target customer business plan

A step-by-step guide to creating your target customer profile

Director of Product Marketing at 7shifts

Table of Contents

At some point, you’ll likely struggle to understand your core target customers.

One powerful strategy that’ll help you on this journey is something you might be doing already: customer segmentation. This process involves dividing your customer base into distinct groups based on specific criteria, thus facilitating a clearer definition of your target customer profile.

However, creating target segments requires a thoughtful and systematic approach. 

In the comprehensive guide, I’ll take you through a step-by-step process to create effective target customer segments for your business. From gathering data and defining segments to leveraging insights, you’ll walk away with the knowledge and tools necessary to establish a deeper connection with your target customer profiles, ultimately driving meaningful results.

It's crucial to note that the successful implementation of this strategy hinges on having a product-market fit backed by sufficient data. 

Now, having covered the essential practice of customer segmentation for a comprehensive audience understanding, let's clarify the differences and overlap between three common terms: taget customer profile, ideal customer profile, and buyer persona.

Understanding these nuances is important to crafting effective go-to-market (GTM) strategies that cater to specific customer needs and preferences.

Target Customer Profile vs. Ideal Customer Profile vs. Buyer Persona

Target and ideal customer profiles are often used interchangeably but have distinct meanings. A target consumer profile focuses on identifying several potential customer segments, while an ideal customer profile pinpoints the specific type of customer you are trying to attract. 

Buyer persona complements both types of customer profiles.  

Having clarified these terms, let's explore how each contributes to a robust GTM strategy.

Target Consumer Profile

Target customer profiling provides a foundational understanding of the audience your SaaS business aims to reach.

It's a broad classification that outlines various segments within the overall market. This profile focuses on identifying different types of potential customers based on demographics, geographic location, industry, company size, and other general factors. 

Ideal Customer Profile (ICP)

In contrast, an ideal customer profile represents a more refined and specific subset within the target consumer profile. It goes beyond basic demographics to include criteria that make a customer an ideal fit for a company's offerings.

When developing an ICP, businesses use insights from their target consumer profile to identify a customer's most valuable and desirable characteristics. This helps concentrate efforts on customers who are not only part of the broader target but are also the most likely to derive significant value from the products or services.

Buyer Persona

A buyer persona complements both the target and ideal customer profiles. It is a detailed and semi-fictional representation of an individual within the broader audience.

This specific contact is the focus when prospecting, and the buyer persona helps understand customers better.

SaaS businesses can tailor their content, messaging, and product development to meet specific needs and interests by delving into the persona's demographics, behaviors, and concerns.

Buyer personas contribute depth and specificity to the target consumer profile, aiding in the creation of an ideal customer profile by identifying the attributes that make a customer an ideal fit.

The impact of defining your target customer

Defining a target customer provides a crystal-clear understanding of who your SaaS product is trying to serve. This, in turn, empowers your company to strategically tailor your marketing, product development, and customer service efforts. Doing so, ultimately, leads to stronger acquisition, retention, and monetization .

The impact of defining your target customer profile manifests in several key benefits, including: 

• Improved marketing messaging : Craft a compelling value proposition that resonates with your core target customer. By understanding their needs and preferences, you can tailor your marketing messages to directly address their customer pain points, fostering a stronger connection and engagement.
• A more focused product roadmap : Utilize target customer profiles to inform and prioritize your product development roadmap . By honing in on your core customer's specific pain points and requirements, you can ensure that your product enhancements are aligned with their expectations, resulting in a more focused and impactful customer experience.
• Pricing undefined packaging : Develop a well-defined pricing strategy by building product tiers that bundle the most relevant features for your target customer. This approach ensures that your pricing and packaging align with the perceived value of your core audience, maximizing monetization opportunities while providing tailored solutions.

Understanding the impact of defining your target customer, let's now explore the practical methods to achieve this through customer segmentation and buyer personas.

2 methods that help define your target customer

The two methods that help define your target customers are:

• Customer segmentation
• Buyer personas

Let’s dive deeper into these concepts and how to choose when to use them.

1. Customer segmentation 

Through quantitative data analysis, customer segmentation divides the company's customer base into distinct groups or segments based on shared characteristics such as demographics, behavior, or purchasing habits.

The segmentation is like dividing your party guests into general categories, such as children, teenagers, adults, and seniors. Doing so helps you understand each group's different needs and preferences, allowing you to plan activities, select music, and arrange the party layout accordingly.

2. Buyer personas

Buyer personas are fictional, generalized representations of the company's ideal customer. 

They are based on qualitative insights from market/ customer research and are used to create a detailed profile of your target customer.

A buyer persona represents a fictional yet highly detailed profile.

Example of buyer personas

For instance, within the adult segment, you might have the following:

• A buyer persona named "Adventurous Annie" loves outdoor activities, values sustainability, and enjoys trying new foods. 
• Another persona, "Busy Bob," might be a professional seeking convenience and time-saving solutions.

5-step framework to create target customer segments

Let's break down this 5-step framework that will guide you from defining segmentation criteria to sharing impactful target customer profiles across your SaaS organization.

1. Define segmentation criteria

Choosing the right profiling segmentation criteria is a bit of art and science based on the stage of your business. The goal should be finding a way to segment the base that creates differentiation between each customer profile.

The first step is to determine the criteria to segment your customers. It could include demographics, psychographic traits, or behavioral characteristics.

The goal is to define criteria to segment your user base.

Depending on the size of the company, there are two methods you can use:

• First Principles: Use a set of criteria to segment your base (e.g., business industry, annual revenue, # of employees).
• Correlation analysis : See what characteristics have a strong connection.

SaaS example

Say you’re a B2B SaaS company that targets SMBs. Based on past analysis and customer research, you have decided the best way to segment your customer base is by the business industry.

So, you define grouping customer segments by the following:

• Field service businesses (e.g., landscaping, trades, etc.)
• Knowledge-based businesses (e.g., consultants, marketing agencies)
• Retail service businesses (e.g., hair undefined nail salons)
• E-commerce businesses (e.g., Shopify store)
• Retail product businesses (e.g. bakeries, restaurants)

This will then inform your data analysis by grouping your customers into these five categories.

With the criteria established, let's move on to the next step — conducting a segmentation analysis to derive meaningful insights from your customer base.

2. Conduct segmentation analysis

This next step is conducting your analysis by segmenting your customer base into distinct groups based on how you defined your segmentation criteria (see step #1).

Doing so ensures you get the data you need by each segment and analyze for clear themes.

Data spreadsheet organization

To get started, you want to dump data into spreadsheets, each tab being a specific customer profile. Each tab should list specific behavioral data points and define how large the customer segment is within your user base.

The spreadsheet should include the following:

• Clearly defined customer segments
• The size of each segment within your customer base
• Specific behavior data points for each customer segment

Let’s continue with our example.

SaaS example 

Picture you are a B2B invoicing SaaS company. Your customer profiles are based on business industries, and now you want to overlay your in-product data for each segment.

This would include data points such as:

• Number of invoices sent
• Number of customers they have
• The size of the invoice amount
• Number of methods they get paid by
• Monthly revenue from invoices

3. Overlay demographic data across customer segments

The next step in this segmentation process is to overlay the demographic data you collect on each user. 

Adding in demographic data makes these customer profiles more actionable for employees in the company to use because you can start to put a face to a name.

Collecting data in SaaS onboarding  

Much of the data collected by SaaS companies at onboarding is demographic-related and starts to put a face to your customer segments. This data might include their industry, annual revenue, number of employees, how many years they have been in business, etc.

To illustrate, consider Shopify’s use of a multi-step signup process. 

On the initial page, users are prompted to answer one question about their e-commerce business.

Upon completing the initial field, the next page presents another question, asking users to select all options related to the business. This approach provides valuable customer profile data.

The strategic aim is to integrate this collected data into each previously defined customer segment. By doing so, each segment's impact is heightened by including behavioral and demographic insights.

The subsequent step involved adding demographic data (e.g., annual revenue, number of employees, business age, etc.) into the five customer segments we created.

4. Build your target customer profiles

Now that you have finished your data exercise, the next step is to build out these customer profiles into an artifact.

The goal is to build an artifact so that anyone at your company can easily understand who your customer segments are.

Create a PDF or slide deck

The best way to do this is to create a PDF or slide deck that showcases each customer segment.

These customer segments should include the following:

• Name of each customer segment
• Photo of them
• Description of who they are
• Key demographic data points
• Key behavior data points

Make your artifact 

Our next step is to create our five customer segments with a designer's help to create a visually appealing artifact that people can easily understand.

I have included a template you can use here .

5. Share your target customer profiles

Our final step is to share the artifact across the company to get people to understand how to use it.

Getting teams to understand how to use this artifact is critical to driving internal adoption. The best way to do this is the following:

• Present these customer segments at an all hands.
• Include this artifact as part of new hiring/onboarding training.

Getting all teams to understand how to apply the insights from the customer segmentation artifact is essential.

The two ways to apply the customer segmentation artifact include: 

• Marketing teams can use this to help target better, brainstorm new channels to acquire, and improve their positioning/messaging on their website.
• Product teams can use this to help prioritize the most critical product features for each of their segments.

Regularly revisit and refine your target customer profiles

As your SaaS company scales, your customer segments are constantly changing. It's essential to revisit these segments every six to 12 months.

If your product-led company isn't scaling as expected, you may not have a product-market fit. This could mean you're targeting the wrong customers for your SaaS product.

In ProductLed's coaching program , building a winning strategy is the first component of a three-phase system that SaaS founders and their teams tackle. To dominate your market, you must be crystal clear about what your company does best and align your strengths with market demands and customer needs. With this clarity, you can confidently create your target customer profile and so much more.

Learn more about applying to the ProductLed Academy and working with Wes Bush to scale your SaaS more efficiently and profitably than ever before.

Most Popular Posts

Free Trial Model or Freemium? Here's Why it Doesn't Actually Matter (& how to choose one).

How to craft a winning business strategy for SaaS in 2024

Moving from Free Trial to Freemium at Tettra: Two Years Later [A Case Study]

Comparing 7 top product adoption software solutions [Vendor Review]

Understanding the differences between product-led growth and product-led sales

How to conduct a SaaS team audit and maintain high-performance standards

Why the right environment matters when you’re building a world-class team

3 simple tactics to improve organizational efficiency and effectiveness 

How to build a company that runs itself

How and why you need an accountability chart for your product-led business

How to scale your SaaS past 8-figures without a sales team

How to slow churn and drive user success with SaaS onboarding coaches 

How to Write the Customer Analysis Section of Your Business Plan

Written by Dave Lavinsky

What is a Customer Analysis?

The customer analysis section which incorporates the essential steps of writing a business plan step-by-step is a key component of your business plan and assesses the customer segments your company serves. The objective of the customer analysis is to justify your market choice, identify differentiators, and prioritize the segments you are targeting.

Components of a Customer Analysis

A complete customer analysis contains 3 primary sections:

• Identify your target customers
• Convey the needs of these customers
• Show how your products and/or services satisfy these needs

Download our Ultimate Business Plan Template here

Why Conduct a Customer Analysis?

A thorough customer analysis provides the following benefits:

• Supports your market choice and helps you avoid entering too broad a market
• Helps you focus on serving current customers rather than trying to find new ones
• Enables you to determine which segments to prioritize and how much effort to put into each one
• Helps you craft a strategic marketing plan and platform to reach these customer segments

How to Write Your Customer Analysis

The first step of the customer analysis is to define exactly which customers the company is serving. This requires specificity. It is not adequate to say the company is targeting small businesses, for example, because there are several million of these types of customers. Rather, an expert business plan writer must identify precisely the customers it is serving, such as small businesses with 10 to 50 employees based in large metropolitan cities on the West Coast.

When defining your target market, be sure to identify the following:

• The market segment you are choosing to serve (i.e., age range, annual income, etc.)
• The geographic location of these customers (i.e., city, region, state)
• What is the average revenues/income of these customers?

Once the plan has clearly identified and defined the company’s target customers and the customer demographics, it is necessary to determine the size of your target market: How many potential customers fit the given definition and is this customer base growing or decreasing?

Next, the business plan must detail these customers’ needs. Conveying customer needs could take the form of past actions (X% have purchased a similar product in the past), future projections (when interviewed, X% said that they would purchase product/service Y), and/or implications (because X% use a product/service which our product/service enhances/replaces, then X% need our product/service).

Prioritize the needs of your target customer according to how critical they are, and include a description of each in your customer analysis. Be sure to answer questions such as: 

• What pain points do these customers have? How is their current situation lacking? 
• What will your product/service do to help solve these problems?

The business plan customer analysis must also detail the drivers of customer decision-making. Sample questions to answer include:

• Do the customers find price to be more important than the quality of the product or service?
• Are customers looking for the highest level of reliability, or will they have their own support and just seek a basic level of service?
• Why will customers purchase your product and/or service rather than look for cheaper alternatives?

Prioritize the benefits of your products and services according to how much difference they make for customers and include a description of each in your customer analysis. Be sure to answer questions such as:

• What does your product do? How is it unique or better than other similar products?
• What type of customer could benefit the most from this feature/benefit and why?

Be sure to also show an understanding of the actual decision-making process. Examples of questions to be answered here include:

• Will the customer consult others in their organization/family before making a decision?
• Will the customer seek multiple bids?
• Will the product/service require significant operational changes (e.g., will the customer have to invest time to learn new technologies, and will the product/service cause other members within the organization to lose their jobs? etc.)

Finally, identify each segment you are targeting and how much effort you will put into reaching them. Be sure to answer questions such as:

• How many customers are in each segment and how much revenue will they generate?
• What percentage of total industry sales does this represent?
• What market potential did we estimate for each segment and how does that compare with actual sales? Include the number of leads converted and average deal size.

Example Customer Analysis Template for a Candle Making Company

The needs of this customer segment are that they are looking for high-quality candles that are made with all-natural ingredients. The benefits of their product that are most important to them are that the candles are vegan, eco-friendly, and made with essential oils. Drivers of customer purchase decisions include quality, price, and unique offerings. The company’s target market size is 750,000 people which represent a significant portion of the candle industry. They will put effort into reaching these customers through online advertising, social media posts, and word-of-mouth.

It is essential to truly understand customers to develop a successful business and marketing plan. That’s why including a customer analysis in your business plan is so crucial. Likewise, sophisticated investors require comprehensive profiles of a company’s target customers. By spending the time researching and analyzing customers in your target market, you will develop both enhance your business strategy and funding success.

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies that have gone on to achieve tremendous success.

See how Growthink business plan consultants can create your business plan for you.

Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan How to Write the Market Analysis Section of a Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Best Business Plan Software Everything You Need to Know about the Business Plan Appendix Business Plan Conclusion: Summary & Recap

Other Helpful Business Plan Articles & Templates

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

How to Write a Market Analysis for a Business Plan

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

• Skip to main content
• Skip to primary sidebar
• Skip to footer
• QuestionPro

• Solutions Industries Gaming Automotive Sports and events Education Government Travel & Hospitality Financial Services Healthcare Cannabis Technology Use Case AskWhy Communities Audience Contactless surveys Mobile LivePolls Member Experience GDPR Positive People Science 360 Feedback Surveys
• Resources Blog eBooks Survey Templates Case Studies Training Help center

Target Customer: What It Is & How to Identify It

A new company’s first step in developing a marketing plan is identifying its target customer. Your marketing efforts will be wasted if you don’t know who your ideal client is, even if it seems straightforward.

