example of customer analysis in business plan

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How to Write a Customer Analysis Section for Your Business Plan

Free Customer Analysis Template

• July 12, 2024

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.

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.

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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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How to Write a Customer Analysis for a Business Plan

• September 4, 2024

Understanding your customers is essential for any business striving for success. A customer analysis provides valuable insights into the demographics, preferences, behaviors, and needs of your target audience .

This guide will walk you through the process of writing a thorough customer analysis, enabling you to tailor your products, services, and marketing strategies to meet the needs of your customers effectively.

Define Your Target Audience

Begin by clearly defining your target audience : the specific group of people you aim to serve with your products or services.

Consider factors such as age, gender, income level, geographic location, and psychographic traits (e.g., lifestyle, values, interests). Understanding who your customers are is the first step in building a successful business strategy.

• Example for a Coffee Shop : Your target audience might include young professionals aged 25-40, living in urban areas, who value high-quality coffee and a relaxed atmosphere for socializing or remote work.

Gather Data on Your Customers

Next, gather data on your customers through various sources, including market research surveys, interviews, focus groups, and customer feedback.

Analyze both quantitative data (e.g., demographics, purchase history) and qualitative data (e.g., customer feedback, testimonials) to gain a holistic understanding of your customers’ needs and preferences.

• Example for a Coffee Shop : Conduct surveys or interviews with your target audience to gather insights into their coffee preferences, frequency of visits to coffee shops, and reasons for choosing one coffee shop over another.

Segment Your Customers

Segment your customers into distinct groups based on common characteristics or behaviors.

This segmentation allows you to tailor your marketing efforts and product offerings to better meet the specific needs of each segment. Common segmentation criteria include demographics, psychographics, behavior, and purchasing patterns.

• Example for a Coffee Shop : Segment your customers based on their coffee preferences (e.g., espresso lovers, latte enthusiasts), frequency of visits (e.g., daily customers, occasional visitors), and reasons for visiting (e.g., socializing, work meetings).

Analyze Customer Needs and Preferences

Analyze the needs, preferences, and pain points of each customer segment to identify opportunities for product or service improvement.

Consider factors such as price sensitivity, convenience, quality expectations, and brand loyalty. This analysis will help you tailor your offerings to better align with customer expectations.

• Example for a Coffee Shop : Analyze customer feedback to identify common preferences in coffee flavors, brewing methods, and food options. Use this information to adjust your menu offerings and pricing strategies accordingly.

Assess Customer Behavior

Examine how customers interact with your business at each stage of the buying process, from awareness to purchase and post-purchase.

Identify patterns in customer behavior, such as browsing habits, purchase frequency, and loyalty. This analysis will help you optimize the customer experience and maximize customer satisfaction and retention.

• Example for a Coffee Shop : Track customer traffic patterns, peak hours, and popular menu items to optimize staffing levels, inventory management, and promotional strategies.

Identify Growth Opportunities

Based on your customer analysis, identify growth opportunities for your business. This could involve expanding into new customer segments, introducing new products or services, or entering new geographic markets.

By understanding your customers’ needs and preferences, you can better position your business for long-term success.

• Example for a Coffee Shop : Identify opportunities to expand your customer base by offering specialty coffee subscriptions for remote workers or partnering with local businesses to host networking events.

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Privacy overview.

How to Write a Customer Analysis

Elon Glucklich

9 min. read

Updated October 27, 2023

You’ve been hard at work conducting market research into your potential customers— developing a deep understanding of industry dynamics and the potential size of your market .

Hopefully, you’ve also spent time interviewing potential customers—learning about their behaviors and needs, and digging into publicly available data to support your research. 

But you still need to document these findings in a way that gives you an actionable road map to grow your customer base.

This is where a well-written customer analysis can be extremely useful. 

Including a customer analysis in your business plan will boost your marketing efforts by identifying your target customers , their needs, and how your product or service addresses these needs.

• Customer analysis vs market analysis

A market analysis is a broader exploration of the market and potential customers.  A customer analysis zooms in on the specific behavioral or demographic characteristics of individual customer segments in your target market.

The market analysis includes details like the number of customers you hope to serve and the types of competitors you must contend with. 

By contrast, the customer analysis looks at the specific attributes of your potential customers – their personal habits, values, beliefs, and other characteristics that might affect their purchasing decisions.

• What should a customer analysis include?

