Business Planning: Analyze Your Market Situation
Your business marketing plan should always include a market analysis, or snapshot of your marketing arena. The market analysis presents what you know about the size, dynamics, and trends of your market, what you face in terms of competition, and what critical issues will affect your ability to sell your products — for better or worse.
MBA-types call this overview a situation analysis because, to sound like former baseball player Yogi Berra, it analyzes the situation you face as you launch your marketing plan.
Anyone who reads your marketing plan — or the summary of it in your business plan — wants to know that your ideas are grounded in reality. So start with a fact-packed summary of the market your business serves, including who will buy your offering and whether the number of prospects are growing, holding steady, or shrinking. Make sure to cover the following points:
Your customer description: Define your customers in geographic terms (where they live), demographic terms (facts such as age, gender, ethnicity, education level, marital status, income level, and household size), and psychographic terms (lifestyle characteristics, including attitudes, beliefs, and behaviors that affect customer-purchasing patterns).
How customers divide into market segments: Market segments are comprised of groups of consumers that share similar characteristics. For example, women may buy from your company very differently than men do, and buyers from one geographic area may have different product interests than customers from another. Midweek customers may be decidedly different than weekend customers.
Here are a few ways that companies may divide their consumers into market segments:
Companies selling to consumers may segment customers by gender, age, income, location, or buying habits.
Business-to-business companies may segment clients by size or type of company, nature of client relationship (contract business versus one-time purchase, for example), or product interest.
Companies using a number of distribution channels (retail outlets, direct-mail, and e-commerce, for example) may find that customers arriving via specific channels share similarities that make them very different — in terms of product interest and buying patterns — from customers that arrive via other channels.
An accounting firm may segment its market into personal and business clients, but beyond those categories, the firm may segment by services offered — for example, tax returns, bookkeeping and accounting services, management consulting, estate tax planning, payroll services, and business start-up or sale consulting.
The firm also may segment by size of client served — for example, small businesses, mid-size organizations, or major corporations. By knowing its market segments, the firm can refine its products, target its efforts, and promote specific offerings that appeal to each group.
The size of your market and the growth trends you see: Indicate size and growth information for your overall market and for the various market segments your company serves. For example, if small businesses represent a sizeable segment of your clientele, include facts about the number and growth trends of small businesses in your market area.
Don’t base your projections on a hunch. Cite experts, refer to census data, excerpt industry analyses, present findings compiled by media organizations that serve your market area, or show a recap of your sales history. Offering proof for what you say about market size and business momentum is important because this proof is the claim on which you stake your marketing plan — and budget.