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 Other Characteristics
clearly identify the current and prospective buyers of What are some of the more subjective traits that define
your Company’s products and/or services. Your goal in your customers? This might include things such as
preparing the target market section is to demonstrate to current buying motivations, perceived shortcomings of
readers that you clearly understand who your other solutions in the market, and trends/purchasing
customers are and how your products/services directly shifts likely to occur within your target market.
meet the needs of the market place. Properly
identifying your potential customer base also helps to Naturally, the more you understand your customers,
drive overall marketing and sales strategies that you the better your chances of success. Many times the
will include within other sections of your business plan. best approach to answer the target market question:
Who is our customer? is to invest time and resources in
Although your product or service may meet the needs primary market research. Conduct simple surveys or
of a large constituency of potential customers, the goal focus groups. And if feasible, work with a reputable
is to define your customer base as specifically as market research firm to guide you through the process.
possible - both quantitatively and qualitatively.
At the very least, use the Internet and industry groups
Size to locate market research studies and statistics for your
How large is your target market?? Are there 1,000 business plan. These resources can range from free
business buyers?? 10 million potential consumers information available on websites to expensive
ready to purchase your product?? Or a small handful of professional market research studies prepared by
very large target customers? experts in the field.

Demographics Performing primary research enables you to gather and

The demographic traits of your customers often vary document the quantitative and qualitative information
based on whether you are focused on serving the needed to prepare a solid target market section for
consumer or business markets: your business plan.

• Consumer - Income, Occupation, Gender,

Single/Married, Ethnic Group, Education
• Business - Industry, Product/Service, Years in Mistakes to Avoid
Business, Revenue, Employee Size,
Private/Public Here are some of the "don'ts" to avoid when writing the
Target Market section of your business plan:
Geographic
Where are your customers located? While technology • Don't assume that everyone is a buyer of your
has made location less of an issue for many product/service.
companies, it doesn’t mean you should overlook the • Don't be unclear about the characteristics that
importance of defining the geographic location of your define who your target customers are.
customers. Clarifying these issues also helps to ensure • Don't assume you must have a "huge" target
that your marketing and sales strategies/budgets market - a well-defined target market that your
properly match your goals to capture market share. company can serve is far better.

