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How to Write a Customer Analysis Section for Your Business Plan

Free Customer Analysis Template

July 12, 2024

how to write a customer analysis for business plan

A customer contributes significantly to building a winning brand.

Understanding your target consumer, their needs, the problems they face, and the way they behave assists you in creating products and services that can satisfy your customer needs.

Customer analysis is a quintessential part of your business plan. Writing it accurately will help you make informed decisions for other aspects of business planning, i.e. product development and business strategies.

So let’s get started. This blog post describes the process of creating customer analysis in a business plan and guides you with a customer persona example.

What Is Customer Analysis?

Customer analysis is an important section of your business plan offering a comprehensive and in-depth understanding of your potential customer. It is a study of their behavioral, psychological, and demographic patterns to help you make sound business decisions.

Such analysis assists in developing products and services addressing the pain points of your customers and in determining your pricing, marketing, and customer retention strategies.

Why conduct a customer analysis?

A thorough and insightful customer analysis offers a plentitude of benefits. Here are a few you should know of:

Helps optimize product development by offering insights into customer behavior, needs, and pain points.
Helps gain a competitive advantage by identifying the pain points that are unaddressed by competitors.
Helps tailor your marketing efforts to cater to specific customer segments.
Increases customer retention by giving you a thorough insight into what the customer needs and what drives their decision.

If you think of it, customer analysis forms the basis for designing your products and services, devising your marketing and sales strategies, determining your pricing point, and driving your business growth.

How to Write a Customer Analysis Section

Writing a customer analysis includes extensive research and collecting data from various sources. This data consists of qualitative and quantitative aspects which help you write an accurate customer analysis for your business plan.

Let’s now understand a step-by-step process to write your customer analysis.

Steps to create customer analysis for your business plan

1. Identify your customers

The first step of customer analysis is to identify your potential customers and collect information about their special characteristics. Such information comes in handy when you want your product and marketing strategies to align with your customers’ needs.

However, what details should you collect and how should you segment it? Well, segmenting in the following manner can help you get a headstart.

Demographic: Age, gender, income
Geographic: Location, type of area (Rural, suburban, urban)
Psychographic: Values, interests, beliefs, personality, lifestyle, social class
Technographic: Type of technology the buyer is using; tech-savviness
Behavioral: Habits, frequent actions, buying patterns
Industry (For B2B): Based on the industry a company belongs to.
Business size (For B2B): Size of the company

Customer database can help capture the above data for existing businesses. However, for additional details, you can retort to surveys and forums.

If you are a startup, conducting an audience analysis might seem impossible as you don’t have an existing customer base. Fortunately, there are numerous ways through which you can study your potential customers.

A few of them are:

Identifying who would benefit from your product/service
Analyzing your competitors to understand their target customers
Using social media to prompt potential buyers to answer questionnaires

2. Define the needs of your Customers

Now that you have identified your customers, the next step is to understand and specify their needs and challenges. This is the step where you need to go hands-on with your research.

Getting to know your customers’ needs helps you determine whether or not your product or service hits the mark.

You can adopt one of these approaches to understand the needs of your customers:

Engage directly with potential Customers

A very reliable way to get to know your customers is to simply engage with them, either in person or on a call. You can reach out to your customers using one of the following ways:

One-on-one interviews
Focus groups
Beta testing (invite users to test your products).

These techniques can help you collect adequate data for your analysis.

However, before approaching your customers, set up a systematic survey that can get you structured data for analysis. To ensure that your questionnaire isn’t just covering surface-level information but a deep interrogation of customers’ problems, use the technique of five whys .

Collect data from your customer support

Customer support is the place where you can find raw and unfiltered feedback given by your customers. Analyzing this data helps you understand the pain points of your customers.

You can further gather direct customer feedback by contacting the customers who had issues with your products. This will help you understand the pain points and gaps in your products more vividly.

Run surveys and mention statistics

Talking to your customers helps you get qualitative information that can be used to alter your product or services according to your customers. The next part is to attain quantitative information, in other words, presenting numbers to support the previous data.

Conducting surveys is one of the commonly used methods for quantifying information. You can conduct in-app surveys, post-purchase surveys, or link surveys in email and apps, etc.

You can also collect statistical data to support your conclusions from the interviews. These include stating studies related to customer choices, results from popular surveys, etc.

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3. Create a Customer Persona

It is now time to present your collected data using a customer persona.