Nobody will be happy with a person who tries to satisfy everyone. Right? The same is true for your marketing. That’s why it’s so important to identify your target customers.

If your goal is to communicate with absolutely everyone, you will end up communicating with nobody. People could take the time to look at your website or notice your advertisement. But if you don’t have target customers in mind, your advertising and its message won’t connect with anybody.

If you’re wondering where to start, keep reading. This post will inform you about the target customer and its identification steps. First, let’s figure out what target customers mean.

LEARN ABOUT: Purchasing Process

What is the target customer?

Defining your target customer is one of the first steps in creating a marketing research strategy. It’s as important as your goal statement, marketing strategy, or financial plan. As a marketer, it’s essential to know your target audience to tailor your marketing strategy.

LEARN ABOUT: Effective Customer Success Plan

The term “target customer” refers to the audience you want to engage with the help of your marketing efforts. These people are most likely to buy your goods or services if they find out about them through one of your marketing efforts. 

Many different types of data may be used to determine a target audience, including:

• Demographic data (such as age and gender identification)
• Psychographic data (such as ambitions, worries, and values)
• Behavioral data (likely to buy online)

Now we will get into the next section, where we will discuss why it is important to identify your target customers.

Importance of identifying target customer

The effectiveness and success rate of every company’s marketing and sales efforts depend on knowing who their target customers are. The people who will be targeted and given special attention are the ones who will most likely make purchases from certain businesses. 

This improves a company’s marketing and advertising efforts since they may utilize resources wisely and save time without wide, costly advertising. Using advertising to target consumers as a marketing technique may help a firm identify and reach its ideal customers.

A lot of significant time and money is wasted in advertising when companies don’t know their target market or consumers. An organization may attract active consumers and clients by actively marketing to its target market. 

Marketing communications to the target audience may bring repeat business and foster brand loyalty. Additionally, this may result in higher brand awareness, trust, and sales.

How to identify your target customers?

Businesses need to find out who is the target customer. So, here we will explore some tips and tricks to identify your target customer.

• Conversation with customer

Talk to your prospective consumers. Ask them about the most pressing problems and the methods being used to solve them. Also ask them what they’d do if they didn’t have that solution. 

In the course of developing a new product, we discovered that the client base is often younger and more urban. Focusing on a certain group of customers may help us restrict our target market.

LEARN ABOUT: Client Management

Have conversations with as many different customers as you can. Find similarities among the characteristics you’re looking for. The more specific you can be about your target audience, the better your chances of succeeding.

• Consider the popularity of the product

The popularity of your items is one of the most effective methods for identifying your target customers. For example, if you own an online pet business and more than 60% of your sales are cat-related goods, you just discovered some helpful information about your target market.

Analyze your sales data and customer feedback to determine what kind of items are most popular and how you can meet or exceed customer expectations .

• Analyze site visitors with SEO tools

You may learn a lot about your website’s visitors by using SEO tools. For example, you’ll discover the keywords and phrases people use to find your website. You’ll also receive similar questions that let you know what other people are thinking about the subject. 

An additional benefit of SEO software is the ability to study your competitors. Analyze their website to see which keywords they rank for and which pages get the most visitors.

• Utilize Customer Data

If you already have clients, you may use their information to identify your target the right audience and gain further insight into your target market. You might utilize a customer relationship management system (CRM) to organize and maintain user data. 

Identifying your target customer is easier when you have a large amount of customer data. This data can be used to find out a lot of different things. Examples include names, email addresses, phone numbers, and many other things.

• Take a look at your competitors

Check out the store or website of a competitor to find out who they are trying to reach. You’ll get a sense of who your audience is, but you’ll also get a sense of who they’re missing. You may be able to identify a niche market that they are ignoring. You’ll also be able to determine what parts aren’t performing well for them.

Now, it’s time to find out how you can improve it. You may take a look at social media sites. Examine the types of individuals that engage with their postings and the material that get a lot of attention. 

Despite your want to avoid investigating your competitors, keep an eye on how they adapt in the face of these circumstances. Don’t forget that your audience isn’t steady. As the economy, technology, and your organization develop, so will your target audience.

• Follow social media

The best learning method is observing and listening to what others say online. You can learn much about your audience by looking at their questions on social media and forums. It may tell you about their pain areas, why they need support, and their overall objectives. You may determine your target market based on their requirements rather than their demographics.

• Establish buyer personas

Making buyer personas or customer profiles is crucial when deciding on your target customer. These profiles include important details about your clients, such as purchasing patterns, age, location, problems, education, income level, way of life, and more. 

After you’ve gathered a few customer profiles, you may understand your customers’ characteristics and how your company might meet their wants. As a result, you may continue to provide relevant information, goods, and services.

The most important step in developing marketing strategies that reach the right people at the right time is identifying your target customer. You may establish your brand strategy and marketing strategy by working hard to identify your target audience. It will serve as a solid foundation upon which you may grow your brand over time.

LEARN ABOUT: Perfect Customer-First Strategy

If you only have one marketer and a lot of potential customers, you shouldn’t feel like you have to focus on all of them simultaneously. You should focus only on one audience at a time to ensure you do everything right.

In this article, we’ve defined a target audience and offered advice on how to identify them. Now, all that’s left to do is implement these tips. Good luck!

At QuestionPro CX, we give you the best tools to track target customers for your organization. Get in touch! We would love to work with you to improve your customers’ experiences.

LEARN MORE         FREE TRIAL

MORE LIKE THIS

Experimental vs Observational Studies: Differences & Examples

Sep 5, 2024

Interactive Forms: Key Features, Benefits, Uses + Design Tips

Sep 4, 2024

Closed-Loop Management: The Key to Customer Centricity

Sep 3, 2024

Net Trust Score: Tool for Measuring Trust in Organization

Sep 2, 2024

Other categories

• Academic Research
• Artificial Intelligence
• Assessments
• Brand Awareness
• Case Studies
• Communities
• Consumer Insights
• Customer effort score
• Customer Engagement
• Customer Experience
• Customer Loyalty
• Customer Research
• Customer Satisfaction
• Employee Benefits
• Employee Engagement
• Employee Retention
• Friday Five
• General Data Protection Regulation
• Insights Hub
• Life@QuestionPro
• Market Research
• Mobile diaries
• Mobile Surveys
• New Features
• Online Communities
• Question Types
• Questionnaire
• QuestionPro Products
• Release Notes
• Research Tools and Apps
• Revenue at Risk
• Survey Templates
• Training Tips
• Tuesday CX Thoughts (TCXT)
• Uncategorized
• What’s Coming Up
• Workforce Intelligence

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

How to Write a Business Plan: Target Market Analysis

The Business Plan and the Importance of Defining Your Target Market

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Conducting a Market Analysis

Polling your target market, writing the market analysis, online tools for market research, u.s. online market research sources, canadian online market research, local sources of market research, doing your own market research.

 Creative Commons CC0

The market analysis is basically the target market section of your business plan . It is a thorough examination of the ideal people to whom you intend to sell your products or services.  

Even if you intend on selling a product or service only in your community, you won't be selling that service to everyone who lives there. Knowing exactly what type(s) of people might be interested in buying your product or service and how many of them reside in your projected area or region is fundamental in creating your market analysis.

Once target market data has been established, you'll also work on sales projections within specific time frames, as well as how prospective sales might be affected by trends and policies.

Research is key and cornerstone of any solid  business plan .

Don't Skip This Step!

Don't skip market research; otherwise, you could end up starting a business that doesn't have a paying market.

Use these general terms as linchpins in research data for the market analysis section of your business plan, and to identify your target market:

But don't stop here. To succinctly define your target market, poll or survey members of your prospective clients or customers to ask 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 computing devices your prospective customers own and how often they require servicing. If you plan on selling garden furniture and accessories, ask what kinds of garden furniture or accessories your potential customers have bought in the past, how often, and what they expect to buy within the next one, three, and five years.

Answers to these and other questions related to your market are to help you understand your market potential.

The goal of the information you collect is to help you project how much of your product or service you'll be able to sell. Review these important questions you need to try to answer using the data you collect:

• What proportion of your target market has used a product similar to yours before?
• How much of your product or service might your target market buy? (Estimate this in gross sales and/or in units of product/service sold.)
• What proportion of your target market might be repeat customers?
• How might your target market be affected by demographic shifts?
• How might your target market be affected by economic events (e.g. a local mill closing or a big-box retailer opening locally)?
• How might your target market be affected by larger socio-economic trends?
• How might your target market be affected by government policies (e.g. new bylaws or changes in taxes)?

One purpose of the market analysis is to ensure you have a viable business idea.

Find Your Buying Market

Use your market research to make sure people don't just like your business idea, but they're also willing to pay for it.

If you have information suggesting that you have a large enough market to sustain your business goals, write the market analysis in the form of several short paragraphs using appropriate headings for each. If you have several target markets, you may want to number each. 

Sections of your market analysis should include:

• Industry Description and Outlook
• Target Market
• Market Research Results
• Competitive Analysis

Remember to properly cite your sources of information within the body of your market analysis as you write it. You and other readers of your business plan, such as potential investors, will need to know the sources of the statistics or opinions that you've gathered.

There are several online resources to learn if your business idea is something worth pursing, including:

• Keyword searches can give you an overall sense of potential demand for your product or service based on the number of searches.
• Google Trends analysis can tell you how the number of searches has changed over time.
• Social media campaigns can give you an indication of the potential customer interest in your business idea.

The U.S. Small Business Administration (SBA) has information on doing your market research and analysis , as well as a list of free small business data and trends resources you can use to conduct your research. Consider these sources for data collection:

• SBA  Business Data and Statistics  
• The U.S. Census Bureau maintains a huge database of demographic information that is searchable by state, county, city/town, or zip code using its census data tool . Community, housing, economic, and population surveys are also available.
• The U.S. Department of Commerce Bureau of Economic Analysis (BEA) has extensive statistics on the economy including consumer income/spending/consumption, business activity, GDP, and more, all of which are searchable by location.

The Government of Canada offers a guide on doing market research and tips for understanding the data you collect. Canadian data resources include:

• Statistics Canada  offers demographic and economic data.
• The  Business Development Bank of Canada (BDC)  offers market research and consulting with industry experts.
• The Canada Business Network provides business information to entrepreneurs by province/territory, including market research data.

There are also a great many local resources for building target market information to explore, including:

• Local library
• Local Chamber of Commerce
• Board of Trade
• Economic Development Centre
• Local government agent's office
• Provincial business ministry
• Local phone book

All of these will have information helpful in defining your target market and providing insights into trends.

The above resources are secondary sources of information, in which others have collected and compiled the data. To get specific information about your business, consider conducting your own market research . For instance, you might want to design a questionnaire and survey your target market to learn more about their habits and preferences relating to your product or service.

Market research is time-consuming but is an important step in affording your business plan validity. If you don't have the time or the research skills to thoroughly define your target market yourself, hiring a person or firm to do the research for you can be a wise investment.​

Small Business Administration. " Market Research and Competitive Analysis. " Accessed Jan. 13, 2020.

Expert business plan and financial models

How to Write a Customer Analysis for a Business Plan

• September 4, 2024
• Business Plan , How to Write

Understanding your customers is essential for any business striving for success. A customer analysis provides valuable insights into the demographics, preferences, behaviors, and needs of your target audience .

This guide will walk you through the process of writing a thorough customer analysis, enabling you to tailor your products, services, and marketing strategies to meet the needs of your customers effectively.

Define Your Target Audience

Begin by clearly defining your target audience : the specific group of people you aim to serve with your products or services.

Consider factors such as age, gender, income level, geographic location, and psychographic traits (e.g., lifestyle, values, interests). Understanding who your customers are is the first step in building a successful business strategy.

• Example for a Coffee Shop : Your target audience might include young professionals aged 25-40, living in urban areas, who value high-quality coffee and a relaxed atmosphere for socializing or remote work.

Gather Data on Your Customers

Next, gather data on your customers through various sources, including market research surveys, interviews, focus groups, and customer feedback.

Analyze both quantitative data (e.g., demographics, purchase history) and qualitative data (e.g., customer feedback, testimonials) to gain a holistic understanding of your customers’ needs and preferences.

• Example for a Coffee Shop : Conduct surveys or interviews with your target audience to gather insights into their coffee preferences, frequency of visits to coffee shops, and reasons for choosing one coffee shop over another.

Segment Your Customers

Segment your customers into distinct groups based on common characteristics or behaviors.

This segmentation allows you to tailor your marketing efforts and product offerings to better meet the specific needs of each segment. Common segmentation criteria include demographics, psychographics, behavior, and purchasing patterns.

• Example for a Coffee Shop : Segment your customers based on their coffee preferences (e.g., espresso lovers, latte enthusiasts), frequency of visits (e.g., daily customers, occasional visitors), and reasons for visiting (e.g., socializing, work meetings).

Analyze Customer Needs and Preferences

Analyze the needs, preferences, and pain points of each customer segment to identify opportunities for product or service improvement.

Consider factors such as price sensitivity, convenience, quality expectations, and brand loyalty. This analysis will help you tailor your offerings to better align with customer expectations.

• Example for a Coffee Shop : Analyze customer feedback to identify common preferences in coffee flavors, brewing methods, and food options. Use this information to adjust your menu offerings and pricing strategies accordingly.

Assess Customer Behavior

Examine how customers interact with your business at each stage of the buying process, from awareness to purchase and post-purchase.

Identify patterns in customer behavior, such as browsing habits, purchase frequency, and loyalty. This analysis will help you optimize the customer experience and maximize customer satisfaction and retention.

• Example for a Coffee Shop : Track customer traffic patterns, peak hours, and popular menu items to optimize staffing levels, inventory management, and promotional strategies.

Identify Growth Opportunities

Based on your customer analysis, identify growth opportunities for your business. This could involve expanding into new customer segments, introducing new products or services, or entering new geographic markets.

By understanding your customers’ needs and preferences, you can better position your business for long-term success.

• Example for a Coffee Shop : Identify opportunities to expand your customer base by offering specialty coffee subscriptions for remote workers or partnering with local businesses to host networking events.

Related Posts

Startup Costs for a Bookstore in 2024: Full List + Free Download

• September 6, 2024
• Startup Costs

Pro One Janitorial Franchise Costs $9K – $76K (2024 Fees & Profits)

Dance Studio Business Plan Template & PDF Example

• Business Plan

Privacy Overview

• Request a demo
• Call Tracking
• Conversation Intelligence
• Contact Center
• Performance Marketing
• Invoca News
• Financial Services
• Home Services
• Telecommunications
• Travel & Hospitality

The Ultimate Guide to Customer Segmentation: How to Identify and Target Your Ideal Customers

• The Forrester Wave™: Real-Time Revenue Execution Platforms Report
• The State of AI in Digital Marketing Report
• Invoca for Contact Center Success Stories
• The State of the Contact Center Report

Marketing is an increasingly costly, resource-intensive, highly competitive, multichannel, and ongoing activity for most businesses today. So, anything they can do to reduce those costs and gain an advantage in the marketplace is critical. 

