Business proposal

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Market Analysis

1. What do you know about your target market?

Who are your potential customers?

Where are they located?

How large is your target market?

What are the needs and wants of your target market?

What criteria do they use in making their buying decisions? Use commerce site

The description of your target market should be very specific. Are your potential

customers individual consumers, businesses or both? If your target market is

consumers, what is their demographic profile: gender, age range, income range,

education, etc? If your target market is businesses, what type are they – retail,

manufacturing, construction, etc.? Where are they located? What size are they in

terms of employees?

Be realistic in estimating your geographic market area and the number of potential

customers. If you own a neighborhood convenience store, for example, you will

attract customers from a limited geographic area. However, if you operate a

specialty furniture store, you will draw customers from a much larger geographic

area. Businesses that have an Internet presence have the potential for vast

geographic coverage.

If your target market is individuals, demographic data from the U.S. Census can

help you in estimating the number of potential customers in your geographic

market area. Consult www.census.gov.

The most critical step is to understand your customer’s needs and to meet those

more effectively than the competition. Constantly focus on the customer and what

he/she needs and wants to buy, not what products or services you need or want to

sell. You must put your personal preferences aside!

Examples of customer needs that you might serve include convenience, education,

recreation, safety and concern about personal health or appearance. Businesses

that meet the customer need for convenience, for example – very popular in our

hectic world – include fast food restaurants, drive-through car washes, errand

services and same-day photo processing or dry cleaning services.

Customer needs and wants are related but not synonymous. The wants are the

customer’s personal desires for satisfying their needs. For example, all adults

have a need for recreation, but if three individuals each had $20 to meet their

need…

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One may want to go out to dinner.

One may want to go to a movie.

One may want to go shopping.

Also, you must determine what criteria are important to your target market in

making buying decisions. Specifically ask potential customers when you do your

market research; don’t make assumptions!

A common mistake is to assume that price is the key factor used by potential

customers in making buying decisions, but this is often not true. For example,

when shopping for specialty services, such as child care or auto repair, customers

are typically more concerned about reputation, quality and reliability.

In general, learn as much as you can about your target market. The better you

understand your potential customers, the better your chances of success in

meeting their needs more effectively than your competition.

2. What do you know about your competition?

Who are they?

Where are they?

What products/services do they offer?

How are their products/services priced?

What are their strengths and weaknesses?

How do they promote their businesses?

In identifying your competition, keep in mind two key points:

Your competition may be located outside your geographic market area.

For example, a women’s clothing business competes with similar local businesses

plus Internet businesses, mail order companies and out-of-town factory outlets.

Your competition is any business that serves the same customer need for the

same target market.

For example, a miniature golf course competes with other courses plus other

businesses that serve the customer need for recreation for adults and children in

the same geographic market area. Therefore, competition may include movie

theaters, bowling alleys, roller skating rinks, etc.

The competition’s strengths and weaknesses are also known as competitive

advantages and competitive disadvantages. A competitive advantage is any

characteristic of the product or service that makes it more appealing to potential

customers than what the competition is offering. Conversely, a competitive

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disadvantage is a characteristic that makes the product or service less appealing.

Realistically, every business has both competitive advantages and disadvantages –

including yours!

Examples of competitive advantages include quality, variety, uniqueness,

convenience, performance and price. Examples of competitive disadvantages

include lack of name recognition, poor location and limited distribution.

Again, learn as much as possible about your competition to improve your chances

of success. Review the suggestions for researching your potential competitors on

page 33.

3. Unmet Customer need: In your line of business in your geographic market area?

Your goal is to find an unsatisfied customer need in your line of business in the

geographic area that you want to serve. This is called a market niche.

If you discover that the customer need is being adequately met by the existing

competition, you can consider a different line of business and/or a different

location, or you may decide against self-employment.

4. Competitive Advantage: What will make your business successful?

Based on what you know about your target market and the competition, you

choose a position in the competitive environment. This decision-making process

is called positioning.

To attract customers, you must offer them a reason to choose your business to

meet their needs. This reason is called your competitive advantage. Be aware that

you may have more than one competitive advantage. For example, you might

position your business to attract customers based on both your convenient

location and unique services.

EXAMPLE:

Glenna Brownell is interested in starting a retail store that offers used household

goods, such as furniture, dinnerware and accessories. Based on research, Glenna

determines that quality and price are key factors used by her target market in

making their buying decisions. She researches the competition and learns that

there are six antique stores in her geographic market area that offer high-quality

used merchandise at high-end prices. Also, she finds three competitors – thrift

stores, flea markets and garage sales – that offer low-quality, low-priced goods.

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Based on what she knows about her target market and competition, Glenna

positions her business to meet the customer need for medium-quality, medium-

priced merchandise. This is her market niche, or unique place in the competitive

environment. Therefore, her competitive advantages are her niche strategy plus

the location she chooses near the successful antique stores that are investing time,

effort and money to attract her target market.

Try to avoid these common errors in positioning your business:

• Not choosing a competitive advantage at all

• Don’t assume If I build it, they will come. You must provide motivation by offering your potential customers an appealing competitive advantage.

• Basing your decisions about your competitive advantages on assumptions about your target market and competition rather than solid research

• Not being honest and realistic about the competitive advantages and disadvantages of your own business

• Choosing an inappropriate competitive advantage

Your decision should be based on two considerations: (1) what competitive

advantages are important to your potential customers and (2) what competitive

advantages are being offered by your competitors. Look for a gap or niche.

• Failing to aggressively and consistently promote your competitive advantages to your potential customers in all of your marketing messages – business card,

brochures, website, ads, etc.