There is no set order in which these choices must be made. In fact, you will probably make initial choices and select your product line, target market, distribution channels, and other aspects of your business model; then after working with those choices for a time, you will revise some or all aspects of your product line, target market, and so on. Revising and updating your product offerings is an activity that you may wish to conduct frequently, depending on the type of business you are in. Manufacturers of everything from cellular phones and automobiles to clothing and dish detergent revise their product offerings regularly.
Similarly, you may wish to regularly revise estimations of your ideal target market. In the example I proposed yesterday, imagine that you have decided to start your own business designing and selling clothing that you make in your residence. In yesterday's post I suggested that your style of clothing designs are probably most suited to fashionable young people in their early twenties; but I raised questions about the willingness of this target market to pay enough for your creations to make the enterprise profitable for you. As a consequence I suggested you may wish to also create a secondary line of fashionable baby-wear. There are several logical arguments to be made in favor of such a move. For example, the smaller clothes would take less fabric and less time to sew, so they would cost you less money and time, and therefore you could sell them for less than the adult clothes but for more relative to your cost per garment, thereby affording you a more likely sale and a better profit on that sale. Additionally, many young parents may be willing to spend more on clothing for their children than they would be willing to spend on themselves; and furthermore, you may be able to tap the friends-and-grandparents market as well, which gives you access to a target market with a much larger combined spending power than just the young parents themselves.
On the other hand, some would argue that while single young twentysomethings are indeed notorious cheapskates, they are also notoriously profligate. They typically make very little money at whatever job they have; often they are still in college and don't have any income at all. However, they may have access to student loan money, or better yet, to the Bank of Mom and Dad; and since they probably do not have families of their own yet, there is a very good chance that whatever money they do acquire will "burn a hole in their pocket" and be spent quickly. Making sure that yours is the product that catches their eye at the precise moment that they happen to have a few bucks in their wallet is a factor related to your distribution strategy and your marketing strategy, both of which I will address in future posts.
These are just a few examples of some of the considerations which you will be evaluating as you plan your business and as you revise your plans to help your business grow. Generally, you are looking for a target market that can afford the goods and services you are offering, and you are are planning to offer goods and services that are best suited to the target markets you serve. You start with an idea for a product offering; you identify a target market for your product offering; then you revise your product offering based on its suitability for your target market; and you further revise your target market analysis based on your revised product offering.
Incidentally, your chosen distribution model is a critical component of target market analysis, and vice versa. For example, if you decide to sell your products online and also at some kind of local street fair, then your target market is not simply all the people within a given age range who happen to enjoy a certain style: your target market is that small segment of those people who happen to either shop online or at local street fairs. If you wish to sell to people who go to street fairs, then you will want to get a booth at one. If you wish to sell to people who shop online, then you will need a website - more on that later.
Most established businesses engage in market segmentation as they plan their product lines and related target markets. Often this means they plan discount, median, and premium product lines, respectively targeted to various consumer groups based on income and other demographic factors. Alternatively a company may target different types of corporate buyers based on their industry; or a company may position itself to target lucrative government contracts. There are many choices to make, and various criteria for evaluating the factors that will influence your decisions; all these will depend on the type of business you are engaged in.
As a very small start-up, sewing clothes in your living room, you probably do not have the time or resources to engage in grandiose plans or extensive market research. You will conduct a certain amount of trial and error. Too much error and you will go out of business; and let's be frank, this is the sad fate of by far the majority of start-ups. But with some planning, some good ideas, and a lot of hard work, you may succeed where others have failed. Best of luck with that.
Until next time, happy planning.
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