That thinking spurred MetLife in 2015 to embark on a 12-month, data-driven process of reimagining its approach to customer segmentation and making “the most significant change to the brand in 30 years.” The insurer’s goal was to realize annual cost savings of $800 million and refresh its brand in front of customer segments that were both “strategic and tactical” so that the company could target the right customers for its business model 

In this post, we’ll examine why customer segmentation is so important to companies like MetLife, and how advanced technology tools like Invoca’s artificial intelligence (AI)-powered call tracking platform are helping to make customer segmentation analysis more complete and precise.

Understanding Customer Segmentation

What is customer segmentation exactly? No two customers are the same, of course, but they can share characteristics like age, gender, education, hobbies, or marital status. Marketers group customers based on certain attributes, behaviors, demographics, or other relevant criteria to create more targeted and effective marketing strategies. That’s customer segmentation in a nutshell. 

Customer segmentation has been around for a long time. But the practice is especially vital to marketing success in a digital, omnichannel world where consumers expect personalized experiences. Grouping customers by shared characteristics, also known as lookalike audiences , provides businesses with greater, more meaningful insight into their customers and a greater understanding of their motivations and buying behaviors.

Segmentation can benefit many functions in a business, including sales, marketing, and product development. MetLife even uses segmentation to help drive employee engagement by uncovering employees’ preferences, motivations, personal goals, and individual circumstances. The insurer reports that its research is “helping HR leaders select their benefits, communicate product features more effectively, adjust current programs to suit their diverse employees,” and help employees understand how to get the most out of their benefits.

As for customer segmentation, what can developing or refining an approach to this method do for your business? Well, it might deliver higher open rates on email marketing campaigns, bring more customers like those already buying from you, improve overall customer service, or guide you to new markets. Creating personalized customer segments can also drive sales higher and increase customer satisfaction .

Market Segmentation vs. Customer Segmentation

Market segmentation is reportedly used by 70% of marketers , and 80% of companies that use market segmentation report increased sales. Market segmentation takes a macro view of the customer base and, as a result, includes both customers and non-customers. 

With market segmentation, businesses typically know little or nothing specific about the customer. For this reason, it’s most often used by startups or companies venturing into entirely new markets where they don’t have existing customers and need a more generalized approach to find their footing. The goal is to build a customer base.

In contrast, customer segmentation is focused firmly on known entities — the existing customer base. Because businesses have a degree of micro-knowledge of those customers, they can easily group them. Grouping allows marketers to create more personalized brand messages and offers that are likely to resonate with these different sets of customers.

Recent research found that 80% of consumers are more likely to make a purchase when brands offer them personalized experiences. (That number jumps to 86% among automotive consumers, by the way.)

Types of Customer Segmentation

How can you approach customer segmentation? In general, there are six types of segmentation that you can use alone or in combination to inform the creation of a customer segmentation model:

• Demographic: Demographic segmentation uses factors such as age group, gender, marital status, education, household income, and occupation. A jeweler is unlikely to market engagement rings to consumers who are already married. But that business could create a potential customer segment to market to by grouping customers in their late 20s or early 30s who are single but living with a significant other.
• Geographic: Factors influencing customer segments based on shared geographic characteristics go beyond location. Geographic segmentation can also feature languages spoken by the consumer as well as their preferred modes of transportation. If a shared characteristic of your customers is that they travel by plane several times a month, you may want to advertise in in-flight magazines or on hotel and travel websites.
• Psychographic: Compiling insight into your customers’ leisure interests and hobbies, whether they have pets or not, and what they do on the weekends can be useful for customer segmentation. For example, customers who like to potter around in the garden on weekends might respond to an ad selling sunscreen or gardening gloves. 
• Technographic: Everyone uses technology, but we don’t always use the same technology, or use a tool or solution for the same purpose. Knowing that your customer uses a smartphone can create a customer segment. But if they indicate they turn their phones off between 9 p.m. and 6 a.m., you won’t want to send a text campaign in that window.
• Behavioral: This method segments customers based on how they have acted in the past. Amazon is a great example of marketers using behavioral customer segmentation. How often have you logged in to your Amazon account only to be asked if you’d like to buy a product again?
• Needs-based: Needs-based segmentation asks the basic question: Does this customer segment need the same features in a product or service? For example, all left-handed tailors need left-handed scissors.

8 Steps to Effective Customer Segmentation

These are the steps you should take when planning an effective customer segmentation analysis:

1. Target Market Selection

The first step toward successful customer segmentation is to identify your target market. You can’t create viable customer segments if you don’t know who your potential customers are and which groups are most likely to be interested in specific offerings. (If you don’t have answers to those questions yet, try market segmentation instead.)

2. Data Collection

You need relevant and accurate data about your customers to create meaningful customer segments. Data can be collected from various sources, including market research, customer service surveys, focus groups, and interviews.

You can also use call tracking software, such as Invoca, to farm valuable first-person data from phone interactions with customers. Hearing the true voice of the customer in phone calls can help you take your customer segmentation models to another level.

3. Data Analysis

Analysis of the data you’ve collected from sources like surveys, interviews, and call tracking can reveal patterns and insights that will allow you to refine your customer segments. Data analysis is a time-consuming task, but technology is easing the process.

For example, Invoca’s conversation intelligence software uses AI and machine learning to group and analyze large amounts of phone call data at scale. It can detect patterns and identify signals in the data relevant to buyer intent, buyer behavior, and other shared characteristics that enable effective customer segmentation.

4. Segment Identification

Segment identification is the process of defining a distinct customer segment based on the insights gleaned from the data you’ve gathered through any of the six types of customer segmentation listed earlier, like demographic and needs-based segmentation. 

When MetLife analyzed its customer base, its marketers identified five distinct segments which they named — Young Achievers, Concerned Moms, Financially Mature, Ho Hum, and Solo Content.

5. Customer Persona Creation

After identifying the five segments, MetLife’s marketers then set about creating a detailed buyer persona for each customer segment to understand their buyer motivations, needs, and preferences. The buyer persona for the intriguingly named Ho Hum, for example, was a risk-averse middle-aged woman who was not a primary decision-maker in the household and wasn’t likely to buy insurance. 

Creating customer personas involves developing detailed profiles of each segment to humanize and understand their motivations, needs, and preferences.

6. Unique Campaign Design

Once you have clearly defined each buyer persona and narrowed down your commitment to the segments most likely to make a purchase or some other desired action, you can now reach out! 

Use the insight you’ve gained about your various customer sets to create personalized campaigns and tailored strategies and messages that are likely to resonate with each target segment based on their characteristics, interests, and preferences.

7. Validation and Refinement

After you’ve launched your campaign or campaigns, you need to focus on validating and refining those efforts. Analyze and measure responses and engagement rates to determine if the message(s) you developed resonated with the customer segment you targeted. 

If you discover that it missed the mark, guess what? You now have the insight to refine the message for strategic retargeting of customers.

8. Iterative Improvement

The insights you gain from validating your results and listening to the voice of the customer in phone calls, emails, and other communications will allow you to fine-tune your customer segmentation strategy. But this refinement is not a one-time activity; it must be continuous. 

Interative improvement in marketing involves making incremental changes over time to optimize the performance of campaigns to achieve better outcomes. You need to constantly adapt your approaches to meet the evolving needs and expectations of your target audiences. 

5 Common Mistakes in Customer Segmentation

Warning: It’s easy to make mistakes when segmenting customers. If that happens, it can seriously skew customer segmentation analysis. So, you need to be careful. Here are five common pitfalls to avoid:

Mistake #1: Incomplete Data

Nothing will mess up data analysis, and customer segmentation analysis, like incorrect or incomplete data. You can avoid this issue by having a clear goal for the process and defining your target market. 

Don’t make data collection too complicated. Also, be open to different methods for data collection, such as call tracking. Above all, document the process so that you can quickly identify where issues arise, fix problems, and more easily replicate the things you’ve done well.

Mistake #2: Inaccurate Segmentation

Incomplete data has a damaging domino effect, leading to inaccurate customer segments. Manual analysis is often the culprit. Lean on advanced technologies, such as conversation intelligence, to accurately retrieve data from phone calls quickly and at scale, whenever you can.

Mistake #3: Dynamic Customer Behavior

Change is constant, and shifting consumer preferences and behavior are evidence of that. Here’s a case in point: In 2010, less than 5% of U.S. retail sales occurred online. By 2020, this consumer buying activity had leaped to 18% . 

Customer behaviors can evolve fast, so make a point to stay attuned to trends and refine your customer segments accordingly.

Mistake #4: Inconsistent Integration Across Channels

Customer segmentation models can quickly become worthless if they aren’t consistent across the various market channels used by a company. 

Take care to integrate segmentation strategies thoughtfully and deploy them consistently across every marketing channel. For example, maintain the same messaging across your display ads and social media ads for each customer segment that you are targeting. And when you make refinements to your strategy, make sure to apply those changes across channels, too. 

Mistake #5: Misalignment of Customers

Your customer segments may be perfectly set, at least for the moment. But if you haven’t accurately matched those segments to your offerings, misalignment can occur. 

In MetLife’s case, after digging into its data, the company successfully identified two customer segments most likely to purchase insurance: Young Achievers and Concerned Moms. If they had targeted Ho Hum, they would have been misaligned . . .  and wasted their marketing budget.

The Role of Technology in Customer Segmentation Analysis

Technology is a critical component of customer segmentation. Tools such as data visualization, machine learning, and other AI-based solutions can collect and sift through huge volumes of data far faster than humans or even prior technologies. 

The ability to collect and analyze data at scale empowers marketers to achieve spot-on segmentation and reach customers with highly personalized messages quickly and efficiently — thereby maximizing their overall marketing spend. 

Enrich Your Customer Segmentation with Invoca

Conversation intelligence is one advanced technology solution for marketers to consider using to support a customer segmentation strategy. It provides rich insights at scale, from tens or hundreds of thousands of actual customer conversations, to enrich customer segmentation analysis. 

Invoca’s call tracking and conversation intelligence solution seamlessly integrates with other elements of the tech stack, such as customer relationship management (CRM) systems, customer data platforms (CDPs), ad platforms, data analytics and attribution solutions, and digital experience platforms, to deliver actionable data in real time. 

Additional Reading

Want to learn more about how Invoca can help you enhance your customer segmentation strategy? Check out these resources:

• Improve Marketing Performance with Voice of Customer Analytics
• 4 Roadblocks to Understanding the Voice of Your Customers
• What Marketers Need to Know About 1st, 2nd, and 3rd-Party Data

Get the latest on AI and conversation intelligence delivered to your inbox.

Recommended articles.

Ad non velit aliquip velit esse ex et nisi sunt non amet ipsum laboris.

What's up next.

19 Metrics You Need To Measure Brand Awareness

Get expert tips on marketing, call tracking, and conversation intelligence ai delivered straight to your inbox every two weeks. join thousands of marketing and contact center professionals and subscribe today, thank you for subscribing your inbox just got a lot more interesting..

Calling all digital marketers!

• Subscribe | The Content Marketer

6 Real-Life Target Audience Examples to Help You Define Your Own (B2B and B2C)

Target audience research allows you to better understand your potential customer(s) and their underlying pain points.

The more you drill down into your high-value audience groups through strategic market segmentation, the closer you are to your next sale.

Learn the ins and outs of target marketing with plenty of examples to inform your strategy.

What Is a Target Audience?

How a target audience differs from a buyer persona, how psychographic and demographic data informs marketing campaigns.

• How To Analyze and Define Your Target Audience

Do Target Audiences Vary by Channel?

3 b2b target audience examples.

• 3 B2C Target Audience Examples

A target audience is a group of consumers within a predefined target market that has been identified as the best recipients for a particular marketing message. And a target market broadly describes B2C or B2B consumers who care about your product or service and, under the right conditions, are most likely to spend money with your company.

An audience is a segment within that market.

For example, the target market for an online bookkeeping tool might include businesses with over $500K in annual revenue.

So a target audience profile for our bookkeeping program might be technology stakeholders with influence on decision-makers at companies that haven’t reviewed their accounting software needs in over two years. It’s much more specific than our target market, which is important because we can craft content marketing collateral that speaks directly to the challenges and needs of this influential group.

To create effective messaging within your marketing campaigns, you first need to define your target audience.

When marketers try to appeal to the broadest possible audience for their products and services, they often end up feeling exhausted without much to show for their efforts. Their messaging seems inauthentic and doesn’t really resonate with anyone in particular.

To create effective messaging within your marketing campaigns, you first need to define your target audience. Doing so will help you engage key decision-makers and eventually convert them into loyal customers.

At this point, you might be asking, “Isn’t that just a buyer persona?” And while the two concepts are similar, they are distinct enough to warrant further discussion.

A buyer persona is a fictional character who represents one of your ideal customers . They have names, occupations, likes and dislikes, as well as challenges and ambitions.

While target audiences are valuable tools for many types of content marketing campaigns, buyer personas tend to be more useful in a B2B context, because they focus on challenges and business information. For example, a B2C company that sells protein bars would not need to create multiple personas, because people from many backgrounds and with varying job titles might purchase their products.

In a B2B context, targeting personas can be extremely valuable, especially when employing content marketing strategies. A SaaS company might create personas for each stakeholder involved in the buying process, for instance. An HR persona might be interested in blog content that addresses common pain points, while a CFO persona would be more interested in white papers with lots of data.

Personas aren’t entirely without value to B2C marketers, however. They can serve as useful guides when crafting messages to engage and inform consumers.

A persona typically includes:

• Personal information: Name, age and geographic location.
• Content preferences: Favorite channels, content formats, tone and style.
• Business background information: Job title, level of influence in decision making processes.
• Objectives: Measurable goals related to the persona’s job.
• Challenges: Frustrations and pain points standing in the way of the persona’s goals.

Your target audiences should be informed by both demographic and psychographic information. The former category describes your intended audience on a superficial level, while the latter describes their motivations.

• Demographics may include cursory information such as gender, age, income and marital status.
• Psychographics include personal interests, attitudes, values, desires and specific behaviors.

When defining and targeting an audience, demographics will only get you so far. For example, if you’re promoting a B2B SaaS solution, your specific audience may be made up of men and women ages 35-49 who earn more than $100,000 annually. That’s all good information to have, but it applies to too broad of a cohort.

Psychographic data for this specific audience could include: worrying about lost resources throughout a supply chain, wanting to eliminate redundancies, or being skeptical of flashy new technology.

Combined, demographic and psychographic information can help you fine-tune your audience targeting goals.

Combined, demographic and psychographic information can help you fine-tune your audience targeting goals. The challenge is where to find this data. Psychographic research may include interviewing existing clients, conducting polls and analyzing your site traffic.

How to Analyze and Define Your Target Audience

Defining the target audience for a particular marketing campaign requires data. Unfortunately, there isn’t a crystal ball that can tell you how to adjust your messages to bring in the right audience. But that’s not to say you can’t trust your gut.

You know your business better than anyone, so combine that experience with hard data to generate a market segment and target audience that is characteristically human, and also strategically defined by scientifically gathered data.

A Three-Step Approach To Defining A Target Audience

1. Conduct target customer research

Your business plan , content marketing strategy, professional experience and prior knowledge of your target customers will lay the foundation for your research. Compile all of your existing intelligence on your target market, and look for opportunities to learn more about it. For example, you might know that most of your customers are senior-level business people, but you may not know if they all have the same job title, or if they all consume content through the same channels.

