Target Market Analysis: What It Is and How To Make One
Effective sales involves companies knowing their customer's wants and needs. A target market analysis is a useful tool for establishing how to reach potential customers. Crafting a target market analysis requires research and detailed study and reporting.
In this article, we explain what a target market analysis is, describe what to include in one, provide examples and outline steps for conducting a target market analysis.
What is a target market analysis?
A target market analysis is an assessment of how your product or service fits into a specific market and where it will gain the most traction with customers. Target market analyses help businesses establish strategies for effective marketing and sales techniques. A company's target market is its core customer base or the demographics of customers most likely to buy its product or service.
A target market analysis provides a high-level perspective of the overall business field and usually outlines opportunities and restraining factors for companies hoping to enter that market. Benefits of a target market analysis include:
Identifying the most and least valuable markets. Target market analyses help determine which markets are worth pursuing and which are not.
Developing buyer personas. Often, creating an "ideal" buyer is part of the target market analysis for businesses to identify the specifics of their target demographic accurately.
Finding gaps in the market to fill. A thorough market analysis might reveal untapped areas of the market that your company, product or service can accommodate.
Assessing the viability of a product or service. Market testing can be a valuable part of a target market analysis, particularly for a brand new product or service. Feedback from potential customers in your target market can help determine how successful your product will be.
Finding new markets. With surveys or other research methods, you may find a new market interested in your product.
Improving business strategy. With the information garnered from the target market analysis, you can create a strong business strategy using data to support your decisions.
Related: How To Identify a Target Market
What to include in a target market analysis
Your company's target market analysis can include a variety of processes, studies and reports depending on your end goals. Generally, you'll want to include the following in your target market analysis:
Industry description and outlook
Market test results
Industry description and outlook
Identify detailed information, including statistics, about your industry. Include information about size, growth potential, trends and outlook. Compile this information and review it closely as it will serve as the data source for many of your decisions.
Your target market is the demographic you're trying to reach with your product or service. Identifying these factors is key:
Additionally, consider these factors of the market as a whole:
While your product might appeal to people outside your target demographic, such as age or gender, an analysis can show that targeting certain parameters will have a higher return on your marketing investment.
Related: How Do I Find My Target Market?
Market testing and results
Perform market analysis through surveys or product testing to determine how your target market responds to your product. Once you've completed the testing, compile the results in a report to include in your actual target market analysis document.
Lead time refers to the time it will take for your company to process and ship the product and for the customer to receive it once ordered. Often companies determine different lead times for individual orders versus bulk orders.
Identify your competing businesses. Determine what they're doing to engage the market and advertise their product or service. Create a report identifying how your company can outperform your competitors and what challenges you might face.
Target market analysis examples
A full target market analysis is a multi-page document complete with research, sources, charts and graphs explaining and supporting why a company's product or service will succeed in the marketplace. One of the most valuable aspects of the target market analysis is the description of the target market customer. Review these examples to see the specificity of the target market.
Example 1: Fresh dog food
Target market for Delivered Doggie Food:
Age: 22 - 39
Income: $42,000+ annually
Lifestyle: Active millennial, health-conscious, works full time, perhaps has no children
Geographical location: Cities and suburbs
Preferences: High quality dog food and treats, cares about natural and organic products, wants to keep their dogs healthy
Example 2: Plant fertilizer
Target market for Growing Garden All-Purpose Plant Fertilizer:
Age: 50 and older
Income: $35,000+ annually
Lifestyle: Retired or working part time, has leisure time, married or single, homeowner
Geographical location: Rural or suburban areas
Preferences: Organization and routine, nature, sustainability
How to conduct a target market analysis
Conduct your own market analysis to determine your target market using these steps:
Conduct market research
Identify your overall market
Segment your target demographics
Select your ideal market
Create the document
1. Conduct market research
Research your industry and ideal market. For industry, consider factors like overall outlook, trends and areas of potential. Research your competitors and create charts, graphs and reports to add to your overall target market analysis summarizing the data you found.
2. Identify your overall market
For your total ideal market, determine which demographics would enjoy your product or service and write up detailed descriptions for each. Include every demographic feature or group you think might be interested in what your company offers.
3. Segment your target demographics
Separate your overall market into distinct segments. You'll likely discover several disparate groups to which you could market your product or service. Run product testing and send surveys to members of these groups to determine who has the most interest in your product.
4. Select your ideal market
From these segments—and based on your product testing and survey information—decide which target market you'll focus on delivering your product to. This segment will most likely be the demographic that responded the most positively in your testing and surveys.
5. Make projections
Project lead time, potential sales, marketing costs and any other preliminary sales tactics you can prepare. Write a report clearly defining all projections.
6. Create the document
Finally, take all the information created and written during the course of the analysis and compile it into a single document. Add any resources, additional findings or final thoughts as needed.
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