benefit fulfills. For instance, an advertising company could decide to only cater to businesses interested in increasing their client base. Although this is still quite too general, it more or less gives you the base to start from.
Note that demographics outline who your target customers are in terms of categories such as age, gender, employment status, life stage, family structure, religion, and income. To help put this into a clearer perspective, here are a few examples of demographic descriptions of your target market:
- High school students seeking summer or part-time jobs
- Women ages 40–50 who are employed full time with a yearly income of at least $60,000
- Retired men who are married but without children
This is used to describe the physical location of your target customers. Vital factors to take into consideration include:
- Whether they reside in a rural, suburban, or urban environment
- The exact area of the country they live in
- Their local language and time zone
In addition, you shouldn’t forget to consider whether your target market uses your product or service in the same place they purchase it. Ask yourself if they have to move or travel with it or send it to someone else.
Psychographics tend to outline the essential and built-in personal qualities of people in your target market. Unlike demographic segmentation, it is used to describe who your consumers are; psychographic segmentation offers a glimpse into the objective behind why they buy something. This includes things like their hobbies and leisure activities, entertainment interests, and preferred sources of information.
Behavioral patterns are those that seek to outline your customers’ purchasing habits. When taking into consideration your target market’s behavioral patterns, it is pertinent you ask yourself what qualities your consumers are eager to see in the item or service and why they would want to go for the product or service.
Extensively consider when and how frequently they buy and use your product or service. By understanding how consumers interact with businesses, you can develop strategies or concepts to improve the effectiveness of their efforts.
Adequately defining your target market is a very challenging task when putting together a business plan. However, once you know who you are targeting, the process of deciding the exact media to leverage to reach them and what marketing messages will resonate with them becomes very easy and it also creates a great possibility for success.