To uncover key audience insights, use Google Analytics to drill down into your site traffic and perform a deep audience analysis. Custom audience reports can show you demographic and psychographic data, geographic locations as well as the types of technology your site visitors use.

2. Analyze the market

Once you know a little more about your target customers and have compared that data with your business process or goals, it’s time to get some context. Not only are you attempting to place the right messages in front of the right people at the right time, but you’re also competing with potentially thousands of other messages.

Review your competitors’ marketing efforts and business plans to better understand what you’re up against. Likewise, you’ll want to be aware of any other campaigns your business is currently running, as you don’t want to cannibalize your share of audience attention.

3. Define the audience

With hard data in tow and a thorough understanding of your audience’s interests, challenges and needs, it’s time to create a concise target audience to which you can direct your content marketing efforts.

Ask yourself these questions as you work to define your target audience:

• What problems does your product or service solve?
• Which demographic characteristics influence the decision-making process?
• Which psychographic traits impact content consumption?
• How does your audience prefer to engage with brands similar to yours?
• Is your audience segment large enough?

That last question is particularly important, because it will prevent you from sinking resources into ultra-niche campaigns with low ROI. Niche marketing is certainly a useful tactic, but your target audiences should represent a group large enough to reach through social and organic channels.

Knowing your intended audience is only one half of the equation. The next step in the target audience analysis process is to determine where this group consumes content so you can develop an actionable marketing strategy.

Depending on the demographic and psychographic data you’ve collected, some channels will be more effective at engaging your intended audience than others. For instance, some decision-makers in a market segment may be more likely to open an email than to click on a social media ad.

Within channels, a specific audience may prefer unique platforms. B2B buyers are more inclined to seek out information on LinkedIn than Instagram, for example.

Subscribe to The Content Marketer

Get weekly insights, advice and opinions about all things digital marketing.

Thank you for subscribing to The Content Marketer!

(Keep in mind the following custom audiences are meant to inform specific campaign messages! These companies may have different audience segments for other targeting efforts. Each example is based on a real client I’ve worked with.)

1. Bookkeeping SaaS Solution

Key demographics

• Age range: 35-49.
• Gender: 65% male, 35% female.
• Common job titles: Head of Digital, Senior Accountant, Chief Financial Officer.

Key psychographics

• Values job security.
• Likes to review all the data before making a decision.
• Striving for a better work-life balance.
• Skeptical of solutions that promise to solve all their problems.
• Their current digital solution is showing its age.
• Current lack of third-party integration is slowing down internal processes.
• Boss/shareholder demands are making work stressful.

Preferred channels

• Email for first contact, then phone conversations.
• Browses social media platforms like LinkedIn , mostly looking for news.

Preferred content types

• Data-rich white papers.
• Case studies.

2. Business Travel Company

• Age range: 30-55.
• Gender: 70% female, 30% male.
• Common job titles: Procurement Officer, Travel Buyer, Supplier Relations Expert.
• Values relationships when working with suppliers.
• Dislikes working on repetitive, mundane tasks.
• Is wary of handing off responsibilities to a third party.
• Suppliers fail to deliver on promised rates.
• Doesn’t have enough data to make informed decisions.
• Not familiar with ground-level travel concerns.
• Looks for answers via organic search.
• Communicates with other procurement professionals on social media platforms.
• Easily digestible blog posts.

3. Facility Security Services

• Age range: 45-60.
• Gender: 80% male, 20% female.
• Common job titles: Facility Manager, Head of Security.
• Doesn’t like drawn-out negotiations.
• Likes to be prepared for everything; gets nervous when things are uncertain.
• Prefers to get pitches from two or three companies before making a decision.
• Needs to save costs, but isn’t willing to sacrifice quality of service.
• Needs a third-party supplier with technology integrations.
• Email for marketing materials.
• Blogs and news sites for industry trends.
• Data-rich infographics.
• Email newsletters.

B2C Target Audience Examples

4. athletic shoes.

• Age range: 18-29
• Gender: 60% male, 40% female
• Wants to look stylish, but doesn’t like to follow trends.
• Looks up to sports figures.
• Strongly values friendships and community.
• Loyal to one or two athletic brands.
• Finding athletic footwear that is both stylish and comfortable.
• Loves the look of designer sneakers, but can’t afford them.
• Follows athletes and influencers on social media.
• Watches sponsored events on YouTube.
• Looks for exercise tips on Google.
• Social media posts.
• Image-rich articles.

5. Organic Protein Bars

• Age range: 18-35.
• Gender: 50% female, 50% male.
• Strives to eat food that is nutritious and sustainable, but isn’t always successful.
• Loves to hang out with friends in nature.
• Feels loyalty toward brands with values similar to their own.
• Finds it difficult to eat healthy food when they’re busy.
• Has a limited food budget.
• Needs a protein source that is compact and easy to transport.
• Follows nature photography accounts on Instagram.
• Watches supplement reviews on YouTube.
• Follows health gurus on Twitter.
• Event marketing.

6. Credit Union Mortgage Products

• Age range: 25-39.
• Gender: 50% male, 50% female.
• Enjoys spending time with friends and family at home.
• Tries to spend their money wisely, but isn’t always sure how to do that.
• Craves stability, but fears another economic recession.
• Feels anxious every time they think about having a mortgage.
• Is thinking about mortgages for the first time ever.
• Unclear on the difference between a bank and a credit union.
• Reads online news sites.
• Downloads how-to guides online.
• Watches home-hunting videos on YouTube.

When you have well-defined, custom audiences informed by strong research, you can stop waiting for buyers to stumble upon your brand and start actively pursuing them with precise messaging.

Editor’s note: Updated November 2021.

Michael O'Neill

Share this article

Get our weekly newsletter

Mike O'Neill is a writer, editor and content manager in Chicago. When he's not keeping a close eye on Brafton's editorial content, he's auditioning to narrate the next Ken Burns documentary. All buzzwords are his own.

Recommended Reading

10 of the Most Innovative Marketing Strategies (Infographic)

Is your marketing strategy lacking in innovation? Explore some of our favorite, innovative marketing strategies from top brands.

Your Step-By-Step Guide To A/B Testing

Learn how to identify the gaps in your marketing campaigns and optimize them with actionable insights with this guide on A/B testing.

The Content Marketer

Get the latest content marketing updates delivered directly to your inbox with our weekly newsletter.

AI ASSISTANTS

Upmetrics AI Your go-to AI-powered business assistant

AI Writing Assist Write, translate, and refine your text with AI

AI Financial Assist Automated forecasts and AI recommendations

TOP FEATURES

AI Business Plan Generator Create business plans faster with AI

Financial Forecasting Make accurate financial forecasts faster

INTEGRATIONS

QuickBooks Sync and compare with your QuickBooks data

Strategic Planning Develop actionable strategic plans on-the-go

AI Pitch Deck Generator Use AI to generate your investor deck

Xero Sync and compare with your Xero data

See how easy it is to plan your business with Upmetrics: Take a Tour  →

AI-powered business planning software

Very useful business plan software connected to AI. Saved a lot of time, money and energy. Their team is highly skilled and always here to help.

- Julien López

BY USE CASE

Secure Funding, Loans, Grants Create plans that get you funded

Starting & Launching a Business Plan your business for launch and success

Validate Your Business Idea Discover the potential of your business idea

E2 Visa Business Plan Create a business plan to support your E2 - Visa

Business Consultant & Advisors Plan with your team members and clients

Incubators & Accelerators Empowering startups for growth

Business Schools & Educators Simplify business plan education for students

Students & Learners Your e-tutor for business planning

• Sample Plans

WHY UPMETRICS?

Reviews See why customers love Upmetrics

Customer Success Stories Read our customer success stories

Blogs Latest business planning tips and strategies

Strategic Planning Templates Ready-to-use strategic plan templates

Business Plan Course A step-by-step business planning course

Help Center Help & guides to plan your business

Ebooks & Guides A free resource hub on business planning

Business Tools Free business tools to help you grow

How to Write a Customer Analysis Section for Your Business Plan

Free Customer Analysis Template

• July 12, 2024

A customer contributes significantly to building a winning brand.

Understanding your target consumer, their needs, the problems they face, and the way they behave assists you in creating products and services that can satisfy your customer needs.

Customer analysis is a quintessential part of your business plan. Writing it accurately will help you make informed decisions for other aspects of business planning, i.e. product development and business strategies.

So let’s get started. This blog post describes the process of creating customer analysis in a business plan and guides you with a customer persona example.

What Is Customer Analysis?

Customer analysis is an important section of your business plan offering a comprehensive and in-depth understanding of your potential customer. It is a study of their behavioral, psychological, and demographic patterns to help you make sound business decisions.

Such analysis assists in developing products and services addressing the pain points of your customers and in determining your pricing, marketing, and customer retention strategies.

Why conduct a customer analysis?

A thorough and insightful customer analysis offers a plentitude of benefits. Here are a few you should know of:

• Helps optimize product development by offering insights into customer behavior, needs, and pain points.
• Helps gain a competitive advantage by identifying the pain points that are unaddressed by competitors.
• Helps tailor your marketing efforts to cater to specific customer segments.
• Increases customer retention by giving you a thorough insight into what the customer needs and what drives their decision.

If you think of it, customer analysis forms the basis for designing your products and services, devising your marketing and sales strategies, determining your pricing point, and driving your business growth.

How to Write a Customer Analysis Section

Writing a customer analysis includes extensive research and collecting data from various sources. This data consists of qualitative and quantitative aspects which help you write an accurate customer analysis for your business plan.

Let’s now understand a step-by-step process to write your customer analysis.

1. Identify your customers

The first step of customer analysis is to identify your potential customers and collect information about their special characteristics. Such information comes in handy when you want your product and marketing strategies to align with your customers’ needs.

However, what details should you collect and how should you segment it? Well, segmenting in the following manner can help you get a headstart.

• Demographic: Age, gender, income
• Geographic: Location, type of area (Rural, suburban, urban)
• Psychographic: Values, interests, beliefs, personality, lifestyle, social class
• Technographic: Type of technology the buyer is using; tech-savviness
• Behavioral: Habits, frequent actions, buying patterns
• Industry (For B2B): Based on the industry a company belongs to.
• Business size (For B2B): Size of the company

Customer database can help capture the above data for existing businesses. However, for additional details, you can retort to surveys and forums.

If you are a startup, conducting an audience analysis might seem impossible as you don’t have an existing customer base. Fortunately, there are numerous ways through which you can study your potential customers.

A few of them are:

• Identifying who would benefit from your product/service
• Analyzing your competitors to understand their target customers
• Using social media to prompt potential buyers to answer questionnaires

2. Define the needs of your Customers

Now that you have identified your customers, the next step is to understand and specify their needs and challenges. This is the step where you need to go hands-on with your research.

Getting to know your customers’ needs helps you determine whether or not your product or service hits the mark.

You can adopt one of these approaches to understand the needs of your customers:

Engage directly with potential Customers

A very reliable way to get to know your customers is to simply engage with them, either in person or on a call. You can reach out to your customers using one of the following ways:

• One-on-one interviews
• Focus groups
• Beta testing (invite users to test your products).

These techniques can help you collect adequate data for your analysis.

However, before approaching your customers, set up a systematic survey that can get you structured data for analysis. To ensure that your questionnaire isn’t just covering surface-level information but a deep interrogation of customers’ problems, use the technique of five whys .

Collect data from your customer support

Customer support is the place where you can find raw and unfiltered feedback given by your customers. Analyzing this data helps you understand the pain points of your customers.

You can further gather direct customer feedback by contacting the customers who had issues with your products. This will help you understand the pain points and gaps in your products more vividly.

Run surveys and mention statistics

Talking to your customers helps you get qualitative information that can be used to alter your product or services according to your customers. The next part is to attain quantitative information, in other words, presenting numbers to support the previous data.

Conducting surveys is one of the commonly used methods for quantifying information. You can conduct in-app surveys, post-purchase surveys, or link surveys in email and apps, etc.

You can also collect statistical data to support your conclusions from the interviews. These include stating studies related to customer choices, results from popular surveys, etc.

Want to create a Customer Persona in Easy Steps?

Generate valuable customer insights in minutes with Free Customer Persona Generator .

3. Create a Customer Persona

It is now time to present your collected data using a customer persona.

A customer persona represents a segment of customers with similar traits. It outlines the psychological and demographic features of your potential customer group and thereby assists you in making important strategic decisions.

Consider it as a tool that will make your data analysis process easier and more efficient.

Now, you can either use customer persona templates or an AI tool to generate your buyer’s persona. However, to get a more thorough insight check how a customer profile looks.

Customer Persona Example

This is a customer persona example of an internet service provider(ISP) to help you get a more practical overview.

• About: A lot of customers remain at home and have a minimal and easy-going lifestyle. They need high-speed, interruption-free internet access.
• Demographics: Age is between 30 and 40, has a laid-back lifestyle, lives in suburban areas, and the income range is between $10,000 to $40,000.
• Professional role: Shop owners, employees, freelancers, etc.
• Identifiers/Personality traits: Introverts, like routines, make schedules, prefer online shopping, and stick with the companies they trust.
• Goals: Wants easily available service, and 24×7 customer support, prefers self-service technologies and chatbots over interacting with representatives.
• Challenges: Fluctuating internet connection while working or consuming media. Not enough signal coverage.

4. Explain the product alignment to the Customer’s Needs

You’ve gathered info and created customer personas. The final step is to explain how your product or service caters to the needs of your customers.

Here, you specify the solution you offer to tackle the challenges faced by your customers.

Mention the USPs of your product and its features, and clarify how they benefit the customer. Also, mention how your offerings make the customers’ lives better.

Continuing the previous example of an ISP provider, this company can show how its high-speed Internet plans cater to the needs of individual working professionals. They can focus on aspects like customizable plans, cost-effectiveness, and coverage in remote areas to attract users.

And there you have it—a guide to writing your customer analysis. Just ensure that you maintain accuracy while making assumptions and predictions to make this section useful for making further decisions.

Build a solid business foundation with customer analysis

Understanding you r customers inside out assists you in making profitable decisions for your business. But remember, it is an ever-evolving and continuous process. You need to analyze your customers as often as possible to stay updated about their ever-changing needs.

After all, understanding what your customers need and what they prefer will help you devise strategies that ensure maximum customer satisfaction.

Now quickly create customer profiles for your business with Upmetrics’s AI SWOT analysis generator. However, once you do that, use this tool to streamline your entire business planning process.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

What key components should be included in customer analysis.

Here are the key components of a sound customer analysis:

• Market segmentation
• Customer behavior analysis
• Customer profiling
• Customer journey mapping
• Trend analysis and future customer behavior

How can I gather data for my customer analysis?

Here are a few ways for you to gather data for your customer analysis:

• Gather customer feedback using surveys, forums, and questionnaires.
• Use secondary methods to gather industrial data, competitors’ data, and data from publications.
• Use the collected data till data (i.e. social media analytics, customer support data) to form your analysis.

Can customer analysis help in forecasting future trends?

