Every effective business plan begins with a clearly defined view of the most ideal buyer. Profiling who they are, what they care about, why they buy, and what benefit your offering provides will allow you to craft a message that suits their needs and sets your new business apart from the others in the market.
Defining and understanding more than one specific target customer is usually better than defining only one very vague target.
The Business Model: Business or Consumers
Commonly businesses start to segment their target customers by identifying whether the business is selling to consumers (Business to Consumer or B2C model) or to other businesses (Business to Business or B2B model).
Examples of Business to Consumer models include most retail shops, recreation and entertainment facilities, food service and household related services and goods.
Examples of Business to Business models include professional and technical services, such as engineers and accountants; suppliers providing materials for manufacturing; tool, machinery and automation businesses; or marketing firms.
People make purchase decisions in both Business to Consumer and Business to Business relationships, however what motivates the buying decision might differ. A consumer buyer might care about how the product makes them feel, how it makes them look, or if it makes their lives easier. A business buyer might be motivated by a job related mandate, an opportunity to look good to their boss, because the business will be more profitable, or that the purchase solves a specific and pressing problem.
Defining Target Markets
Who they are – Demographics
A consumer can be defined by their income, level of education, native or preferred language, location of home or work, number of children, marital status, religion, gender, ethnicity, and any number of additional factors. The specific factors related to a business plan will differ depending on the products and services being offered.
A business can be defined by its sector, number of employees, location, facility type revenue, ownership type, etc.
What they care about – Psychographics
Consumers can be motivated by what they think, how they feel, their values and their preferences. Understanding these will allow an entrepreneur to reach their buyers with messages and tactics that “speak the right language” and solve a problem that the buyer relates to.
Understanding Value Propositions
A value proposition describes why buying a product or service solves a problem or achieves something desired.
The best exercise for an entrepreneur is to look at the product from the buyer’s perspective. This outside view looking in allows the entrepreneur to focus on benefits that will appeal to the buyer. Customers don’t need to hear about the dozen things a product can do if they relate to the one problem it can solve.
Next week we will discuss how to use your target market profile to answer the second question in our series “How will you reach your customer?”