A customer persona represents a segment of customers with similar traits. It outlines the psychological and demographic features of your potential customer group and thereby assists you in making important strategic decisions.

Consider it as a tool that will make your data analysis process easier and more efficient.

Now, you can either use customer persona templates or an AI tool to generate your buyer’s persona. However, to get a more thorough insight check how a customer profile looks.

Customer Persona Example

This is a customer persona example of an internet service provider(ISP) to help you get a more practical overview.

About: A lot of customers remain at home and have a minimal and easy-going lifestyle. They need high-speed, interruption-free internet access.
Demographics: Age is between 30 and 40, has a laid-back lifestyle, lives in suburban areas, and the income range is between $10,000 to $40,000.
Professional role: Shop owners, employees, freelancers, etc.
Identifiers/Personality traits: Introverts, like routines, make schedules, prefer online shopping, and stick with the companies they trust.
Goals: Wants easily available service, and 24×7 customer support, prefers self-service technologies and chatbots over interacting with representatives.
Challenges: Fluctuating internet connection while working or consuming media. Not enough signal coverage.

4. Explain the product alignment to the Customer’s Needs

You’ve gathered info and created customer personas. The final step is to explain how your product or service caters to the needs of your customers.

Here, you specify the solution you offer to tackle the challenges faced by your customers.

Mention the USPs of your product and its features, and clarify how they benefit the customer. Also, mention how your offerings make the customers’ lives better.

Continuing the previous example of an ISP provider, this company can show how its high-speed Internet plans cater to the needs of individual working professionals. They can focus on aspects like customizable plans, cost-effectiveness, and coverage in remote areas to attract users.

And there you have it—a guide to writing your customer analysis. Just ensure that you maintain accuracy while making assumptions and predictions to make this section useful for making further decisions.

Build a solid business foundation with customer analysis

Understanding you r customers inside out assists you in making profitable decisions for your business. But remember, it is an ever-evolving and continuous process. You need to analyze your customers as often as possible to stay updated about their ever-changing needs.

After all, understanding what your customers need and what they prefer will help you devise strategies that ensure maximum customer satisfaction.

Now quickly create customer profiles for your business with Upmetrics’s AI SWOT analysis generator. However, once you do that, use this tool to streamline your entire business planning process.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

What key components should be included in customer analysis.

Here are the key components of a sound customer analysis:

Market segmentation
Customer behavior analysis
Customer profiling
Customer journey mapping
Trend analysis and future customer behavior

How can I gather data for my customer analysis?

Here are a few ways for you to gather data for your customer analysis:

Gather customer feedback using surveys, forums, and questionnaires.
Use secondary methods to gather industrial data, competitors’ data, and data from publications.
Use the collected data till data (i.e. social media analytics, customer support data) to form your analysis.

Can customer analysis help in forecasting future trends?

Absolutely, yes. A detailed customer analysis helps you to understand the emerging shifts and patterns in consumer behavior, thereby helping you optimize your product offerings and marketing strategies.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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Business Planning

How to Define Your Target Market for a Business Plan

Written by Vinay Kevadiya

Published Oct. 8 2024 · 11 Min Read

A well-defined target market in a business plan can significantly enhance your chance of impressing your investors and stakeholders. Why? Well for starters, they know you're not trying to sell to everyone (which is practically no one).

But what exactly is target market? How do you define it and document the same to ensure the success of your business plan? Worry not! We have you covered.

By going through this blog, you'll gain insights into how to define your target markets and successfully grow your business.

Let’s dive in.

What is a target market?

According to the target market definition, it’s a group of customers that a business aims to reach with its products or services. This could be done through digital marketing, traditional advertising, or direct outreach.

By identifying the target markets, your business can tailor products and services to meet those groups' specific needs and preferences.

A prominent example of effective target market identification is Nike.

Initially, Nike primarily marketed to professional athletes (niche market), but they recognized an opportunity to broaden their appeal.

With the launch of its iconic " Just Do It " campaign, Nike shifted its focus to include a wider audience of fitness enthusiasts and aspiring athletes.

Hence, understanding your target market will help you uncover similar opportunities and gaps within your industry.

Importance of defining a specific target market for your business plan

Defining a target market is crucial for any business plan because it directly influences your marketing strategy, product development, and overall business success.