Copyright 2004 Rob McLeod

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.
 So why focus on your target customer?
Firstly, if you don't understand who they are, how can
• Don't jump to conclusions about why your you tailor your product or service to best meet their
target market needs you - instead explain how needs? One key to business success is the ability to
you meet their needs. provide products and services that meet the needs and
• Don't underestimate the value of focus - sell a wants of your customers. If your customers want to
specific product/service to a specific group. purchase red shoes, and all you sell are blue shoes,
• Don't try to attack too many markets at once - how many do you suspect you will sell? If your
particularly if you are a startup or early-stage customer believes that the speed of your service is
company. more important than its quality, isn't that information
you need to know?
Useful tips
Secondly, when you understand who your customers
A popular and critical question posed to business is, you can determine with more accuracy which
owners and entrepreneurs by lenders and investors is marketing mediums and channels will be most effective
"Who is your customer?" It's such a simple question, in reaching them. If your potential customer only listens
yet the inability to answer it has possibly caused more to national stations, and you advertise on a local
?going out of business' sales than any other. station, your marketing efforts will be unsuccessful. The
more narrowly you can define your customer, the more
focused your marketing efforts become, and the more
Why can failing to answer such a simple question have
your marketing dollars will work for you.
such a devastating impact on your business?
Unfortunately, because many business owners place
too much emphasis on their products and services, and For example, if you want to sell print shop owners a
too little on what the customer truly wants and needs. product, then advertising in a print industry magazine is
You may have a great product, with more neat a far more effective use of £1million than placing an ad
gadgets, features, and benefits that your competition in the Sunday Times. This doesn't mean that your
offers, but does your customer care? And how do you customer won't read the Sunday Times, just that you
know they care? won't be advertising to all the millions of people who
clearly have no interest in your product.
The first place to start is by defining exactly who would
be interested in buying your product or service. This is Demographic characteristics are specific, objective,
your target market, defined as the group of the and observable characteristics that your target
population sharing a common set of traits, which customers share. Most marketing mediums, such as
distinguish them from everyone else. newspapers, magazines, radio stations and television
stations can provide excellent demographic
characteristics on their audience. General demographic
For example, a children's clothing store located in the
characteristics include:
mall might have a customer profile like this: Children
between the ages of 3 to 8 years old, 65% female and
35% male, located within 10 miles of the mall, and • Age or age range
whose parents earn over £40,000 a year. These • Gender
characteristics define a target market - and a central • Income Level
set of characteristics for potential customers for • Family Life Cycle
children's clothing. If you're in the start-up phase, your • Occupation
target market may be less tangible than the target • Education
market for a company with years of operational history • Race/Ethnic Group
and customer files. But as you gain experience running • Social Class
your business, and you maintain accurate records of • Industry
who actually purchases your product or service, your • Product/Service Sold
understanding of your ideal customer will improve. • 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. 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.
Geographic characteristics are based on the location(s) Market Size
where your target customer can be reached. Are they Once you determine who your customer is, it's
in the urban areas or do they reside in the rural areas? important to identify the size of your customer base. Is
Are they in Montana or New York? Correctly deciding it large or is it small? If it's too large, consider
whether to run an advertisement in the New York narrowing it down and focusing on a particular niche.
Times or the Los Angeles Times, will save you money, Trying to reach and sell a large target market is difficult
and help you generate more effective marketing and costly, especially if it's populated by well-financed
results. Try to identify your customer based on the competitors who will force you to incur significant costs
following geographic characteristics: to achieve a sizable market share. If too small, will you
be able to capture enough customers to make a
• Country / Region sufficient profit?
• State
• City / Town Market Trends
• Size of Population Once you define your customer, and determine their
• Climate total numbers in the population, it's a good idea to
• Population Density research the trends of your market. Over the next few
years, what growth rate can be expected for your target
Psychographic characteristics, though less tangible, market? What changes are taking place in the makeup
are still important to identify and understand. These of your market, and how will they change in the future?
traits have more to do with a person's psychological How are, and how will, customers change their use of
characteristics such as attitudes, beliefs, hopes, fears, your product or service?
prejudices, needs or desires, and are highly dependent
on your customers' self-image and their perceptions of So you ask, "How do I find all this information?" A few
your industry or product. Psychographic traits include suggestions: First, talk to as many of the people in your
such things as: target market as possible. Seriously - just talk to them
and ask questions. Conduct surveys. Discover what
• Social Class they like and dislike, and what they want and need.
• Lifestyle What is the most important factor in their purchase
• Leader / Follower decision? Facilitate a focus group, or if you have the
• Extrovert / Introvert money, consider working with a market research firm.
• Independent / Dependent
• Conservative / Liberal Second, don't forget the local library. It's rich with
• Traditional / Experimental books, magazines, research journals, reference guides,
• Socially conscious / Self-centered and computer databases to help you find the
information you need. Ask the librarian for help, we
Consumer / Behavioral characteristics are those always find them extremely helpful in locating specific
relating to the purchasing and usage traits of your sources quickly.
customers. Do they use similar products such as yours,
and how often do they use them? What are the benefits Lastly, use your own eyes and ears to discover
people desire in your service, and how does this valuable details about your target market and their
translate into sales? Consider these consumer / buying habits. Visit your competitors disguised as a
behavioral traits for your target customer: consumer. Hang out in a store related to the product or
service you sell and take it all in. Request annual
• Usage Ratio reports and marketing information to find out about the
• Benefits Sought financial, operational, and marketing factors that are
• Method of Usage important in your industry. Essentially, look around,
• Frequency of Usage collect information, get organized, and figure out who
• Frequency of Purchase your target customer is, and how you will reach them
effectively.

Copyright 2004 Rob McLeod

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.