Target Market Analysis

In the industry and target market analysis, you will examine the current status of your industry, describe your target market and assess your competition.

Examine the status of your industry and identify significant future trends.

• Determine the specific industry that best describes your business. You'll use that information to gather important statistics and information.
  
• Your business may fit into two or more industries. If that's the case, research each industry, and give more importance in your target market analysis to the information that is most relevant to your own specific business.
  
• Determine whether there is a seasonal element to your business.
  
• Note whether your industry is sensitive to economic conditions and in what way.
  
• Address any issues related to supply and distribution.

Describe your target market.

• Describe your specific target customer. It can be relevant to determine the following characteristics of your target market: age range, gender, income range, family status, home ownership, education level.
  
• Determine the concerns and interests of your customers.
  
• Your target market analysis will help you to understand your customers and be better prepared to make smart decisions about where you spend your marketing resources. You'll be able to allocate resources to strategies that actually reach your target market.
  
• Avoid defining your target market in unreasonably broad terms. Dividing your market into segments provides you with a set of specific characteristics that help you to make informed marketing decisions.
  
• You may have a primary and a secondary target market. For example, you may sell products directly to retail customers and you may also wholesale your product to other retail outlets. In that case, you'll need to assess each target market.
  
• Note the primary geographic market you intend to cover.
  
• Marketing professionals divide consumer groups into different psychographic and lifestyle groups. A familiar example would be "early adopters," consumers who are eager to be the first to use a new type of technology. If you have a local business development association, check out their library; they may have some very interesting literature that details the psychological factors that influence your customers' purchasing decisions.
  
• Determine the size of your market. Determine how many potential customers you can reach. Typically, you will be looking for a market that is not so small that it cannot sustain a business, but not so big that you cannot possibly compete with larger established companies unless you are very well financed.
  
• Determine the trends that impact your customers. Indicate ways in which your customers' needs are changing and any relevant social, technical or other changes that impact your target market.
  
• Census reports will provide you with some of this information. Refer to the Business Research Resources section for links to census reports.

Assess your competition

• Identify your major competitors.
  
• Determine how you will compete with them and honestly assess how you compare with your major competitors.
  
• Note any barriers to entry into your industry. Determine what makes it difficult for new competitors to enter the market. Examples of barriers to entry include: high startup costs, patents or substantial expertise required. The more barriers to entry that exist, the more difficult it will be for new competitors to enter the market and challenge your position.

Additional Resources
Business plan outline with links to further information about each section
The Successful Business Plan by Rhonda Abrams book review