Demographics

Some of the earliest information you’ve collected probably about your customers includes:

• Gender/ethnicity
• Income level
• Geographic area
• Education level

Example: Suppose you own a business that creates an environmentally friendly cleaning product . Your customer demographics might include: 

• Age range: 30-60 (old enough to have used a variety of cleaning products in their homes)
• Income: Above average (more likely to buy a higher-priced alternative to discount cleaning products)
• Education level: college degree or equivalent (high enough education level to understand the product’s societal benefits).
• Employment: full-time employee

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Values and beliefs

This section captures the psychological and emotional factors that influence customer behavior. 

• Cultural backgrounds
• Ethical values

Let’s return to the environmentally friendly cleaning product example. You are more likely to attract customers who prioritize sustainability and are willing to pay more for products that match their values.

Buying behaviors

Analyzing buying behaviors involves understanding how, when, and why customers purchase. These behaviors impact:

• The channels customers prefer for shopping
• Price sensitivity
• Factors that trigger a buying decision

Example: Suppose you’re running an environmentally friendly cleaning products business. In that case, you might discover that most of your customers buy their cleaning products from a magazine for homeowners or that they typically buy multiple cleaning products simultaneously. 

Technology use

Nearly three-quarters of small businesses have a website . Even if your business doesn’t have one, your customers are, without a doubt, browsing the internet. 

So it’s critical to understand how your target customers interact with technology and to set up an online presence for your business if you aren’t already active. 

Key questions about customers’ technology habits include:

• Are they active on social media? If so, which platforms? 
• Do they prefer online shopping or in-store visits? 
• Are they more likely to respond to email marketing, blog content, or social media campaigns?

Example: Let’s say you discover that significantly more of your target customers visit websites like yours on a smartphone than a desktop. In that case, it would be important to optimize your website for mobile viewing or develop a user-friendly app . 

• 5 steps to write a customer analysis for your business plan

Now that we understand the individual pieces of a customer analysis, we’ll examine how to write a customer analysis for your business plan .

1. Use existing data

Regardless of your country, there are likely numerous sources of data published by government agencies, private industry, or educational institutions that could be relevant to your business.

Finding existing data is the best starting point for your customer analysis. It’s easy to find, it’s regularly updated, and it’s immensely valuable for providing context for your research. 

For instance, if you determine that your target demographic is people between 30 and 60, Census data can help you determine the number of residents in your selling area within that age range.

We’ll look at some examples of publicly available data for businesses operating in the United States.

U.S. Census Bureau

The Census Bureau publishes official population counts for the country, states, and local communities. Demographic characteristics like age, gender, and race sort the data. Census data also includes useful data for businesses, such as the total number of businesses, employment counts, and average incomes in local communities across the country.

Bureau of Labor Statistics

Data from the Bureau of Labor Statistics tracks changes in the U.S. workforce and the overall state of the labor market. The BLS publishes the Consumer Price Index , tracks consumer spending, and gauges overall consumer confidence. 

Examining this data can give you insights into the willingness of consumers to pay for your product or service.

Bureau of Economic Analysis

The Bureau of Economic Analysis takes a broader look at the performance of the U.S. Economy. You can use BEA data to find personal income and corporate profit data by industry. 

If you make a product or service used by other businesses, these figures can help you understand the financial health of the broad customer base you’re targeting.

Federal Reserve

The Federal Reserve publishes various financial reports, such as consumer credit and spending statistics , as well as the health of banks. 

This data can give you important context about the financial health of your customers, which could help you determine pricing strategies—like whether you should offer flexible payment plans.

Industry associations

There are thousands of private sector industry associations in the United States alone. These organizations not only advocate for the businesses in their field. They provide members with a wealth of helpful information, such as “state of the industry” reports and business surveys. 

You should leverage customer data from these peer organizations as a business owner.

Academic institutions

Many university business schools make their research publicly available online. Scholars make a career out of researching market and industry trends, and much of their work is available through online searches. 

2. Review customer feedback

One of the most direct ways to show an understanding of your customers in your analysis is by reviewing their feedback.

If you’re a new business without direct customer feedback yet, that’s OK. Instead, look around at what people are saying about your competitors . You might find common complaints from customers in your industry about the products available. 

You can then reach out and interview potential customers to better understand their needs.

If you have an existing business, there may already be reviews of your company on Google or social media sites like LinkedIn. Doing so can help you determine if customers are struggling to use your product or have suggestions for improvements. 

