The target audience section of the business plan is the one crucial element that you must compose with the utmost care. Knowing your audience is imperative if you wish to succeed in your business endeavors; from the small mom-and-pop to the gigantic mega-corporation, your success begins and ends with your understanding of your audience and their behaviors. After all, no matter how amazing your service or product might appear in the abstract, without the appropriate audience it will remain, quite simply, in the abstract.
What is a Target Market?
A target market is basically the groups and individuals to whom you will be offering your products/services. In other words, the people who will give your business money so it remains a business. In reality, your potential customers will not be limited to your target market, but your target audience is the most efficient means of drumming up business, that is, who will be in most need of your business. This may seem like an easy task to develop your target market, but don’t be fooled into a false sense of security. Many companies fail because they either make their target audience too broad, or else stray from the fulfillment of their needs.
Borders Books and Music (which I still miss!) lived the consequences of straying from your target market’s needs by failing to see the market’s direction, in this case online sales. Not even the strange non-merger with Amazon did not help. Unlike their biggest competitor at the time of their bankruptcy, Barnes & Nobles, Borders was quite simply unprepared to meet the changing purchasing habits of its customer base and sales predictably dropped below sustainability level.
Defining the Target Market
In order to properly define your target audience, you need to ask yourself a series of questions regarding your potential customers. What gender are they? How old are they? Where do they live? What is their financial situation? How do they spend their money? What influences their purchasing decisions? How do they like to shop? How large is their demographic? What do they do in their spare time? Every one of these questions that you can answer, you will get that much closer to defining a lucrative target audience.
The process of defining a target audience is usually an evolving process that works in tandem with your business’ development, as you will likely alter both your audience and your business according to changing consumer patters. That is to say, you will most likely know what type of business you want to get into before studying the market, however you will specialize the direction of your business during the development of your ‘Target Market’ section of your business plan.
A great example of a company that has done a successful job of servicing a target audience is 5-hour energy. As most competitors target a younger crowd, the owners of 5-hour energy noticed a niche market for energy drinks: the middle aged professional class. The market was virtually untapped and as a result of defining a narrow target audience, they have seen incredible growth despite their predecessor’s failures.
Operationalizing the Target Market
Once the Target Market section is complete, develop a closely-controlled experiment and test your product/service. The controls should be simple: assume an ideal transaction (your homemade jam beautifully packaged at an exclusive farmer’s market) and set it against a not-so-ideal one (lost in supermarket shelves surrounded by mass-produced competitors). Then try to make it happen. Strike a deal with retailers at both places, asking for their cooperation in promoting local businesses (bring a draft of the business plan, it’ll help!). Then, observe what happens, take notes, ask questions. Tally your results. If you still need more data, then get focus groups. By offering deep discounts, you can barter for comments that will help you determine your understanding of your target audience’s needs.
Ultimately, an approach that combines research, observation, and constant refinement will allow you to keep your finger on your target audience’s pulse. Remember that, no matter if you’re a blogger or multinational corporation, they are the ones who buy what you have to sell. For them to do that, you need to know what they want and you need to get it to them. Easy as pie.
Dave Landry Jr. is a financial expert and small business consultant located in Southern California. He writes for several publications, including DepositAccounts and others. Feel free to contact him with any questions!
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