Here are several reasons why understanding and defining a target market is essential:

1) Helps you tailor products and services

By identifying a specific target market, businesses can develop products and services that meet that audience's unique needs and preferences.

This approach increases the effectiveness of your business plan and helps you reach your target quickly.

Moreover, tailoring your business product or services according to audience preference enhances customer satisfaction and the likelihood of sales.

2) Improves product development

Analyzing your niche market can help you develop products and services specifically for targeted audiences and improve your product development.

For example, you manufacture shirts in sizes ranging from M to XL.

Through target market analyses, you discover that XXL shirts are the most popular choice among customers, while XXXL shirts have minimal demand, and M-size shirts have no buyers.

With this information from target market segmentation, you can plan your product offerings more effectively. You can focus more on producing XXL shirts and pivot what’s wrong in other sizes to improve its demand in the market.

3) Allocates resources effectively

By identifying your target market, you can allocate resources more efficiently. You can focus your time, budget, and efforts on the specific segment or segments most likely to generate sales rather than spreading resources across a broader audience.

A practical resource allocation helps your business with the following:

Maximum return on marketing and sales investments
Create a more relevant and personalized marketing message
Tailor your product and services to meet the specific needs of the target audience
Position your brand as the preferred choice within a particular market segment

4) Aid your business with informed decision-making

A well-defined target market analysis provides valuable insights into production, marketing, and sales. It also clearly identifies your audience’s needs, preferences, and behaviors.

With this information, your business can make informed decisions on how to move forward in various areas, such as:

Product development
Market strategies
Sales approaches
Budget and resource allocation
Growth opportunities

5) Enables customer engagement

Analyzing the target market helps your business understand your target audiences and fosters better communication and engagement.

It makes you understand your target customer's interests and behavior helping you create social media content that addresses their needs.

Further, knowing your audience's values can enhance their experience with customized offers and services.

Such practices keep your audience connected to your brand and foster engagement, which leads to the long-term success of your business.

How to identify your target market?

Here’s how you can determine your target market effectively and design your product according to your customer needs:

Analyze your product and service

Start by understanding your product or service's benefits and features. What problems does it solve, and who would most likely need it? This helps narrow down who would value your offerings.

Analyzing your product or service helps you identify potential pitfalls and mitigate the risk of failure before launching it into the market.

Once you understand what makes your offering unique, you can position your product more effectively.

Research your market

Gather information about potential customers and understand their needs, preferences, and behaviors. For target market research, focus on the key factors that include:

Segment your market

Segmenting your market is essential because it helps you clearly define your target market. It becomes more crucial for businesses that have multiple target markets.

For example, if you sell both casual and formal clothing, you would target younger customers for casual wear and professionals for formal attire. This allows you to tailor your marketing and products to each group effectively.

Here’s a table that helps you demonstrate key segmentation types and their purposes:

Analyze your competitors

Look at who your competitors are targeting and how they position their products or services. Understanding their strategies can provide insights into potential gaps in the market.

Further, identifying areas where you can differentiate yourself from competitors can reveal opportunities for targeting new or niche markets.

Here are a few aspects to consider when analyzing your competitors:

Examine the range and quality of products or services they provide.
Analyze their pricing models and how they compare to your offerings.
Look at their promotional strategies, advertising channels, and messaging.
Understand their primary target market and how they position themselves in the industry.
Assess how they interact with customers through social media and customer service.

Test and validate

Once you identify your target customers, target markets, and competitors, it’s time to test your assumptions through small-scale campaigns, product launches, or focus groups.

Gather feedback and adjust your strategy as needed. Validation ensures you're not just guessing but making target market analysis and data-driven decisions.

To explore market analysis further, check out our blog on conducting a market analysis for a business plan .

How to write about your target market for a business plan?

Writing about your target market in a business plan is essential for clearly communicating who your primary customers are and how you intend to reach them.

Here’s a table that segments your target market for different stakeholders in your business plan:

However, to write about your target market, you should focus on the following common aspects:

Define your target market

Start with a clear definition of your target market. Describe the specific group of consumers that your business aims to serve. This could include details about:

Market segments
Right target market
Geographic segments
Demographic segments
Unique value propositions
Types of audiences and their age

Demonstrate market research

Incorporate findings from market research to support your definition. Include data from surveys, focus groups, or industry reports to support your conclusions.

Including these data in your business plan will make your stakeholders understand the customer needs, preferences, and pain points.