Read as many reviews as possible, and use them to show an understanding of your customers’ needs in your analysis.

3. Use third-party data

So far, we’ve discussed free, publicly available sources to find information about your customers. 

But for those willing to dig deeper, third-party data providers can help you uncover information that’s truly unique to your business and your customers.

Google Analytics

Third-party data providers like Google track the activity of users across numerous websites. Google has its own tool, Google Analytics , which makes that information available on your company’s website.

This data is a gold mine for understanding your customers. Besides giving you a demographic and geographic breakdown of your visitors, it can tell if they view your site on a desktop or smartphone, what pages they’re clicking, navigating around your site, and much more.

For new business owners, Google Trends is a powerful tool to discover what people are searching for online. 

For the environmentally friendly cleaning products business we’ve used as an example—you could see how many people are searching on Google for information about products like floor cleaners or dishwasher detergents.

Social media metrics

If your business uses social media, there are plenty of tools to help you understand your audience on these platforms. 

Many social media companies make their data available to businesses at a cost. For instance, the Facebook Audience Insights platform gives you information about the types of people who visit your page or interact with your posts.

There are also third-party tools like Hootsuite, Sprout Social, and Buffer, which track various metrics across social media platforms.

Wherever you find the data, including social media metrics in your customer analysis provides instant feedback about how customers interact with your business.

Specialty tools

Software companies have created numerous tools that collect and analyze customer data from various online sources. 

Audience research tools like SparkToro and FullStory analyze large amounts of data online and spot trends—such as the topics people discuss online and which websites or social media accounts those audiences visit. 

These are insights that would be incredibly time-consuming to get directly from customers. However, understanding where potential customers spend time online and what they talk about can easily turn your analysis into a targeted marketing campaign that addresses their needs.

4. Create a customer persona

After gathering and analyzing all this data, you should have plenty of information about your customers. The next step is to create a customer persona . In case you need a refresher, the customer persona is a semi-fictional representation of your ideal customer based on your collected data.

For example, a customer persona for that environmentally friendly cleaning products business will reflect that audience’s demographics, behaviors, and needs. 

In addition to being an effective tool to focus your marketing efforts, creating this persona can help determine the size of your customer base and how to prioritize your time and resources to attract them to your business. It’s also helpful to show potential investors you know your target audience.

5. Connect to your problem/solution statement

Many business plans include a problem and solution statement as early as the introduction. It’s a reasonable way to start, considering that successful businesses identify a problem and provide a solution. 

So as you put your customer analysis together, ensure the research is grounded in the problems they’re experiencing. Doing so will keep you accountable by making you validate your product or service as the solution they need.

• Get started with your business plan template

A customer analysis is a key part of any business plan. But it’s just one piece. At Bplans, we take some of the pain out of business planning. 

We’ve developed a free business planning template to help reduce entrepreneurs’ time to create a full, lender-ready business plan.

Bplans has also collected over 550 free sample business plans across numerous industries. Find one that fits your industry to get inspiration and guidance when writing your plan.

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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How to Write Customer Analysis in Business Plan? Example & Guide

Selma Khayal

When crafting a business plan, one of the most crucial sections is the customer analysis. This part of your plan delves into who your customers are, what they need, and how your business can meet those needs. A well-researched and articulated customer analysis not only helps you understand your target audience but also demonstrates to investors and stakeholders that you have a clear grasp of your market.

In this article, we’ll explore how to write a compelling customer analysis section for your business plan. We will cover the basics of what a customer analysis entails, why it is vital for your business plan, and how to effectively write and present this section. We’ll also look at an example to illustrate the concepts discussed.

What is a Customer Analysis?

Customer analysis is the process of studying and understanding your target market. It involves identifying who your potential customers are, what their needs and preferences are, and how your product or service fits into their lives. The customer analysis section of your business plan should provide a detailed description of your target customers, including their demographics, behaviors, and buying patterns.

Key Components of Customer Analysis

Demographics: Information such as age, gender, income, education, and occupation. Psychographics: Insights into customers’ lifestyles, values, and interests. Behavioral Data: Purchasing habits, brand loyalty, and product usage. Needs and Pain Points: Specific problems or needs that your product or service addresses.

Why Conduct a Customer Analysis for Business Plan?

Conducting a thorough customer analysis is essential for several reasons:

1. Understanding Your Market

By analyzing your customers, you gain a deep understanding of who they are and what they want. This knowledge enables you to tailor your marketing strategies, product offerings, and business operations to better meet their needs.

