customer analysis for business plan

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 the Customer Analysis Section of Your Business Plan

Written by Dave Lavinsky

What is a Customer Analysis?

The customer analysis section which incorporates the essential steps of writing a business plan step-by-step is a key component of your business plan and assesses the customer segments your company serves. The objective of the customer analysis is to justify your market choice, identify differentiators, and prioritize the segments you are targeting.

Components of a Customer Analysis

A complete customer analysis contains 3 primary sections:

• Identify your target customers
• Convey the needs of these customers
• Show how your products and/or services satisfy these needs

Download our Ultimate Business Plan Template here

Why Conduct a Customer Analysis?

A thorough customer analysis provides the following benefits:

• Supports your market choice and helps you avoid entering too broad a market
• Helps you focus on serving current customers rather than trying to find new ones
• Enables you to determine which segments to prioritize and how much effort to put into each one
• Helps you craft a strategic marketing plan and platform to reach these customer segments

How to Write Your Customer Analysis

The first step of the customer analysis is to define exactly which customers the company is serving. This requires specificity. It is not adequate to say the company is targeting small businesses, for example, because there are several million of these types of customers. Rather, an expert business plan writer must identify precisely the customers it is serving, such as small businesses with 10 to 50 employees based in large metropolitan cities on the West Coast.

When defining your target market, be sure to identify the following:

• The market segment you are choosing to serve (i.e., age range, annual income, etc.)
• The geographic location of these customers (i.e., city, region, state)
• What is the average revenues/income of these customers?

Once the plan has clearly identified and defined the company’s target customers and the customer demographics, it is necessary to determine the size of your target market: How many potential customers fit the given definition and is this customer base growing or decreasing?

Next, the business plan must detail these customers’ needs. Conveying customer needs could take the form of past actions (X% have purchased a similar product in the past), future projections (when interviewed, X% said that they would purchase product/service Y), and/or implications (because X% use a product/service which our product/service enhances/replaces, then X% need our product/service).

Prioritize the needs of your target customer according to how critical they are, and include a description of each in your customer analysis. Be sure to answer questions such as: 

• What pain points do these customers have? How is their current situation lacking? 
• What will your product/service do to help solve these problems?

The business plan customer analysis must also detail the drivers of customer decision-making. Sample questions to answer include:

• Do the customers find price to be more important than the quality of the product or service?
• Are customers looking for the highest level of reliability, or will they have their own support and just seek a basic level of service?
• Why will customers purchase your product and/or service rather than look for cheaper alternatives?

Prioritize the benefits of your products and services according to how much difference they make for customers and include a description of each in your customer analysis. Be sure to answer questions such as:

• What does your product do? How is it unique or better than other similar products?
• What type of customer could benefit the most from this feature/benefit and why?

Be sure to also show an understanding of the actual decision-making process. Examples of questions to be answered here include:

• Will the customer consult others in their organization/family before making a decision?
• Will the customer seek multiple bids?
• Will the product/service require significant operational changes (e.g., will the customer have to invest time to learn new technologies, and will the product/service cause other members within the organization to lose their jobs? etc.)

Finally, identify each segment you are targeting and how much effort you will put into reaching them. Be sure to answer questions such as:

• How many customers are in each segment and how much revenue will they generate?
• What percentage of total industry sales does this represent?
• What market potential did we estimate for each segment and how does that compare with actual sales? Include the number of leads converted and average deal size.

Example Customer Analysis Template for a Candle Making Company

The needs of this customer segment are that they are looking for high-quality candles that are made with all-natural ingredients. The benefits of their product that are most important to them are that the candles are vegan, eco-friendly, and made with essential oils. Drivers of customer purchase decisions include quality, price, and unique offerings. The company’s target market size is 750,000 people which represent a significant portion of the candle industry. They will put effort into reaching these customers through online advertising, social media posts, and word-of-mouth.

It is essential to truly understand customers to develop a successful business and marketing plan. That’s why including a customer analysis in your business plan is so crucial. Likewise, sophisticated investors require comprehensive profiles of a company’s target customers. By spending the time researching and analyzing customers in your target market, you will develop both enhance your business strategy and funding success.

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Other Resources for Writing Your Business Plan

How to Write a Great Business Plan Executive Summary How to Expertly Write the Company Description in Your Business Plan How to Write the Market Analysis Section of a Business Plan Completing the Competitive Analysis Section of Your Business Plan The Management Team Section of Your Business Plan Financial Assumptions and Your Business Plan How to Create Financial Projections for Your Business Plan Best Business Plan Software Everything You Need to Know about the Business Plan Appendix Business Plan Conclusion: Summary & Recap

Other Helpful Business Plan Articles & Templates

• 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.

Happy planning!

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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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