The purpose of the target market section of your business plan is to prove that the market is large enough in your area to support the survival and growth of your business.
however, it is noticed that the success of many new ventures is often determined by how well they have prepared this section of the business plan.
The section itself should be broken down into subsections:
Market analysis, and
Begin by providing a brief description of the market you will be competing in, define your market, how large it is, and how much of the market share you expect to capture.
It is important to reference credible sources and includes the name of your source(s) of information along with a date. Indicate how you will market the products/services and which channels will be used to deliver your products/services to your target market(s) (i.e. website, direct sales force, Value Added Re-sellers, channel partners, etc…).
Be sure to answer the following questions that are usually asked by potential investors:
What are the key drivers, trends, and influences in the market?
To whom do you market your products and services?
How will you educate your customers to buy from you?
Who is your target market?
What is your total industry-wide sales volume? In dollars? In units?
What are the trends in sales volumes within your industry?
Who are the major players and your key competitors? What are they like?
What does it take to compete? What are the barriers to entry?
What technological trends affect your industry?
What are the main modes of marketing?
How does government regulation affect the industry?
In what ways are changing consumer tastes affecting your industry?
Identify recent demographic trends affecting the industry.
How sensitive are the industry to seasons and economic cycles?
What are key financial measures in your industry (average profit margins, sales commissions, etc.)?
Furthermore, the focus of your target market is who are you selling to? Depending on the type of business you are starting and the type of plan you are writing, you may not need to go into too much detail here.
But, no matter what, you must be aware who your customer is and have an estimated value of how many there are. If your customers are few, it may just be a bad signal for you.
Therefore, it is pertinent to do your market research. Every business can benefit from doing market research to make sure it is where it wants to be. Use the business planning process as your opportunity to uncover data and question your marketing efforts.
Be rest assured it will benefit your business in the future and if the time is well spent. first, you will find your market segments and then decide how big each segment is. A market segment is a group of people or businesses that you planned to sell to.
Whatever the facts are, you’ll need to support them with an analysis of the state of your industry and any trends taking place.
You need to support your opinions with market research that identifies specific competitors and outlines their weaknesses and strengths and any barriers to entry into the market.
You need to describe why your industry is valuable and how it will continue to be important. Finally, and perhaps most important, you’ll have to convincingly describe what makes you better and destined to succeed.
When preparing the state of the industry section, instead of looking at your business as a self-contained system.
You’ll describe the industry in which you work and point to your position in that universe. You then zero in on your country, your state, and your local community, deepening on how far your business stretches.
The following are the subsections to consider while writing this section of your business plan.
1. Industry Research
Describe your industry. If you are in a new industry, or an industry not well-known to a reader, this will be a fairly comprehensive section. A better-known industry requires less explanation.
Describe the state of the industry. Is it a new industry, growth industry, competitive industry, or a stable mature industry?
Document industry trends on a local, national or world scale. Sales, number of customers, number of units sold, trends in related industries are all good industry indicators.
Describe the key customers for your specific industry.
Provide other national/international economic indicators that encourage the health of your industry.
Examine risks to the industry caused by legislation, technological change or any threat to the industry.
2. Target Market – Customer Research
The Target Market is the groupings of consumers or businesses most likely to buy your products or services.
The erst group you plan to target is your Primary Target Market; the second is your Secondary Target Market.
It is very important that you understand your target markets − after all, these are the customers you need to keep happy!
Answer the following questions regarding your customer and your target markets.
Who is the customer? (Provide both the description and the information in this section.)
Consumer Markets: • Age • Gender • Income • Family Status. Be sure to include how many customers there are in each grouping.
Business Markets: • Industry Type • Size of Customer • Annual Sales. Estimate the number of companies using directories or Yellow Pages.
Where is the customer?
Consumer Markets: Target the geographic radius of your customer base by city, region province or country.
Business Markets: The geography of business to business markets tends to be larger than consumer markets.
When do they buy?
Consumer Markets: Is there a particularly busy season for your product or service?
Business Markets: If you are selling to seasonal businesses, the timing can be everything. (e.g. wholesaling)
What do they buy?
Consumer Markets: • Necessity • Luxury Item • High involvement/Big ticket • Low involvement/consumable
Business Markets: • Inventory Item (e.g. item that is resold) • Capital Item • Consumable Item
Why do they buy?
Consumer Markets: How does your product or service help the consumer?
Business Markets: How does your product enhance the performance of the customers’ business?
How much do they buy?
Consumer Markets: Determine how much is spent on your product by your customers.
Business Markets: Estimate the commercial expenditure by the industries in your target area
Note: If you are using indirect distribution, it may be necessary to describe both your customers as a target market and the end-user as a target market. It is a good idea to state your sources. This gives the reader more confidence in the information and in the case, you are making for your business.
Provide the results of any customer survey work you have done and the sources of information.
List the direct competitors in your local market. These are firms who offer exactly what you offer. List the current number and the number in existence for the past three-year period.
List the indirect competitors in your local market. These are firms who offer substitute products.
Analyse any competitors who have gone out of business in the past and if possible describe why their business failed.
Explain how your firm will compete with these competitors to prove how you can survive in their markets.
Examine risks that could occur when you enter the market. For example, what if your key competitor cuts their price when you open your business?
Position your product. Show how your products/services or company is different from your competition.
Now Over to You
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