2. Identifying Opportunities

A well-executed customer analysis can reveal market gaps and opportunities for growth. It helps you spot trends and shifts in consumer behavior, allowing you to adapt and innovate accordingly.

3. Attracting Investors

Investors want to know that your business has a clear understanding of its target market. A detailed customer analysis demonstrates that you have done your homework and are prepared to meet market demands effectively.

4. Improving Customer Experience

Understanding your customers’ needs and preferences allows you to enhance their experience with your business, leading to higher satisfaction and loyalty.

How to Write Customer Analysis in Business Plan?

Writing a comprehensive customer analysis involves several steps. Here’s a structured approach to guide you:

1. Define Your Target Market

Start by defining who your target customers are. Segment them based on various criteria:

Demographic Segmentation: Age, gender, income, education, etc. Geographic Segmentation: Location, region, urban vs. rural, etc. Psychographic Segmentation: Lifestyle, values, personality traits, etc. Behavioral Segmentation: Purchasing behavior, brand loyalty, usage frequency, etc.

2. Conduct Market Research

Gather data to support your customer analysis. This can include:

Surveys and Questionnaires: Collect firsthand information from potential customers. Interviews: Conduct in-depth interviews to gain detailed insights. Focus Groups: Engage a group of target customers in discussions to understand their needs. Secondary Research: Use existing data from industry reports, market studies, and competitor analyses.

3. Analyze Customer Data

Organize and interpret the data collected to draw meaningful conclusions. Look for patterns and trends in the information:

Demographic Trends: Identify common characteristics among your target customers. Behavioral Trends: Determine purchasing habits and preferences. Psychographic Insights: Understand the values and interests driving customer behavior.

4. Create Customer Profiles

Develop detailed customer profiles or personas based on your analysis. Each profile should represent a segment of your target market and include:

Name and Demographics: A fictional name, age, gender, income level, etc. Background: Education, occupation, and lifestyle. Goals and Challenges: What are their goals and challenges related to your product or service? Buying Behavior: How do they make purchasing decisions?

5. Include Customer Feedback

Incorporate feedback from existing customers, if available. This can provide real-world insights into how your product or service is perceived and used.

6. Update Regularly

Customer preferences and market conditions can change over time. Regularly update your customer analysis to keep your business plan relevant and accurate.

Example of Customer Analysis in Business Plan

Here’s an example of a customer analysis section for a hypothetical coffee shop business:

Customer Analysis

Target Market

Our primary target market consists of young professionals aged 25–35 living in urban areas. They are well-educated, have disposable income, and lead busy lifestyles. Our secondary market includes students and freelancers who frequent coffee shops for study and work sessions.

Demographics

• Gender: Male and Female
• Income: $40,000 — $80,000 annually
• Occupation: Professionals, students, and freelancers

Psychographics

• Lifestyle: Busy, health-conscious, and tech-savvy
• Values: Quality, convenience, and social interaction
• Interests: Coffee culture, technology, and community events

Behavioral Data

• Buying Habits: Frequent visitors, often purchase specialty coffee and pastries
• Brand Loyalty: Prefer brands with a strong community presence and high-quality products
• Usage: Regularly use coffee shops as a workspace or meeting place

Needs and Pain Points

• Needs: High-quality coffee, convenient location, and a comfortable environment
• Pain Points: Long wait times, lack of seating, and inconsistent product quality

Customer Feedback

Customer feedback highlights a desire for a wider variety of coffee blends and improved seating arrangements. Many customers appreciate our eco-friendly practices and community events.

The customer analysis section of your business plan is a critical component that provides insights into who your customers are, what they need, and how your business can fulfill those needs. By defining your target market, conducting thorough research, and creating detailed customer profiles, you can craft a compelling analysis that not only guides your business strategies but also impresses potential investors.

Remember, a well-executed customer analysis is not a one-time task but an ongoing process that evolves with market trends and customer preferences.

FAQs on customer analysis of business plan

What are the three components of customer analysis?

The three components of customer analysis are demographics (age, gender, income, etc.), psychographics (lifestyle, values, interests), and behavioral data (purchasing habits, brand loyalty). These components help you understand who your customers are, what they value, and how they behave.

How do you present customer analysis?

Present customer analysis by using clear and detailed customer profiles or personas. Include demographic data, psychographic insights, and behavioral trends, supported by charts or tables for clarity.