Absolutely, yes. A detailed customer analysis helps you to understand the emerging shifts and patterns in consumer behavior, thereby helping you optimize your product offerings and marketing strategies.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

Reach Your Goals with Accurate Planning

Target Markets: Why They Aren't Just for Marketers [A Quick Guide]

Published: August 08, 2022

Sales teams and entrepreneurs need to know their target market. You can get there by asking yourself, "Who is the ideal fit for my offering? What are their interests and priorities?"

Answering these questions can help you prioritize the deals you're most likely to win. But how can you really understand the ins-and-outs of your target market?

Let's take a closer look at what a target market is, go over how to conduct a target market analysis, see some helpful examples, review target market segmentation, and look into how sales teams can leverage target markets.

Table of Contents

How to analyze your target market, target market analysis example, target market examples, target market segmentation.

How Sales Teams Can Leverage Target Markets

What Is a Target Market?

A target market is a group of customers for which your products and services are aimed. First defined by an industry (i.e., healthcare, travel, technology, etc.), it represents a specific subset of the broader market the industry covers. It's usually based on factors like behavioral tendencies, geographic location, and demographic characteristics.

Let's say you've created a B2B software product that helps remote construction teams. In that case (and to state the obvious), you'd probably focus on companies within the construction industry. But defining your target market doesn't stop there.

You know your industry, but there's no one-size-fits-all mold for the businesses within it. If you were pinning down a target market for your product, you'd have to start with business characteristics — for instance, scale would be a good place to begin.

Your product will suit certain companies better than others, and selling to a Fortune 1000 company isn't the same as a small construction business with less than 100 employees.

In this case, you'd want to pin down the size of your ideal customer's business — and this number would be the start of a target market analysis.

Let's take a closer look at what that process looks like.

• Analyze your product or service.
• Check out the competition.
• Choose criteria to segment by.
• Perform research.
• Track and evaluate your results.

As the name implies, target market analysis is the basis for identifying your target market. Here are the five steps you can take to do one of your own.

1. Analyze your product or service.

Take a look at what you're selling to understand which consumers would get value from your product. The questions below will help with the brainstorming process:

• "What need does your product or service fill?"
• "Are there any problems or pain points it solves for?"
• "Who would benefit most from your product or service?"

Once you've answered these questions, you might want to consider getting feedback from current customers. Conduct a focus group or ask your service department about their common problems.

Analyzing your product or service in this way will help you better understand your target market. In fact, you might learn that your current customers aren't the people you're trying to target. If you notice a disconnect in this process, you'll want to better align your target market with your actual marketing goals so you can realign.

2. Check out the competition.

Perform an analysis of your competitors to see who they're targeting. Take a look at their customer base, and see if you can find an area of the market you could focus on that they might be missing.

The best way to do this is to conduct a competitive analysis . This entails researching who your competitors are, what they offer, and even review their sales tactics.

Looking at your competitors will even help you identify target market gaps that you can fill. Are there any target markets they do not focusing on?

This could lead you to expand into new markets geographically or develop new products to target a different market.

3. Choose criteria to segment by.

A target market can be segmented by a few different variables. Consumers can be split by demographic, geographic, and behavioral factors.

This is essentially the process of creating a buyer persona . You'll divide your target market into several target customers — also known as (you guessed it) buyer personas.

For example, perhaps your target market is midsized companies looking to purchase marketing automation software. You could divide your target customers into several groups, including marketing department leaders, sales leaders, founders, or CEOs.

Here are some of the most common ways to segment a target market:

4. Perform research.

As you begin narrowing your market, the research phase doesn't end there. What marketing strategies should you use to reach your potential target market? Is the target market large enough for your product or service? Market research will help you learn more about your target market.

Picking the right target market can tell you a great deal about your business. Are you looking to become a true velocity business, or do you see yourself as a steadier flow of pipeline with enterprises and consumers?

5. Track and evaluate your results.

Target market analysis should never be static — you don't just conduct one, be immediately content with the results, and stop there. It's an ongoing process. You need to continuously track your results, evaluate what you see, and iterate on the conception of your target market to more effectively appeal to it.

Let's imagine a company that sells inexpensive, "function-over-form" athletic footwear that stresses comfort and arch support instead of trendy aesthetics.

1. Analyze the product or service.

When conducting its target market analysis, the business in question would have to start by taking a thorough, objective look at its product to get a solid grip on its value and differentiating factors.

The company would likely find that its shoes are better suited for day-to-day wear instead of legitimate athletic competition, lack trendy appeal, and can help with sore feet while standing.

This initial insight can help shape the personas that the company will ultimately target. It would have a better picture of how to construct its value proposition. In this case, the business might find that suburban men over 50 who don't exercise regularly appear to be the most likely to buy its shoes.

Next, the company would dig into its competitor's products, how they were selling them, and any noticeable gaps in their potential target markets. After conducting a competitive analysis, the company might find that its competition was ignoring some geographical trends embedded in its target markets.

Let's say its competitors' retail locations and store placements were primarily in cities — ignoring locations like suburban strip malls and local "mom and pop" retail stores. With that information in mind, the company in question could have a starting point for appealing to a target market its competition is ignoring.

Here, the company would begin to string more detailed personas together. Again, it would base its segmentation criteria on its product analysis and refine it according to its competitive analysis.

In this case, a significant portion of the criteria would revolve around age, social class, location, and interests — making one of its personas older, working class, suburban consumers who prioritize function over form.

After creating its target persona, the company would conduct a market analysis, survey consumers that fit its target market bill, potentially employ more direct tactics like hosting focus groups, and take any other strides it sees fit to ensure that it has a thorough understanding of its target consumers.

From there, it can shape a thoughtful value proposition that will guide its sales messaging, outreach strategies, pricing structure, and other crucial sales-related factors that influence how it reaches consumers.

5. Track and evaluate results.

Once the other steps have been covered, the company would continue to monitor how its efforts resonate with its target persona. If sales aren't where they need to be — or it appears the company might have other personas it can cater to — it might restart this process and shift gears on its messaging, strategies, or target market as a whole.

Let's look at some of the best-in-class companies — both B2C and B2B — to see how they set up their target markets.

1. Atlassian Target Market

Atlassian offers a suite of collaboration tools designed to help developers and product leaders take their projects from concept to completion.

Like most larger companies, Atlassian uses target market segmentation to look at different markets and break up its unique value propositions, terminology, and values.

By diving into one segment, like retail, we see they're working with several large companies — especially with their support-related products.

This tells us that while Atlassian can work with almost anyone doing software development, it recognizes how its value proposition changes depending on the market segment in question.

Even the same product for two different customer types creates different levels of value.

2. Nike Target Market

Nike offers products to athletes and other consumers who want to exercise regularly. They offer apparel, equipment, shoes, and accessories.

They work with athletes and a fitness-minded audience, but we know a good target market definition can't be that broad. Let's break two of their segments down:

• Young athletes — Kids who get frequent exercise and play sports growing up are a huge, growing category for Nike. Nike engages with this market through sports leagues and associations and with endorsements from popular sports stars like LeBron James.
• Runners — With a focus on new types of shoes, Nike shows it targets consumers based on both demographic information and lifestyle. Nike launches shoes and apparel designed to help the avid runner stay on the road a bit longer.

3. Starbucks Target Market

Next time you're sipping your cold foam Cascara cold brew, ponder the target market of the top coffee destination in town: Starbucks .

Many of their locations have been remodeled and offer a hip, contemporary look. Not that surprising since about half of their customers are between the ages of 25 and 40.

If you spend more than five minutes sitting and drinking your coffee, you'll probably hear a barista shout, "mobile order!" The mobile process now accounts for 24% of Starbucks' transactions which shows they're catering to a tech-savvy crowd.

The next clue we have on their target market is the location of their shops. By positioning its locations in heavily urban areas, Starbucks is attracting on-the-go professionals. To recap, here are a few of Starbucks' target markets:

• 25 - 40-year-olds — Remodeled locations accommodate their largest demographic base.
• Tech-savvy adults — Their mobile app has caught on and lends itself to a forward-thinking crowd.
• Working professionals — Their urban focus tells us the type of lifestyle they're catering to.

4. Apple Target Market

What about a company that occupies both the B2B and B2C spaces? How can it develop a target market with such a broad set of customers? Apple is the textbook case for innovation and product design.

But how does that apply to finding a target market? With its wide array of product offerings, Apple has a little something for everyone. Here are two of their target markets:

• Tech enthusiasts — A customer category that launched Apple's brand decades ago, technology enthusiasts still get attention from the company. With launches of new tech categories (including wearables, Apple TVs, and HomePods), Apple has shown it's still creating value for this segment. There is also a tremendous ecosystem where owning a suite of Apple products enables better interoperability among your tech.
• Healthcare — One market Apple has its eyes on is healthcare. By focusing on the appeal of having information right at your fingertips with mobile and the iPad, they've positioned healthcare workers to more conveniently communicate with patients.

Apple doesn't seem to exclude many people from its target market and has positioned itself to benefit both consumers and businesses — even with the same products like the iPad.

Its success has been more about understanding the value of its different segments rather than excluding people from them.

5. McDonald's Target Market

McDonald's target market is broad and encompasses a wide variety of customer personas. Younger professionals represent one of the chain's more prominent target market segments — and that trend is reflected in many of the company's location remodels. Several McDonald's franchises have been revamped to look sleeker, more modern, and better suited for millennials.

Image Source: Community Impact

"Full nest" families with children over six represent another key base for the chain. The franchise takes many strides to appeal to this specific segment, primarily reflected in its Happy Meal options.

But there's another factor that underscores virtually every target market McDonald's tries to appeal to — social class. The chain makes a conscious effort to resonate with lower, working, and middle-class patrons.

Pricing is the basis of McDonald's value proposition. It tries to bill itself as an affordable alternative to more expensive options in the spaces it attempts to sell in. For instance, when promoting its McCafe line, the chain stressed the brand's particularly low price points as a major selling point.

Image Source: McDonald's

Ultimately, the franchise's target market isn't singular and clear-cut in terms of most demographics — but it is specific in terms of its various personas' economic circumstances. Its value proposition fundamentally rests on the fact that its food is inexpensive.

Target Customers

A target customer is an individual that's most likely to buy your product. And it's a subset of the broader target market. For example, if your target market is female athletes between the ages of 13 to 25, a target customer could be female athletes in the specific age range of 13 to 16.

You need to have a firm grasp of your target customers if you're going to develop pointed, effective value propositions. The success and viability of your sales messaging, prospecting efforts, and broader sales process rests on your knowledge of who's buying your product or service and the mindset that makes them do it.

That starts with target market segmentation.

Target market segmentation is the process of partitioning your target audience into more focused, identifiable, and approachable groups (or segments). It's a broad concept that can take on a lot of forms, including:

• Geographic segmentation — Dividing your target market based on geographical boundaries
• Firmographic segmentation — A practice specific to B2B sales where firms are divided based on characteristics like company size or number of employees
• Behavioral segmentation — Dividing your target market based on behavioral tendencies and decision-making patterns
• Demographic segmentation — Dividing your target market based on factors like income, education, race, gender, or occupation
• Psychographic segmentation — Dividing your target market-based elements like personality traits, values, and opinions

How you elect to segment your target market will be specific to your company's needs and interests. In many — if not most — cases, you'll employ more than one of the segmentation methods listed above when defining a target market.

When you identify the customers you want to serve — and the ones you don't — ask:

• "Do my target customers have different problems they're solving with my product?"
• "Do my target customers get different value from my product?"
• "Are either of these things related to demographic, geographic, or lifestyle components?"

In order to segment effectively, you must have a decent way of measuring the value you provide to the market. Then, identify if certain groups are getting more value than others.

This will power the positioning of your product. Suddenly, you can pinpoint pain for your customers while speaking their language.

This helps you refine your position in the market and connect on a deeper level with your customer. Having a target market (or target customer) is all about relevancy and relating to the person on the other side of the cash register.

How Sales Teams Can Leverage Target Markets + Segmentation

Segmentation poses several benefits for sales teams. If you know who will be most receptive to your product or service, you get a leg up when conducting most steps of your sales process.

For one, effective segmentation can be a major asset in prospecting. If your SDRs have a solid picture of the types of customers that show an interest in your offering, cold leads can become a little warmer — letting those reps make more thoughtfully guided use of your sales messaging when connecting with prospects.

Beyond that, segmentation can also help with lead qualification. Knowing whether a lead fits the bill of a class of high-converting customers gives reps a head start during that stage.

You need to have some kind of criteria that can immediately distinguish a prospect who needs your product or service from one that lacks the decision-making tendencies, location, or economic circumstances to actually get something out of it. Target market segmentation gets you there.

Finally, target markets provide sales teams with the necessary information to breach new markets and sell to them effectively. If you're not on top of any emerging markets that might need your product or service, you could hit a wall with your sales potential and lose out on incredibly lucrative business opportunities.

Ultimately, knowing your target markets inside and out is one of the most fundamental tenets of successful sales efforts. If you're not actively analyzing, pursuing, and refining your understanding of your target markets, you're losing out on sales and painting yourself into a corner with your business potential.

Editor's note: This post was originally published in July 2018 and has been updated for comprehensiveness.

Don't forget to share this post!

Related articles.

42 Stats About Diversity In Entrepreneurship

7 Popular Startup CRMs & Which is Best For You in 2024

Adults Drive Up Toy Sales: 3 Opportunities to Help Grown-Ups Have More Fun

A Beginner's Guide To Selling Your Online Business

What I Learned About Pursuing Solopreneurship from Jayde Powell, LinkedIn’s Coolest Creativepreneur

21 Accounting & Bookkeeping Software Tools Loved by Small Businesses

13 Characteristics & Personality Traits Great Entrepreneurs Share

Barriers to Entry: What’s Keeping Your Business From Entering the Market

The $113B Opportunity In Building Better Senior Living Communities

Entrepreneurship vs. Employment: The Pros & Cons That 200+ Owners & I Weighed [Data]

Free Guide & Templates to Help Your Market Research

Powerful and easy-to-use sales software that drives productivity, enables customer connection, and supports growing sales orgs

Plan Projections

ideas to numbers .. simple financial projections

Home > Business Plan > Target Market in a Business Plan

Target Market in a Business Plan

… we are targeting this part of the market …

What is the Target Market?

Target Market Segments

Your product will not be of equal interest to all potential customers, as they do not all have the same needs and characteristics. This section of the business plan deals with the analysis of the target market into different groups of customers (customer or target market segments) each having distinct characteristics and needs from the product.

The target market segmentation strategy depends on the business and the product, but generally segmentation falls into the following customer characteristics groups.

Psychographic segmentation

Psychographic segmentation splits up a sales market of a business based on such things as the social class, lifestyle choices, personality traits, tastes, attitudes, and the opinions of its customers.

Psychographic market segmentation examples include the promotion of products such as cars as these often reflect a customers lifestyle, and leisure activities. For example, a car business might identify customers who are interested in keeping the environment green and promote hybrid cars to them, or a business involved in activity holidays will seek to market to customers who show a preference for an active lifestyle.

Demographic segmentation

• Social class
• Size of family
• Nationality

Geographic Segmentation

Geographic segmentation is the process of splitting up a sales market of a business based on the geographical location of the customers. It is a particularly important marketing tool when the business is a multinational, worldwide business, but is also used by businesses to split their markets into region, county, state, city, neighborhood, or postal code.

