Not all products and services are meant for all types of consumers, and consumers are often cautious with their spending power. For this reason, target markets are typically segregated by age, location, income and lifestyle. A company defines its target market by the consumers that are likely to have a need for its product.
Town B Although Town B looks more competitive 10 competitors vs. The definition of a potential customer will depend on your type of business. For example if you are opening a small shop selling office furniture then your market will be all the companies within your delivery range.
As in the example above it is likely that most companies would have only one person in charge of purchasing furniture hence you wouldn't take the size of these businesses in consideration when assessing the number of potential customers.
You would however factor it when assessing the value of the market. Market value Estimating the market value is often more difficult than assessing the number of potential customers.
The first thing to do is to see if the figure is publicly available as either published by a consultancy firm or by a state body. It is very likely that you will find at least a number on a national level.
If not then you can either buy some market research or try to estimate it yourself. Methods for building an estimate There are 2 methods that can be used to build estimates: The bottom up approach consist in building a global number starting with unitary values. In our case the number of potential clients multiplied by an average transaction value.
Let's keep our office furniture example and try to estimate the value of the 'desk' segment. We would first factor in the size of the businesses in our delivery range in order to come up with the size of the desks park. Then we would try to estimate the renewal rate of the park to get the volume of annual transactions.
Finally, we would apply an average price to the annual volume of transactions to get to the estimated market value. Here is a summary of the steps including where to find the information: You can get the number and size of businesses in your delivery area from the national statistics.
Your accountant should be able to give you the useful life of a desk but you should know it since it is your market! You can compare the desk prices of other furniture stores in your area. As a side note here: That was the bottom up approach, now let's look into the top down approach. The top down approach consist in starting with a global number and reducing it pro-rata.
Once again the number of employees would only be a rough proxy given all business don't have the same furniture requirements. When coming up with an estimate yourself it is always a good practice to test both the bottom up and top down approaches and to compare the results.
If the numbers are too far away then you probably missed something or used the wrong proxy. Once you have estimated the market size you need to explain to your reader which segment s of the market you view as your target market.
Target Market The target market is the type of customers you target within the market. For example if you are selling jewellery you can either be a generalist or decide to focus on the high end or the lower end of the market. This section is relevant when your market has clear segments with different drivers of demand.
In my example of jewels, value for money would be one of the drivers of the lower end market whereas exclusivity and prestige would drive the high end. Now it is time to focus on the more qualitative side of the market analysis by looking at what drives the demand.
Market Need This section is very important as it is where you show your potential investor that you have an intimate knowledge of your market.
You know why they buy! Here you need to get into the details of the drivers of demand for your product or services. One way to look at what a driver is, is to look at takeaway coffee.
One of the drivers for coffee is consistency. The coffee one buys in a chain is not necessarily better than the one from the independent coffee shop next door. But if you are not from the area then you don't know what the independent coffee shop's coffee is worth.
Whereas you know that the coffee from the chain will taste just like in every other shop of this chain. Hence most people on the move buy coffee from chains rather than independent coffee shops. From a tactical point of view, this section is also where you need to place your competitive edge without mentioning it explicitly.
In the following sections of your business plan you are going to talk about your competition and their strengths, weaknesses and market positioning before reaching the Strategy section in which you'll explain your own market positioning.Find the answer by reading this article which explains how to do a market analysis for a business plan.
What is a market analysis? Find the answer by reading this article which explains how to do a market analysis for a business plan. The target market is the type of customers you target within the market. For example if you are selling. Learning about your market and adjusting your business plan accordingly is an ongoing process -- indeed, it is the heart of successfully running a business.
Smart business owners constantly monitor market conditions and make adjustments to their businesses in order to stay profitable. Mar 05, · Lucky for you, we’re living in the days of the niche market! You can use target marketing to carve out your own space in the marketplace.
Case study: The wireless industry. The wireless industry is a great example of small businesses succeeding with niche markets and target marketing/5(44). The task then becomes determining, as closely as possible, exactly who those people are, and ‘targeting’ the business’s marketing efforts and dollars toward them.
You, too, can build a better, stronger business, by identifying and serving a particular customer group – your target market. To define a target market for your business plan, you should research the potential buying audience for your product.
This could range from millions of people if you are starting an online business, to a few thousand individuals if you are opening a retail store in a small town. To succinctly define your target market, through polling or survey, ask members of your target market specific questions directly related to your products or services.
For instance, if you plan to sell computer-related services, ask questions relating to the number of .