How do you write an analysis in a business plan?

To write an analysis in a business plan, define your target market, gather relevant data through research, analyze this data to identify trends and insights, and present it using structured customer profiles. Ensure the analysis is concise and relevant to your business objectives.

How to do a customer analysis for a business plan?

Conduct a customer analysis for a business plan by defining your target market segments, gathering data through surveys, interviews, and research, analyzing the data to identify key customer characteristics, and summarizing the findings in a structured format.

What is an example of analysis in business?

An example of analysis in business is a customer profile that describes a segment of your target market. For instance, a profile might detail that your primary customers are tech-savvy professionals aged 25–35 who value high-quality products and frequent coffee shops for work and socializing.

Written by Selma Khayal

Experienced Content Writer With 3 Years of Writing Experience During this time, I’ve helped numerous entrepreneurs turn their visions into actionable plan

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• Business Planning

How to Write a Customer Analysis Section for Your Business Plan

Written by Vinay Kevadiya

Published Jul. 4 2024 · 7 Min Read

"There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” – Sam Walton.

So, everything a business does is for its customers. Because they’re central, customer analysis isn’t just any other section of the business plan.

It's the key section that determines what your product or service will be, who will buy it, and how you will target them.

But how do you write a customer analysis section for your business plan ? Don't worry; here are six simple steps to guide you through writing this crucial section, along with an example.

Let's start by understanding what customer analysis precisely means.

What is customer analysis in a business plan?

Customer analysis in a business plan is a detailed look at your target customers, including their characteristics, needs, and buying behaviors. This analysis helps you understand your market better, customize your products and services to meet customer demands, as well as identify opportunities for business growth.

Why conduct customer analysis?

According to a Google survey, more than 40% of marketers use customer research and analysis to drive strategic business decisions.

Needless to say, there are multiple benefits to accurate customer analysis. Here are some of them:

• Helps in customizing marketing strategies for better customer engagement by understanding customer profiles.
• Assists in making informed decisions about product developments and improvements.
• Allows you to deeply understand customer needs reducing customer churn rate.
• Helps in identifying the pain points which supports gaining a competitive edge.

In short, the purpose of customer analysis in a business plan is to align your business strategy with the needs and behaviors of your target market.

6 steps to write customer analysis in a business plan

Now, that you understand why the customer analysis section is important, let's move forward with how to actually write one in 6 simple steps:

1. Define your target customers

The first step of customer analysis is to define and identify your target customers. Here are the steps on how to identify your target audience through market segment:

Customer demographics

Firstly define the age range of your customers (teenagers, young adults, seniors, or middle-aged). Then see to which gender your product or services appeal.

Also, consider the educational background, occupation, and income level of the target customers.

Psychographics

The psychological and emotional factors affecting the choice of a consumer are known as psychographics. It includes analyzing the lifestyle of your consumers.

Likewise, identify the core values of your customers like do they seek affordability, quality, or sustainability. Try to understand the interests of your customers too.

Here, mention the location of your customers. Are they situated in urban, suburban, or rural areas? Additionally, look if the weather affects the demand for your product or service. If it does, then consider the weather of the particular location.

Purchasing behavior

Understand the customer behavior whether they prefer to buy things online or through physical stores. Do they think twice before buying any product or purchase it recklessly?

Additionally, consider whether your target audience sticks to a brand or switches it frequently.

Use of technology

Technographic segmentation can help companies to identify the applications and motives for purchasing. Here is how you can create technographic segments:

• Find out what technologies your customers use with surveys, web analytics, or third-party data providers.
• Identify key technographic variables (consumers' technology usage behaviors) such as hardware, software, technology stack, etc.
• Segment your audience based on essential variables such as device-based, tech savviness, usage intensity, etc.

2. Gather data from existing sources

The next step is to identify sources for gathering relevant data. Start with your internal data, which may include customer statistics such as age, gender, location, and contact numbers.

Here are some ways:

• Google Analytics: It’s an excellent tool for tracking user activities across your website including age, gender, interests, traffic sources, buying behavior, and more.
• Social media metrics: Instagram insights, Facebook insights, and others provide you with demographic information and visitor tools.
• U.S. Census Bureau: You should seek population statistics like age, gender, and race. Then search for average incomes, number of businesses, and employment figures in local communities.

3. Estimate market size and trends

Once you know the target audience, estimate the market size for your product and the number of potential customers from your target market.