A geographic segmentation example would be seasonal clothing items such as coats and swimwear. In contrast, in a colder climate coats would be marketed and sold all year round whereas swimwear would be highly seasonal during the holiday period. In a hot climate swimwear would be the all year round product and winter coats might not be sold at all.

Behavioral segmentation

Behavioral segmentation is the process of splitting up the sales market based on brand loyalty, usage, benefits required.

Target Market Presentation in the Business Plan

The business plan target market section can be presented in a number of formats, but a listing of the major customer segments together with a pie chart will show the investor where the main potential for the product lies. In the example below, the market is split into four main segments both in terms of number of customers and percentage of the total target market.

The average customer spend is also included, to reconcile the total target market back to the served available market (SAM) in monetary terms. Finally, a brief statement about the growth prospects for the market is included to show the investor the potential for growth in your chosen customer segments.

When identifying the target-market segments, it is important to be as specific as possible about the customer characteristics which make up each segment. In choosing which segments to concentrate on, take into account the size and potential for growth of each segment, and identify clearly what benefits, both emotional and financial, the product provides for the customer.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series is about the analysis of the competition for the target-market.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

You May Also Like

What is Target Marketing?

Michael Kerr

13 min. read

Updated October 29, 2023

If you build it, they will come.

That’s what I believed when I was first starting out. I assumed that if I opened a business, customers would just show up—no major marketing effort required. Other entrepreneurs take the complete opposite approach and treat marketing as if it’s the 1916 Battle of the Somme: they throw all of their resources in the general direction of their intended audience and hope something hits its mark.

The “if you build it they will come” approach is pretty risky. Just because it worked in Field of Dreams doesn’t mean there’s any reason at all to think that your ideal customers—the ones who both need your product or service and will pay for it—are just going to magically find you and start showing up in droves with their dollars. There’s a greater chance that Kevin Costner will show up at your door in a baseball uniform later today.

“Don’t trust Kevin Costner for marketing advice” is probably a good rule of thumb.

• What is target marketing?

Target marketing is researching and understanding your prospective customers’ interests, hobbies, and needs so that you can focus your message and your marketing budget on the specific segment of the market that is most likely to purchase your product or service.

Identifying your target market: Who, what, why, how

Identifying your target market is part of business planning—notice that it’s planning as an ongoing action not just writing a plan as a one-time event. Gathering information about your target market, like business planning, shouldn’t be an exercise you do once and then never revisit. For as long as you are in business, you’ll always need to be thinking about how to better understand your ideal prospective customers.

One of your first steps in starting a business (or growing one) is identifying your market— the subset of the population who need and will pay for what you’re selling. Think of it this way: if your business idea is to revolutionize fashionable hiking shoes made from ethically sourced materials, it can be tempting to think that your target market is everyone with feet.

But realistically, the people most likely to purchase your shoes probably share some similar characteristics: they’re fashion-conscious but prioritize comfort over style. They would rather buy something that lasts for 700 miles than 200, even if it costs more.  

You can make some hypotheses, like that because of your price point, college students are less likely to buy them than people in their mid-thirties, or that people who live in areas where hiking and nature are easy to access are more likely to buy than people in dense urban areas.  Part of target marketing is identifying who your ideal customers are, and then testing your assumptions about them to make sure you’re not barking up the wrong tree.

You’ll want to be able to identify who your ideal customer is, where they live (or buy), what motivates them to make choices, and how they behave, or the steps they take in making a purchase.

Who: Demographics

Who needs your product or service? Include basic demographic details such as age, gender, family size, educational level, and occupation.

“Our target customer is male-identifying, age between 28 and 45 with a relatively small family—a partner and 0-1 children. He works a white collar job and makes slightly more than the average median income.”

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

Where: Geographics

Where are your customers? These are the places your customers can be found (i.e., their zip code), and be sure to learn details like the size of the area, its population density, and its climate.

“We think that our customers are more likely to live in suburban areas—zip codes with slightly above average median incomes, in areas with a relatively mild climate all year long, like San Diego.

Why: Psychographics

Why do your customers make the choices they make? This is personality and lifestyle information that will help you figure out your customers’ buying patterns. For example, if you know why your customers buy your product, you can figure out how much of your product they need and how often they need to buy it. Also consider what benefits you can provide over your competitors, and how loyal your customers are to you or your competitor (and why).

“We think that our customers probably buy one new pair of hiking shoes each year. They’re relatively loyal when they find a brand that works, but we think our socially conscious mission and the fact that no one else is manufacturing shoes like ours in the US will resonate with them.”

How: Behaviors

How do your customers behave? All customers are buying products to fulfill a need, but how do they regard that need? How do they regard your product? How much information do they have on this need or how your product fulfills it, and what are their information sources?

“Our customers are generally not big impulse buyers. They want information on how products are made before they buy them, and they’re likely to do several online searches before they buy.”

All the examples above represent assumptions—things that you think are true about your ideal customers. But your work isn’t done. Now you need to do the work of figuring out whether your assumptions are correct, and revise them if they’re not. Finding out your wrong at this stage is actually something to get excited about, so don’t let your ego get in the way. You’re better off finding out that you need to shift your ideas (and your resources) toward another demographic than proceed with assumptions are incorrect or untested.

Researching your target market

New technologies can make nailing down your demographics and psychographics much easier (and cheaper) than in the past.

Start with social . If you run social media profiles for your business, most social sites provide a free demographic breakdown of your followers in the backend analytics area.

Leverage email addresses . If you have your customers’ email addresses, services like TowerData can pull detailed demographic information for you.

Use Census information . If you have your customers’ zip codes, there is a ton of free information available to you from the U.S. Census Bureau —it might not drill down to your exact customers’ households, but it’s free and it’s a very good starting point.

If you’re already up and running, leverage your own sales data . Data from your payment processor or inventory history could also be helpful. What are your customers buying, and when? How much is the average purchase in your store? What time of day is the busiest? When do purchases spike, and when do they fall, and can you develop any hypotheses to explain the fluctuations?

Ask your customers . You can also use email, phone, or in-person customer surveys. You don’t necessarily need large numbers of participants to learn more about your customer base—you might be surprised how much you’ll take away from just 5-10 good conversations. If you’re worried about being able to recruit survey participants, offer a free gift or store credit.

At the bare minimum, these are the things you should know about your target customers:

• What is their gender? Yes, this is the 21st century, but gender identity still makes a difference when it comes to patterns in purchasing decisions for a variety of complex reasons.
• How old are they? “18 to 49” won’t fly anymore. The majority of millennials and boomers have feet, but what they choose to put on them, and how they make purchases pretty different.
• What are their interests or hobbies? Finding out what people are into will help you connect with them. Even if they don’t buy from you, you’ve made a new friend. Everyone needs friends.
• Where do they live? Is geography a limiting factor for your customers (or for you)? Are they able to get to you easily? Is there plenty of parking? Public transportation? Can you deliver? I once purchased a coffee shop tucked in a strip mall between an antique store and a Gold’s Gym. On the upside, most of my 12 or so regular customers were either super fit or could fix an old watch.
• How do they make a living? Knowing what your primary customers do can help you adjust your hours to fit their needs, or help you devise special offers. People like to feel special.
• How much money do they make? Whether you’re selling gold-plated sailboats or glow sticks in bulk, it’s a good idea to know how much—or how little—your customers are willing to spend.
• Do they own their own homes or do they rent? Depending on the answer and what you sell, you may need to tweak your messaging to resonate with your audience.

The key here is to collect information, and then compare it to the assumptions you’ve made about your customers. What’s surprising? What strikes you as an untapped opportunity? Did you hear the same or similar complaints/suggestions from multiple people?

This may also be a good time to create a buyer persona for your business, and/or to conduct a SWOT analysis of your business, so you can develop a fully fleshed-out business strategy.

• How businesses can use target marketing

Whether you’re still in the process of starting your business , looking for an innovative opportunity to grow your business, or want to protect the business you’ve already built, target marketing is an important tool.

Beat your competition in niche markets

If you’re opening a bookstore or selling sporting goods, you’ve got some big-time competition. Mega-retailers like Amazon and REI aren’t just going to give up a piece of their pie to a scrappy upstart. 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. The biggest wireless providers—AT&T, Verizon, Sprint—are focused on the biggest markets, and they have shareholders to answer to every quarter; despite being multi-billion-dollar companies, they don’t have the resources (and it isn’t in their best interest) to staff their support centers with multilingual employees or to offer the most competitive rates on cell phone plans.

So you know what they do instead? They run wholesale divisions that sell small businesses the rights to their wireless networks, and those small businesses then run after the niche markets whose interests and needs are ignored by the big wireless companies.

SIM Shalom targets Israeli-American immigrants by offering Hebrew-language support and cheap calls between the U.S. and Israel.

Kajeet targets parents who want to offer restricted phone lines to their young kids, offering the ability to turn off the phone’s network during certain periods of the day (like school hours, or bedtime) and to block certain phone numbers or websites, as well as the ability to activate GPS notifications so that parents know when their child has arrived at after-school activities.

Consumer Cellular targets senior citizens with simpler plans, a curated selection of phone options, a focus on affordability and reliability, and a partnership with the AARP.

GIV Mobile targets community-minded individuals who are looking for ways to “give back” by offering to donate 8 percent of a user’s monthly bill to a charity of their choice.

Virgin Mobile is after young adults with “back to school” marketing campaigns, pay-as-you-go plans with no credit required, casual website and marketing copy, and a focus on trends.

Identifying and focusing on target markets is what defines each of these businesses. Each one knows that their particular offering isn’t for everyone. They’re not just trying to market to everyone who needs or wants a cell phone. They’ve identified specific audiences with particular needs that aren’t being addressed by the biggest players in the marketplace.

Today, finding out what your competitors are (and aren’t) doing can be as easy as running a Yelp search. Studying your competitors’ customer feedback can help you identify blind spots in their businesses that you can exploit for your own gain.

Build a loyal customer base

Remember, identifying your target market isn’t something you do once and then check off a box. Up and running businesses should create systems to regularly ask your current customers feedback on what they like (and don’t like) about doing business with you.

The great thing about getting to know your customers is that not only will you be able to track down new customers just like them, but your tried-and-true customers will become more loyal—and spend more money

Case study: Sephora

One example that comes to mind is Sephora, a makeup and skincare retailer. My wife shops there for her makeup and skincare almost exclusively—why?

When I asked her, she didn’t say that she shops at Sephora every time she needs makeup and skincare products because they’re the only place that sells particular items (they aren’t), or because they have the best selection (they don’t), or because they offer free shipping (only on orders greater than $50, apparently).

The answer was that she gets “really good” free samples with her order and that she accumulates reward points with every purchase for even bigger and better free samples later. Even better, the selection of free samples is always changing, and she gets to choose the samples she wants from a wide selection of options.

By handing out free samples and—even she admitted—pretty-close-to-worthless reward points, Sephora’s gained an extremely loyal customer.

Would this strategy work for everyone? No way. But it works really, really well on a 30-something woman who wants to feel like her favorite mascara/eye cream/perfume is worth the hefty price tag.

Clearly, Sephora’s tapped into the psychographics of their target customer base. How can you do that for your own customer base? Research the types of loyalty deals your competitors even highly successful businesses outside of your industry are offering. Incorporate the research that you gathered on your target market to figure out what your customers are going to find most valuable.

Your knowledge of their hobbies, living situation, and typical job will help you craft loyalty programs that will resonate. Don’t forget to ask your customers what they think as you test out different programs. That direct feedback is the most valuable research that you can gather and will help you build a loyal customer base.

Getting to know your customers, and giving them what they want, is a surefire way to build a loyal customer base—the kind that gives your business 5-star reviews online, and that tells all their friends about how much they love you. (You know, the kind of customers you want.)

• In conclusion

The only thing I learned from my do-nothing plan was to never take marketing advice from a disembodied voice in a Kevin Costner film. Had I done any research at all, I would have known that’s not even the real quote.* Doing nothing won’t help your business, and it will almost certainly hurt it in the long run. The everything-but-the-kitchen-sink marketing plan where you throw resources into marketing to everyone with a pulse usually ends in similar disappointment: a lot of zeros on the bank statement, and all in the wrong places.

Target marketing is going to require some upfront work, but the rewards are huge and well worth the effort.

*The correct quote is, “If you build it, he will come.” Which is, in fact, more representative of the number of customers I attracted with my old marketing plan. 

Michael Kerr began his professional life as an entrepreneur. He built and managed a number of successful businesses before returning to school to indulge his passion for writing. An award-winning writer, Michael's work has appeared thousands of times in dozens of publications, including Portland Business Journal, USA Today and the Houston Chronicle. He lives in Portland, Oregon.

Table of Contents

Related Articles

8 Min. Read

How to Create a Market Penetration Strategy — 2024 Guide

6 Min. Read

Types of Market Research Explained and How to Use Them

12 Min. Read

6 Things to Consider Before Entering a Market

How Garrett McKenzie Made Our Product Better

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Artificial Intelligence (AI)
• Web Scraping
• For Small Business

How to Create a Winning Business Plan in 9 Critical Steps

• September 7, 2024
• by steven-austin

Starting a business without a plan is like building a house without blueprints – success is largely left to chance. That‘s why over 82% of startups fail in the first year without a business plan guiding activities and goals.

This comprehensive 9-step guide will outline exactly what a business plan is, why you need one, and how to craft a strategic plan tailored to your company‘s needs – no matter the size or stage.

What is a Business Plan and Why It‘s Essential

A business plan is a written document describing your company‘s objectives and how you intend to achieve them. It lays out your products and services, target customers, operations, marketing channels, competitive landscape, management team, financial situation – basically the entire strategy.

In essence, a solid business plan translates your vision on paper into an actionable model for activities. It not only shows potential investors that your venture will deliver substantial ROI but also keeps your internal team aligned.

According to Forbes , companies with a formal business plan grow 30% faster on average than competitors without one. And those seeking investments through pitch competitions often raise 7X more capital with them.

Simply put, no serious business should be without a strategic plan guiding high-level direction – especially in the early days. It brings discipline, focus, and coordination to turning ideas into reality.

Now let‘s dive into the key pieces that come together to create a winning business plan.

Step 1 – Craft a Compelling Executive Summary

The Executive Summary is one of the most critical pieces of a strategic business plan, appearing right up front before any other section. It‘s often the first part investors read to decide if they should continue exploring the opportunity further.

You‘ll want to open with 1-2 concise paragraphs covering:

• Business Concept: Brief yet intriguing explanation of the company‘s purpose, products/services offered, and basic operations.
• Target Customers: Summary of who you plan to sell to.
• Market Opportunity: The problem you’re solving, estimated market size, and competitive advantages you leverage.
• Management Team: Founders’ industry experience and what makes this team equipped to capitalize on the opportunity where others have failed.
• Financial Highlights: Capital needed to get started, projected revenue growth and profitability, expected 5-year ROI for investors.

The goal of the Executive Summary is to intrigue readers enough to continue through your entire strategic plan – while also establishing credibility around key business facets upfront.

Step 2 – Describe Products/Services Offered

With high-level concepts and opportunity framed, the next section expands on your actual business operations and product details.

