SECTION 1: MARKET SEGMENTATION & TARGET MARKET SELECTION

*(NOTE HOW THESE OVERLAP WITH COMPONENT(S) OF THE BMC*

Include your experiences from your various experiments with the BMC

Some helpful notes as you fill this part of the analysis:

Market Segmentation and Target Market Selection

• A firm must answer the basic question, "Who are our customers, and how will we appeal to them?"
• In some cases, a firm will have two markets, and you should describe the characteristics of both markets

1. Market Segmentation

• Market segmentation is the process of dividing a market into distinct subsets (or segments) that behave in the same way or have similar needs
• Markets can be segmented in many ways, such as by geography (city, state, country), demographic variables (age, gender, family size, income), psychographic variables (personality, lifestyle, values), behavioral variables (benefits sought, product usage rate, brand loyalty), and product type (varies by product)
• There are requirements for successful market segmentation:
  • Homogeneity of needs and wants within the segment
  • Heterogeneity of needs and wants among segments
  • Differences within the segment are small compared to differences across segments
  • The segment is distinct enough that its members can be easily identified
  • It should be possible to determine the size of the segment
  • The segment should be large enough to be profitable
• IBISWorld and Mintel provide suggestions for segmenting the industries that they follow
• The entrepreneurial process often results in the identification of new segments of an industry that weren't previously considered

b. Selecting a Target Market

• After a firm segments its market, it selects a segment within the market to target
• A big mistake is to define the target market too broadly or to try to target more than one segment simultaneously
• Focusing intently on a single market allows a firm to become an expert in a specialized area rather than trying to spread itself too thin
• A firm should assess the size of the market to make sure it is large and healthy enough to meet the firm's objectives

c. Target Market Size and Trends

• Estimating the size of a target market can be tricky; in many cases, you must literally invent a methodology for making an estimate
• The key is to explain the path that led to your conclusions
• If you are producing an enhanced version of something that is already available, numbers will be fairly easy to get
• Estimating the size of a target market for a market that doesn't currently exist, or a market that is specific to a particular location or geographic area, is harder
• Readers will normally judge projections based on (1) the reasonableness of the assumptions made, (2) the degree to which the numbers are anchored in facts, and (3) the extent to which it appears that a good faith effort was made to be as accurate as possible
• The best recourse, if you are stuck, is to talk with a reference librarian to see if there are additional information resources; editors of industry-specific trade journals and directors of trade associations are also good sources of information
• This section should also comment on industry trends that have the potential to affect the target market positively or negatively

SECTION 2: BUYER BEHAVIOR

Some helpful notes as you fill this part of the analysis:

1. Buyer Behavior

• It's important to include a section that deals directly with the behavior of the consumers in a firm's target market
• In many business-to-business start-ups, it's important to discern specifically who the "decision makers" are in the businesses you'll be trying to sell to
• The length of a customer's buying process is often an important concern
  • A high-involvement purchase is one for which the buyer is prepared to spend a considerable amount of time and effort searching
  • A low-involvement purchase is one that a buyer makes with minimum thought because it does not have much impact on his or her life