In this module you will learn how to:

• Define and understand your target market
• Understand what motivates your customers
• Define your unique value to your target audience

OVERVIEW

How many buyers are there? For the non-profits, how many people need what you’re providing? Where are they, and what do they care about? What do they read, what do they watch, what do they listen to? You need to know the market for your business.

DEFINITION

A market analysis looks at the potential market, its size, its growth, its characteristics, and its trends, then breaks the market down into segments, which leads to target marketing — marketing to a specific market segment, with a specific strategy for that segment.

(Optional Reading)

• The Plan-As-You-Go Business Plan, Chapter 5, Pages 210-218

The plan outline for this assignment has been customized using Business Plan Pro. The graph shows what portion of your plan outline you will be working on. Before starting the exercise, it is recommended that you create a copy of the Business Plan Pro file first. Follow these steps to get started:

• Download MinimumBusinessPlan.bpdx
• Open in Business Plan Pro
• Use the “Save as” command to save a copy of the file as yourname_businessplan.bpdx
  
• Follow the instructions to complete the exercise to your business plan file

NOTE: Saving under a different file name preserves the original file, in case you decide to create a second business plan using this customized outline.

Each topic should include a paragraph describing the key points for that topic:

Summary: The main chapter level topic should be a summary of its sub-topics. If you finish the sub-topics first, it will be easier to create a summary paragraph of the most important points.

Ideal target: Create a profile of one ideal target customer (or organization). Use your imagination. Describe the ideal target customer including why he or she buys, what his or her problem is, how old, economic status, family status, favorite media, where you find this person to send a message.  A picture is a good idea.

Market segmentation: most markets divide into meaningful groups. For a local restaurant, segments might include families, university students, high school students, older people. Create a table showing how the market divides into segments, as suggested by this illustration:

(Click on the illustration for a larger view)

The table is a simple spreadsheet, with projected years along the top, segment names on the side, and totals along the bottom. This isn’t a course in market research. You’re allowed to make educated guesses, as long as they make sense.

There is a detailed explanation of the table and how it shows segments, including even the Compound Average Growth Rate formula in the last column, in the online version of Hurdle: The Book on Business Planning, in the section called Your Target Market Forecast. I’ve also added specific instructions on this site.

Business Plan Pro includes a pie chart of your market analysis table. Here is an example:
(Click on the illustration for a larger view)

You can probably see how that links directly back to the present year market segmentation, the first annual column in your market forecast table.

Market needs:  For each market segment included in your strategy, explain the market needs that lead this group to buy your product or service:

• Did the need exist before the business was there?
• Are there other products or services or stores that offer different ways to satisfy this same need?
• Do you have market research related to this market need?

It is always a good idea to try to define your retail offering in terms of target market needs, so you focus not on what you have to sell, but rather on the buyer needs you satisfy. As a shoe store, for example, are you selling shoes or are you satisfying the customer needs for covered feet? Are there additional underlying needs, such as style and prestige for fashion footwear, or padding for runners, or jumping for basketball players, that relate to selling shoes? Are kids buying status with their basketball shoes?

Market trends:  Market trends could be changes in demographics, changes in customer needs, a new sense of style or fashion, or something else. It depends on what business you are in.

• What factors seem to be changing the market, or changing the business?
• What developing trends can make a difference?

Here are a few examples:

• A building supply store might note the trend toward remodeling older homes instead of buying new homes, or a trend toward more rooms in larger houses, despite smaller families, because of home offices, dens, and exercise rooms.
• A grocery store might note a trend toward Asian foods or spicier foods, or toward fresher, healthier foods, or development of a new shopping area in a different part of town.
• A credit and investment counselor might note demographic trends, such as baby boomers aging, leading to a greater need for estate planning and retirement planning.

Look to market trends as a way to get ahead of the market, to know where it is going before it gets there.

Market Growth: Ideally you cite experts: a market expert, market research firm, trade association, or credible journalist. But this isn’t a class in market research. You have only three pages total, including the table and chart, so be brief.

Competition: Mention the main competitors, and the strengths and weaknesses of main competitors. You might consider:

• Their products, pricing, reputation, management, financial position, channels of distribution, brand awareness, business development, technology, or other factors that you feel are important.
• What segment of the market do they operate in? What seems to be their strategy?
• How much do they impact your products, and what threats and opportunities do they represent?