Here you‘ll want to explain:

• Company Overview: Official registered name, founders and management bios, headquarters location, legal business entity structure chosen (LLC, S-Corp, C-Corp etc.)
• Company History: Origins story, key developmental milestones achieved, past funding rounds and amounts raised.
• Vision Statement: What eventual success looks like for the company and its place in the industry.
• Products/Services Details: Technical specs, photos, competitive advantages versus alternatives – explaining precisely how and why customers will choose you.

Remember to clearly identify how your offerings uniquely solve target customer pain points better than competitors. Use visuals like product images when possible for added clarity.

Step 3 – Define The Target Customer Profile

Now that readers understand your actual business, you need to help them identify the target customer base you’ll market and sell to.

Outlining addressable demographics is especially important for B2C companies, but also applies to B2B. Be sure to segment users into buyer personas based on real-world data.

Elements to cover include:

• Market Size Estimates: Current industry revenue as well as expected market growth in coming years. This quantifies the total pursuitable opportunity.
• Market Trends: Recent developments, emerging technologies, regulatory changes, or other macro factors driving industry shifts – and how your company will capitalize on them.
• Competitor Analysis: Summary of major players, their relative market share, areas of strength and weakness compared to your offerings.
• Customer Personas: Details on your ideal buyer demographics like gender, age brackets, income levels, common pain points, and reasons they would buy from you.

Thorough market opportunity analysis demonstrates you understand existing customers down to a persona level and crafted your products strategically based on true needs. It signals doing the homework required to compete and win market share.

Step 4 – Map Out Your Go-To-Market Plan

With target users and buying factors framed, smart investors next want to understand how you’ll reach those customers with a sound go-to-market strategy.

This core piece of the strategic puzzle should outline exactly how you plan to attract customers across stages:

• Customer Acquisition Channels: Specific outreach pathways like search ads, referrals, trade shows etc. that align to buyer journey stages
• Lead Nurturing Tactics: How you will develop inbound leads through email, content offers, appointments etc. to become sales qualified. Should map to each persona path.
• Revenue Models: Such as recurring subscriptions, wholesale, marketplace commissions etc. including pricing tiers and structures.
• Sales Projections: Expected customer conversions from investments across growth levers in a multi-year forecast based on conversion rate assumptions.

Investors want to see well-planned, integrated strategies tailored to getting the right messaging to mapped personas, guiding them from unawareness to purchase and retention.

Step 5 – Introduce Your Management Team & Staffing

Even the most impressive market opportunity and well-devised strategy is theoretical without capable hands to execute it daily.

That’s why readers need confidence in the key leaders who will drive growth. For each member of your core team, aim to include:

• Name, Title, Responsibilities: What tactical areas of the business each person owns.
• Relevant Past Experience: Their credentials, training, and previous positions that qualify them to fulfill this role successfully.
• Ownership Stake: What equity share of the company this leader holds. This demonstrates their financial incentives are tied directly to performing well in accelerating business growth.

Essentially, this management team section puts faces to names and proves why they deserve trust to make the opportunity a success using their skills and experience. As a rule of thumb, include biographies for all C-level roles plus department leads.

Step 6 – Map Out Operational Execution

Even if your products and market strategy seem promising on paper, investors want to understand how you‘ll coordinate the complex timing of actions required to build the company.

These execution plans for turning your idea into reality should include:

• Milestones Schedule: Key timeline for dates reaching company growth milestones. Examples may include product development stages, expanding to second office, securing patents, new vertical market launches etc.
• Physical Locations: Whether you‘ll operate a distributed workforce or leasing corporate offices and warehouses. Should link to milestones.
• Mission-Critical Partners: Any third party vendors, suppliers, agencies etc. crucial for delivering your products or services. Investors want to ensure these relationships are reliable.
• Ongoing Operations: Specific schedules and workflows for essential functions like manufacturing, QA testing, maintaining inventory, order fulfillment etc. to meet demand.

Detailing this coordination capability upfront is crucial for investors to understand how you‘ll manage moving parts required to establish real businesses infrastructure beyond just sales.

Step 7 – Develop Current and Future Financial Estimates

What smart investors most want to quantify is how quickly and profitably their money can grow in the opportunity. That’s why no business plan is complete without financial modeling.

Elements to include are:

• Startup Costs: Expected one-time purchases for initial product development, corporate formation, branding etc. even before selling.
• Income Statements: Conservative, realistic projections of multi-year revenue growth, expense ratios, and profitability. Tip: use industry average ratios as a starting point.
• Balance Sheets: Estimating asset and liability changes over time from company equity, debt issuances, inventory builds etc.
• Cash Flow Statements: Multi-year estimates of cash inflows and outflows by business function. This determines how much operating capital infusion might be needed even if profitable on paper.
• Capital Requirements: Articulating exactly how much money you require upfront and any future funding rounds from investors or lenders given financial model assumptions.
• Anticipated ROI: What annual returns investors can expect during the projected investment time horizon based on exit value opportunities.

Advisors caution entrepreneurs to be realistic with early assumptions since most investors understand revenue projections in emerging spaces involve lots of guesswork. Focus valuations on addressing clear market problems. You can always overdeliver for stakeholders if you underpromise at the start!

Step 8 – Define Your Company Mission, Vision and Values

While the preceding sections focus mainly on logistical details, many modern business plans also outline softer elements like:

• Mission Statement: A short paragraph summarizing the company’s reason for being beyond financial motivations. It reminds the founding team why they show up to work each day.
• Vision Statement: Where the company aspires to go in coming years. This is broader and more conceptual than business milestones – more akin to the legacy it strives to leave on the world related to their defined mission.
• Core Values: 4-5 guiding principles that inform daily decisions as the company scales. What behaviors does it expect from staff? What does it stand for in business practices? Conveying values builds confidence you’ll grow sustainably.

With these three pieces combined, investors better understand the heart of your organization beyond spreadsheet numbers. It sets you apart from profit-driven competitors just satisfying shareholders short-term. Think Patagonia’s mission to save the outdoors or Toms Shoes donating to impoverished communities. Defining deeper purpose matters for attracting top talent and loyal brand advocates.

Step 9: Outline How You‘ll Track Meaningful Growth Metrics

As a final section, detail how your leadership team intends to regularly review performance relative to your plan using key growth indicators. This ties results back to original projections and ensures you stay on track or can course correct.

Relevant elements could include setting quarterly targets for:

• Marketing: Web traffic, lead volume, email subscriber gains
• Sales Activity: Calls made, deals won, average deal size
• Financial: Cash runway, net revenue retention
• Customer Success: Product usage, churn rate, NPS scores

Choose 2-5 metrics per department that best indicate business health and growth. Schedule monthly reviews of each – then revisit progress against targets during quarterly planning sessions.

This creates built-in accountability to stick to activities that directly fuel expansion. It also gives investors confidence you won‘t lose focus. If needed, tie compensation and bonuses to these success markers.

Regularly Review and Revise the Strategic Plan

Your business plan provides immense initial value in focusing efforts and clarifying direction across stakeholders – but don‘t just stick it on a shelf once completed!

Treat strategic plans as living documents requiring revision every 6-12 months at minimum. Set calendar reminders accordingly. As your business grows and strategies must adapt, review the plan again to confirm it still reflects realities on the ground.

Done consistently over time, a well-structured business plan both communicated the viability of ideas to investors and guides internal activities. It‘s the blueprint laying foundation to turn entrepreneurial aspirations into game-changing success stories.

So what are you waiting for? Grab the template provided and start crafting a focused, strategic plan tailored to your venture today!

Simple Business Plan Template (2024)

Updated: May 4, 2024, 4:37pm

Table of Contents

Why business plans are vital, get your free simple business plan template, how to write an effective business plan in 6 steps, frequently asked questions.

While taking many forms and serving many purposes, they all have one thing in common: business plans help you establish your goals and define the means for achieving them. Our simple business plan template covers everything you need to consider when launching a side gig, solo operation or small business. By following this step-by-step process, you might even uncover a few alternate routes to success.

Featured Partners

ZenBusiness

$0 + State Fees

Varies By State & Package

On ZenBusiness' Website

Northwest Registered Agent

$39 + State Fees

On Northwest Registered Agent's Website

Tailor Brands

$0 + state fee + up to $50 Amazon gift card

Varies by State & Package

On Tailor Brands' Website

$0 + State Fee

On Formations' Website

Whether you’re a first-time solopreneur or a seasoned business owner, the planning process challenges you to examine the costs and tasks involved in bringing a product or service to market. The process can also help you spot new income opportunities and hone in on the most profitable business models.

Though vital, business planning doesn’t have to be a chore. Business plans for lean startups and solopreneurs can simply outline the business concept, sales proposition, target customers and sketch out a plan of action to bring the product or service to market. However, if you’re seeking startup funding or partnership opportunities, you’ll need a write a business plan that details market research, operating costs and revenue forecasting. Whichever startup category you fall into, if you’re at square one, our simple business plan template will point you down the right path.

Copy our free simple business plan template so you can fill in the blanks as we explore each element of your business plan. Need help getting your ideas flowing? You’ll also find several startup scenario examples below.

Download free template as .docx

Whether you need a quick-launch overview or an in-depth plan for investors, any business plan should cover the six key elements outlined in our free template and explained below. The main difference in starting a small business versus an investor-funded business is the market research and operational and financial details needed to support the concept.

1. Your Mission or Vision

Start by declaring a “dream statement” for your business. You can call this your executive summary, vision statement or mission. Whatever the name, the first part of your business plan summarizes your idea by answering five questions. Keep it brief, such as an elevator pitch. You’ll expand these answers in the following sections of the simple business plan template.

• What does your business do? Are you selling products, services, information or a combination?
• Where does this happen? Will you conduct business online, in-store, via mobile means or in a specific location or environment?
• Who does your business benefit? Who is your target market and ideal customer for your concept?
• Why would potential customers care? What would make your ideal customers take notice of your business?
• How do your products and/or services outshine the competition? What would make your ideal customers choose you over a competitor?

These answers come easily if you have a solid concept for your business, but don’t worry if you get stuck. Use the rest of your plan template to brainstorm ideas and tactics. You’ll quickly find these answers and possibly new directions as you explore your ideas and options.

2. Offer and Value Proposition

This is where you detail your offer, such as selling products, providing services or both, and why anyone would care. That’s the value proposition. Specifically, you’ll expand on your answers to the first and fourth bullets from your mission/vision.

As you complete this section, you might find that exploring value propositions uncovers marketable business opportunities that you hadn’t yet considered. So spend some time brainstorming the possibilities in this section.

For example, a cottage baker startup specializing in gluten-free or keto-friendly products might be a value proposition that certain audiences care deeply about. Plus, you could expand on that value proposition by offering wedding and other special-occasion cakes that incorporate gluten-free, keto-friendly and traditional cake elements that all guests can enjoy.

3. Audience and Ideal Customer

Here is where you explore bullet point number three, who your business will benefit. Identifying your ideal customer and exploring a broader audience for your goods or services is essential in defining your sales and marketing strategies, plus it helps fine-tune what you offer.

There are many ways to research potential audiences, but a shortcut is to simply identify a problem that people have that your product or service can solve. If you start from the position of being a problem solver, it’s easy to define your audience and describe the wants and needs of your ideal customer for marketing efforts.

Using the cottage baker startup example, a problem people might have is finding fresh-baked gluten-free or keto-friendly sweets. Examining the wants and needs of these people might reveal a target audience that is health-conscious or possibly dealing with health issues and willing to spend more for hard-to-find items.

However, it’s essential to have a customer base that can support your business. You can be too specialized. For example, our baker startup can attract a broader audience and boost revenue by offering a wider selection of traditional baked goods alongside its gluten-free and keto-focused specialties.

4. Revenue Streams, Sales Channels and Marketing

Thanks to our internet-driven economy, startups have many revenue opportunities and can connect with target audiences through various channels. Revenue streams and sales channels also serve as marketing vehicles, so you can cover all three in this section.

Revenue Streams

Revenue streams are the many ways you can make money in your business. In your plan template, list how you’ll make money upon launch, plus include ideas for future expansion. The income possibilities just might surprise you.

For example, our cottage baker startup might consider these revenue streams:

• Product sales : Online, pop-up shops , wholesale and (future) in-store sales
• Affiliate income : Monetize blog and social media posts with affiliate links
• Advertising income : Reserve website space for advertising
• E-book sales : (future) Publish recipe e-books targeting gluten-free and keto-friendly dessert niches
• Video income : (future) Monetize a YouTube channel featuring how-to videos for the gluten-free and keto-friendly dessert niches
• Webinars and online classes : (future) Monetize coaching-style webinars and online classes covering specialty baking tips and techniques
• Members-only content : (future) Monetize a members-only section of the website for specialty content to complement webinars and online classes
• Franchise : (future) Monetize a specialty cottage bakery concept and sell to franchise entrepreneurs

Sales Channels

Sales channels put your revenue streams into action. This section also answers the “where will this happen” question in the second bullet of your vision.

The product sales channels for our cottage bakery example can include:

• Mobile point-of-sale (POS) : A mobile platform such as Shopify or Square POS for managing in-person sales at local farmers’ markets, fairs and festivals
• E-commerce platform : An online store such as Shopify, Square or WooCommerce for online retail sales and wholesale sales orders
• Social media channels : Facebook, Instagram and Pinterest shoppable posts and pins for online sales via social media channels
• Brick-and-mortar location : For in-store sales , once the business has grown to a point that it can support a physical location

Channels that support other income streams might include:

• Affiliate income : Blog section on the e-commerce website and affiliate partner accounts
• Advertising income : Reserved advertising spaces on the e-commerce website
• E-book sales : Amazon e-book sales via Amazon Kindle Direct Publishing
• Video income : YouTube channel with ad monetization
• Webinars and online classes : Online class and webinar platforms that support member accounts, recordings and playback
• Members-only content : Password-protected website content using membership apps such as MemberPress

Nowadays, the line between marketing and sales channels is blurred. Social media outlets, e-books, websites, blogs and videos serve as both marketing tools and income opportunities. Since most are free and those with advertising options are extremely economical, these are ideal marketing outlets for lean startups.

However, many businesses still find value in traditional advertising such as local radio, television, direct mail, newspapers and magazines. You can include these advertising costs in your simple business plan template to help build a marketing plan and budget.

5. Structure, Suppliers and Operations

This section of your simple business plan template explores how to structure and operate your business. Details include the type of business organization your startup will take, roles and responsibilities, supplier logistics and day-to-day operations. Also, include any certifications or permits needed to launch your enterprise in this section.

Our cottage baker example might use a structure and startup plan such as this:

• Business structure : Sole proprietorship with a “doing business as” (DBA) .
• Permits and certifications : County-issued food handling permit and state cottage food certification for home-based food production. Option, check into certified commercial kitchen rentals.
• Roles and responsibilities : Solopreneur, all roles and responsibilities with the owner.
• Supply chain : Bulk ingredients and food packaging via Sam’s Club, Costco, Amazon Prime with annual membership costs. Uline for shipping supplies; no membership needed.
• Day-to-day operations : Source ingredients and bake three days per week to fulfill local and online orders. Reserve time for specialty sales, wholesale partner orders and market events as needed. Ship online orders on alternating days. Update website and create marketing and affiliate blog posts on non-shipping days.

Start A Limited Liability Company Online Today with ZenBusiness

Click to get started.

