The market you aim with your product or service means the actual number of people you can get to. You have to prove how you came up with this number.
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You can prove the growth rate and the size of the market in two ways. If you follow these steps you will gain valuable knowledge that will influence your business plan.
1. Go from general to specific
Use a process of elimination to determine the size of the market. Determine which part is relevant to your business. Rule out the parts of the market you will not address.
For example, if you produce a coffee-making machine, your relevant market is just about anyone who drinks coffee. Select customer beginning from general to specific. DonΓÇÖt ignore market research. Eliminate the low-income segment first. You can then remove people who did not bought such a product in over five years. Eliminate those who only prefer other products, or in this case people that drink coffee only at coffee shops.
What you have in the end is the exact profile of the target market. Include what you found out in the Customer Analysis.
2. Analyzing Market Factors
Determine what will influence your target market:
Can the competition steal customers? How many? If they succeed, they will steal a big part of the pie and that is a fact you should also include in the Competitive Analysis, even if it sounds bad. Investors are not looking for utopist scenarios.
Tell more about your prospective buyers using demographics and psychographics factors. How much do they earn? Do they live in the city or in small villages? Where exactly can you find them? Are you targeting businesses, what kind of businesses? All this must go in the Customer Analysis.
Can different laws affect your business? Can market shifts or material pricing influence your business?
Use Case Studies
Give examples of other companies that have made it in a similar field and with a similar plan. Maybe even with the same target market. Include this in the Competitive Analysis and Industry Analysis.
You can only gain the confidence of investors if you describe a real picture of the market you are aiming; moreover, it will help you concentrate your marketing efforts for the Marketing Plan.