Understanding your target market research will improve your chances of securing successful deals with investors and may significantly persuade them about your project.

Segment the market

Divide your target market into distinct segments. Explain why these segments are relevant to your business and how they differ.

Moreover, if you have diverse products and services and want to focus on different target markets, tailor your marketing strategy for each segment.

By doing so, you can address each group's unique needs, preferences, and pain points more effectively.

Types of segmentation include:

Demographic segmentation
Geographic segmentation
Psychographic segmentation
Behavioral segmentation

Create customer profile

Develop detailed profiles for each segment. These profiles should outline your ideal customers' characteristics, motivations, and challenges.

For example, let’s explore a customer profile for SpeedyEats , a food delivery business that delivers within 30 minutes.

Name: Sarah Thompson

Challenge: Sarah is a busy working professional who struggles to find time to cook healthy meals for herself and her family. She often resorts to takeout or ready-made meals, which lack the nutrition and variety she desires.

How Our Product Helps: Our meal delivery service offers fresh, pre-portioned ingredients with easy-to-follow recipes, allowing Sarah to cook healthy meals in under 30 minutes. This solution saves her time and ensures her family enjoys nutritious, home-cooked meals without the hassle.

Here’s another customer profile for Movewell, a company that provides personalized fitness apps for health enthusiasts.

Name: Mark Johnson

Challenge: Mark is a fitness enthusiast but finds it challenging to stay motivated and track his progress toward his fitness goals. He’s overwhelmed by the abundance of fitness apps that don’t provide personalized workout plans or progress-tracking tools.

How Our Product Helps: Our fitness app offers customized workout plans tailored to Mark’s fitness level and goals, real-time progress tracking and motivational reminders. This helps him stay on track and feel more accountable, making it easier to achieve his fitness milestones.

These customer profiles clearly show what your target audience is, their pain points, and how your product solves their problems.

Outline marketing strategies

Discuss the marketing strategy and tactics you’ll use to reach your target market effectively. Which marketing campaigns will you prioritize, and which channels will you use to engage your audience?

Here are several marketing segments of a target market you can include in your business plan to effectively promote your products and services:

Email marketing campaigns
Social media ads
Social media platforms (Instagram, Facebook, and Twitter)
Hire marketing professionals to develop and execute strategies

Include conclusion

Summarizing the key points, adding target market examples, and including relevant data or statistics in the conclusion of your target market section will help your audience understand your project clearly.

By positioning your plan with a firm conclusion, you increase the likelihood of convincing your audience of its value and purpose.

The bottom line

That’s all! We hope this blog has provided valuable insights on the target market in a business plan.

In it, we explored the definition of the target market, how to identify it, and how to present it to your stakeholders effectively.

Additionally, if you want more assistance in creating a business plan that addresses your target market precisely, consider using our AI-powered business plan generator . By answering a few questions on this platform, you can generate your business plan within minutes.

Try it out today and craft your business plan with an effective target market section!

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Frequently Asked Questions

How detailed should a target market be?

A target market should be detailed enough to provide clear insights into your ideal customers' specific characteristics, needs, and preferences. This includes the primary target market, market segment, marketing efforts, target market strategy, major selling point, and customer base.

What is the purpose of a target market?

The purpose of a target market is to identify the specific group of consumers most likely to purchase your products or services. By understanding this group, your business can focus its marketing efforts and tailor their offerings to meet customer needs.

What’s the difference between the target audience and the target market?

The target market refers to a broader group of potential customers a business aims to reach based on shared characteristics. The target audience, on the other hand, is a more specific subset within that market, typically defined for particular marketing campaigns or initiatives.

Can my target market change over time?

Yes, your target market can change over time due to various factors, such as shifts in consumer preferences, market trends, technological advancements, or changes in the competitive landscape. Hence, regular target market analysis is crucial to ensure that your business remains relevant and effectively meets your customers' needs.

What happens if my target market is too broad?

If your target market is too broad, it can result in ineffective marketing strategies and wasted resources. Crafting tailored messages that resonate with diverse segments becomes challenging, which can dilute your brand's message.

By narrowing down your target market, you can focus your marketing efforts more precisely, enhancing engagement and improving conversion rates.

How does segmentation help in defining a target market?

Segmentation to define your target market helps with customer behavioral factors, customer demographics, buying behaviors, customer personas, and critical characteristics of the market.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

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