You can use existing data from industry reports, market research data, and statistical resources to support your estimates.

Also, analyze the current trends affecting your target market. It includes technological advancements, economic factors, cultural shifts, or other relevant trends.

4. Discover customer needs and pain points

The next step is to specify the needs and challenges of your target audience. Getting to know what exactly your customers need helps you understand whether your product or service is fitting or not.

Some of the ways to do it are:

• Engage directly with potential customers - Engage directly with customers as it is a reliable and affordable way to know about their needs.
• Collect customer support data - Gather direct customer data from the customers who had any issue with your product or service to better understand their pain points.
• Review customer feedback - Check all the Google reviews and social media platforms for direct customer feedback to understand more about what kind of products or services are they seeking.

5. Develop customer profiles and personas

After all the research, it’s now time to create a customer profile. It includes all the characteristics of the type of audience you’re planning to target.

These personas enable businesses to understand customers more deeply. It allows businesses to tailor marketing efforts and product development to meet their needs better.

Here’s an example of a persona profile for a skincare company:

6. Conduct competitor analysis

Identify your potential competitors and analyze how they meet their customer needs. Evaluate their strengths and weaknesses in comparison to your offerings.

Determine where your competitors stand in the market and how they segment their customer base. This will help you identify opportunities and gaps in the market.

With all the competitor research data, you can craft a marketing plan to target customers differently than competitors, helping in identifying unique selling points.

So, these were the six simple steps, and to understand it further, let’s get forward with the example.

Customer analysis example of an online sustainable clothing retail store

Target market overview

• Demographic Segmentation : Women aged 18-35; Men aged 18-35; College-educated; Students and young professionals.
• Geographic Segmentation : Urban areas in the U.S.; Major cities like New York, Los Angeles, and Chicago.
• Psychographic Segmentation : Environmentally conscious; Interested in fashion and trendy styles.
• Behavioral Segmentation : Regular online shoppers; Prefer eco-friendly products; willing to pay a premium for sustainability.

Target customer profile 

Primary Target Customer:

Secondary Target Customer:

Customer needs and preferences 

Customer Needs:

• High-quality, sustainable fashion products
• Easy online shopping experience
• Reliable and fast shipping options
• Transparent information about product sustainability.

Buying Preferences:

• Prefer online shopping via website and social media
• Detailed product descriptions and reviews
• Attracted to brands with strong ethical and environmental values

Market Size and Growth

Customer Buying Behavior

Buying Process:

• Discover through social media and online ads
• Visit the website, browse products, read reviews, compare options
• Follow the brand on social media, engage with content

Decision-Making Factors:

• Product quality and sustainability
• Brand reputation and ethical values
• Positive reviews and word-of-mouth
• Price and value for money

Competitive Landscape:

This comprehensive customer analysis example will help align business strategies with customer needs, drive growth, and build a loyal customer base.

In the end, understanding and prioritizing the customer is necessary for any business's success.

Customer analysis is not merely a section in your business plan; it influences product development, marketing strategies, and overall business growth.

And we hope you can write this crucial section effectively with this article. But if you're still unsure about formatting and presentation, consider using an AI business plan generator .

This tool can help you create a comprehensive customer analysis section and complete your entire business plan within minutes.

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Frequently Asked Questions

What are the most important customer metrics to track?

The most important customer metrics to track include:

• Customer acquisition cost (CAC)
• Customer lifetime value (CLV)
• Customer retention rate
• Customer satisfaction score (CSAT)
• Average revenue per user (ARPU)
• Repeat purchase rate

Tracking these metrics helps you understand customer behavior, improve satisfaction, and drive business growth.

What common mistakes should be avoided in customer analysis?

Common mistakes to avoid in customer analysis include:

• Ignoring data quality : Ensure your data is accurate and up-to-date.
• Overgeneralizing customer segments : Avoid lumping diverse customers into broad categories.
• Neglecting qualitative insights : Balance quantitative data with qualitative feedback.
• Focusing solely on demographics : Consider psychographic and behavioral factors as well.
• Not updating analysis regularly : Regularly review and update your analysis to reflect current trends.
• Overlooking competitor insights : Consider how competitors influence your customers.

Avoiding these mistakes will lead to more accurate and actionable customer insights.

What are the most effective methods for collecting customer data?

The most effective methods for collecting customer data include surveys, website analytics, social media monitoring, customer feedback forms, purchase history, customer reviews, etc.

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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