6. Financial Forecasts

Your final task is to list forecasted business startup and ongoing costs and profit projections in your simple business plan template. Thanks to free business tools such as Square and free marketing on social media, lean startups can launch with few upfront costs. In many cases, cost of goods, shipping and packaging, business permits and printing for business cards are your only out-of-pocket expenses.

Cost Forecast

Our cottage baker’s forecasted lean startup costs might include:

Gross Profit Projections

This helps you determine the retail prices and sales volume required to keep your business running and, hopefully, earn income for yourself. Use product research to spot target retail prices for your goods, then subtract your cost of goods, such as hourly rate, raw goods and supplier costs. The total amount is your gross profit per item or service.

Here are some examples of projected gross profits for our cottage baker:

Bottom Line

Putting careful thought and detail in a business plan is always beneficial, but don’t get so bogged down in planning that you never hit the start button to launch your business . Also, remember that business plans aren’t set in stone. Markets, audiences and technologies change, and so will your goals and means of achieving them. Think of your business plan as a living document and regularly revisit, expand and restructure it as market opportunities and business growth demand.

Is there a template for a business plan?

You can copy our free business plan template and fill in the blanks or customize it in Google Docs, Microsoft Word or another word processing app. This free business plan template includes the six key elements that any entrepreneur needs to consider when launching a new business.

What does a simple business plan include?

A simple business plan is a one- to two-page overview covering six key elements that any budding entrepreneur needs to consider when launching a startup. These include your vision or mission, product or service offering, target audience, revenue streams and sales channels, structure and operations, and financial forecasts.

How can I create a free business plan template?

Start with our free business plan template that covers the six essential elements of a startup. Once downloaded, you can edit this document in Google Docs or another word processing app and add new sections or subsections to your plan template to meet your specific business plan needs.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

• Best LLC Services
• Best Registered Agent Services
• Best Trademark Registration Services
• Top LegalZoom Competitors
• Best Business Loans
• Best Business Plan Software
• ZenBusiness Review
• LegalZoom LLC Review
• Northwest Registered Agent Review
• Rocket Lawyer Review
• Inc. Authority Review
• Rocket Lawyer vs. LegalZoom
• Bizee Review (Formerly Incfile)
• Swyft Filings Review
• Harbor Compliance Review
• Sole Proprietorship vs. LLC
• LLC vs. Corporation
• LLC vs. S Corp
• LLP vs. LLC
• DBA vs. LLC
• LegalZoom vs. Incfile
• LegalZoom vs. ZenBusiness
• LegalZoom vs. Rocket Lawyer
• ZenBusiness vs. Incfile
• How To Start A Business
• How to Set Up an LLC
• How to Get a Business License
• LLC Operating Agreement Template
• 501(c)(3) Application Guide
• What is a Business License?
• What is an LLC?
• What is an S Corp?
• What is a C Corp?
• What is a DBA?
• What is a Sole Proprietorship?
• What is a Registered Agent?
• How to Dissolve an LLC
• How to File a DBA
• What Are Articles Of Incorporation?
• Types Of Business Ownership

Next Up In Company Formation

• Best Online Legal Services
• How To Write A Business Plan
• Member-Managed LLC Vs. Manager-Managed LLC
• Starting An S-Corp
• LLC Vs. C-Corp
• How Much Does It Cost To Start An LLC?

What Is SNMP? Simple Network Management Protocol Explained

What Is A Single-Member LLC? Definition, Pros And Cons

What Is Penetration Testing? Definition & Best Practices

What Is Network Access Control (NAC)?

What Is Network Segmentation?

How To Start A Business In Louisiana (2024 Guide)

Krista Fabregas is a seasoned eCommerce and online content pro sharing more than 20 years of hands-on know-how with those looking to launch and grow tech-forward businesses. Her expertise includes eCommerce startups and growth, SMB operations and logistics, website platforms, payment systems, side-gig and affiliate income, and multichannel marketing. Krista holds a bachelor's degree in English from The University of Texas at Austin and held senior positions at NASA, a Fortune 100 company, and several online startups.

Resource Library

Introduction to customer analysis.

A customer analysis (or customer profile) is a critical section of a company’s business plan or marketing plan. It identifies target customers, ascertains the needs of these customers, and then specifies how the product satisfies these needs.

Customer analysis can be broken down into a behavioral profile (why your product matches a customer’s lifestyle) and a demographic profile (describing a customer’s demographic attributes).

A customer profile is a simple tool that can help business better understand current and potential customers, so they can increase sales and grow their business. Customer profiles are a collection of information about customers that help determine why people buy or don’t buy a product. Customer profiles can also help develop targeted marketing plans and help ensure that products meet the needs of their intended audience.

Behavioral Analysis (Customer Buying Criteria)

A behavioral analysis of customers (or psychographic profile) seeks to identify and weigh the relative importance of factors consumers use to choose one product over another. These factors, sometimes called buying criteria, are key to understanding the reasons that customers choose to buy your product (or service) versus the products offered by your competitors. The four major criteria that customers use to distinguish competing products are: price, quality, convenience andprestige.

In consumer transactions, price and quality tend to be the dominant factors. However with business-to-business (B2B) transactions (also called industrial marketing), service issues such as reliability, payment terms, and delivery schedule become much more important. The sales transaction in an industrial marketing scenario also differs from consumer marketing in that the purchase decision is typically made by a group of people instead of one person, and the selling process can be much more complex (including stages such as: request for bid, proposal preparation and contract negotiations).

By identifying customer needs through market research and analysis, companies can develop a clear and concise value proposition which reflects the tangible benefits that customers can expect from the company’s products. And once the primary buying criteria have been identified, marketing efforts can influence the customer’s perception of the product along the four main dimensions (price, quality, convenience and prestige), relative to the competition’s product.  

Behavioral Analysis (Purchase Process and Patterns)

Occasionally, customer behavior analysis requires a more in-depth understanding of the actual decision-making process of the customer purchase. This may be especially true in an industrial marketing scenario. Examples of purchase process questions to be answered here include:

* What steps are involved in the decision-making process? * What sources of information are sought? * What is a timeline for a purchase (e.g., impulse vs. extended decision-making)? * Will the customer consult others in their organization/family before making a decision? * Who has the authority to make the final decision? * Will the customer seek multiple bids? * Will the product/service require significant modifications?

Behavior profiles can also focus on actions, such as: which types of items were purchased, how frequently items are purchased, the average transaction value, or which items were purchased in conjunction with other items. To understand the buying habits and patterns of your customers, answer the following questions:

* Reason/occasion for purchase? * Number of times they’ll purchase? * Timetable of purchase, every week, month, quarter, etc.? * Amount of product/service purchased? * How long to make a decision to purchase? * Where does the customer purchase and/or use the product/service?

Customer Demographics

 The second major component in customer analysis is identifying target market segments that are predisposed to preferring your products over those of your competitors. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A marketing program aimed at individual segments needs to understand and capitalize on the group’s differences and use them strategically in all advertising campaigns. 

Gender, age, ethnicity, geography and income are all market-segmenting criteria based on demographics.  

Typical questions to ask when determining the demographics of the target market include: * What is the age range of the customer who wants my product or service?  * Which gender would be most interested in this product or service?  * What is the income level of my potential customers?  * What level of education do they have?  * What is their marital or family status: Are they married, single, divorced? Do they have kids, grandkids? * What are the hobbies of my target customers?

The target market segments are specified by demographic factors: age, income, education, ethnicity, geography, etc. Then by having a well defined set of demographic factors, marketing will be able to identify the best channels to reach these specific demographic segments. 

Customer Analysis Example

Customer Analysis References

Market Analysis {U.S. Small Business Administration (SBA) Website’s content on Marketing Analysis} http://www.sba.gov/content/market-analysis

“Analyzing Customers in Your Business Plan” 2011 {Growthink, Inc.} http://www.growthink.com/businessplan/help-center/analyzing-customers-your-business-plan

Related Resources

Keyword Advertising

A guide to keyword advertising: online advertising that uses search engine keywords to trigger contextualized ads.

Google AdSense

A guide to Google AdSense: a free, simple way for website publishers to earn money by displaying targeted Google ads on their websites.

Online Advertising Networks

Ad networks are primarily involved in selling space for online ads. This online advertising inventory comes in many different forms, including space on websites, in RSS feeds in e-mails, and on other sources.

SBDC Intel™

Subscribe for updates, events and opportunities to network..

Subscribe for updates, events, and opportunities to network.

Get practical resources, important updates, and a calendar of online training, events, and more delivered to your inbox.

• First Name *
• Last Name *

• Search Search Please fill out this field.

What Is a Target Market?

• Defining a Product's Target Market
• 4 Target Markets

Why Are Target Markets Important?

What are market segments, target market and product sales.

• Target Market FAQs

The Bottom Line

• Marketing Essentials

Target Market: Definition, Purpose, Examples, Market Segments

Investopedia / Mira Norian

A target market is a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics, such as age, income, and lifestyle.

Identifying the target market is a key part of the decision-making process when a company designs, packages, and advertises its product.

Key Takeaways

• A target market is a group of customers with shared demographics who have been identified as the most likely buyers of a company's product or service.
• Identifying the target market is important in the development and implementation of a successful marketing plan for any new product.
• The target market also can inform a product's specifications, packaging, and distribution.

How Do I Define My Product's Target Market?

Part of creating a new product is envisioning the consumers who will buy it.

A new product must satisfy a need or solve a problem—or both. That need or problem is probably not universal (unless it reaches the level of indoor plumbing). More likely, it is needed by a subset of consumers, such as environmentally-conscious vegetarians, science nerds, or outdoor enthusiasts. It may appeal to a teenager or a middle-aged professional, a bargain-hunter or a snob.

Envisioning your likely target market is part of the process of creating and refining a product and informs decisions about its packaging, marketing, and placement.

What Are the 4 Target Markets?

Market researchers use activity, interest, and opinion (AIO) surveys to construct psychographic profiles of their target customers. Marketing professionals divide consumers into four major segments:

Demographic : These are the main characteristics that define your target market. Everyone can be identified as belonging to a specific age group, income level, gender, occupation, and education level.

Geographic : This segment is increasingly relevant in the era of globalization. Regional preferences need to be taken into account.

Psychographic : This segment goes beyond the basics of demographics to consider lifestyle, attitudes, interests, and values.

Behavioral : This is the one segment that relies on research into the decisions of a company's current customers. New products may be introduced based on research into the proven appeal of past products.

What Is an Example of a Target Market?

Each of the four target markets can be used to consider who the customer is for a new product.

For example, there are an estimated 49,773 Italian restaurants in the U.S. Clearly, they have enormous appeal.

But a corner pizza joint might appeal mostly—although by no means entirely—to a younger and more budget-conscious consumer, while an old-fashioned white tablecloth place might be frequented by older individuals and families who live in the neighborhood. Meanwhile, a newer venue down the street might cater to an upscale and trend-conscious crowd who will travel a good distance for the restaurant's innovative menu and fancy wine list.

In each successful case, a savvy business person has consciously considered the ideal target market for the restaurant and has tweaked the menu, decor, and advertising strategy to appeal to that market.

Few products today are designed to appeal to absolutely everyone. The Aveda Rosemary Mint Bath Bar, available for $26 per bar at Aveda beauty stores, is marketed to the upscale and eco-conscious woman who will pay extra for quality. Clé de Peau Beauté Synactif Soap retails for $110 a bar and is marketed to wealthy, fashion-conscious women who are willing to pay a premium for a luxury product. An eight-pack of Dial soap costs $11.49 at CVS, and it is known to get the job done.

Part of the success of selling a good or service is knowing whom it will appeal to and who will ultimately buy it. Its user base can grow over time through additional marketing, advertising, and word of mouth.

That's why businesses spend a lot of time and money in defining their initial target markets, and why they follow through with special offers, social media campaigns , and specialized advertising.

Dividing a target market into segments means grouping the population according to the key characteristics that drive their spending decisions. Some of these are gender, age, income level, race, education level, religion, marital status, and geographic location.

Consumers with the same demographics tend to value the same products and services, which is why narrowing down the segments is one of the most important factors in determining target markets.

For example, people who fall into a higher income bracket may be more likely to buy specialty coffee from Starbucks instead of relying on Dunkin' Donuts. The parent companies of both of these brands need to know that in order to decide where to locate their stores, where to stock their products, and where to advertise their brand.

A business may have more than one target market—a primary target market, which is the main focus, and a secondary target market, which is smaller but has growth potential. Toy commercials are targeted directly to children, and their parents are the secondary market.

Identifying the target market is an essential part of a product development plan, along with manufacturing, distribution, price, and promotion planning. The target market determines significant factors about the product itself. A company may tweak certain aspects of a product, such as the amount of sugar in a soft drink or the style of the packaging, so that it appeals more to consumers in its target group.

As a company’s product sales grow, it may expand its target market internationally. International expansion allows a company to reach a broader subset of its target market in other regions of the world.

In addition to international expansion, a company may find its domestic target market expands as its products gain more traction in the marketplace. Expanding a product's target market is a revenue opportunity worth pursuing.

How Detailed Should a Target Market Be?

It depends. Broadly speaking, a product may be designed for a mass market or a niche market, and a niche market can be a very small group indeed, especially in a product's early introductory phase.

Some carbonated beverages aim for a practically universal market. Coca-Cola had to branch out to 200 markets abroad to continue growing its customer base. Gatorade is owned by Pepsi Cola, but the brand is positioned as a drink for athletes. The soda brand Poppi, which is branded as a healthy, sparkling, prebiotic soda with real fruit juice and gut health and immunity benefits, is clearly aimed at a younger, healthier, and more trend-conscious target market.

Consider a casual apparel company that is working to build its distribution channels abroad. In order to determine where its apparel will be most successful, it conducts some research to identify its primary target market. It discovers that the people most likely to buy its products are middle-class women between the ages of 35 and 55 who live in cold climates.

It's reasonable for the company to focus its advertising efforts on northern European websites that have a strong female audience. But first, the company may consider how its apparel can be most attractive to that target market. It may revise its styles and colors and tweak its advertising strategy to optimize its appeal to this new prospective market.

What Is the Purpose of a Target Market?

A target market defines a product as well as vice versa. Once a target market is identified, it can influence a product's design, packaging, price, promotion, and distribution. A product aimed at men won't be packaged in pink plastic. A luxury cosmetic won't be sold in a pharmacy. An expensive pair of shoes comes with a branded cloth drawstring bag as well as a shoebox. All of those factors are signals to the target audience that they have found the right product.

Identifying the target market is part of the process of creating and refining a new product.

A target market can be translated into a profile of the consumer to whom a product is most likely to appeal. The profile considers four main characteristics of that person: demographic, geographic, psychographic, and behavioral. These characteristics help determine who might purchase a company's product.

IBISWorld. " Italian Restaurants in the U.S. - Number of Businesses ."

Aveda. " Rosemary Mint Bath Bar ."

Cle de Peau. " Synactif Soap ."

CVS. " Dial Antibacterial Deodorant Bar Soap, White ."

Coca-Cola Australia. " Coca-Cola: From Start-Up to Global Enterprise ."

Pepsico Partners. " Gatorade ."

DrinkPoppi. " Home ."

• Terms of Service
• Editorial Policy
• Privacy Policy

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy .

For inquiries related to this message please contact our support team and provide the reference ID below.