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How to use AI & ChatGPT to Identify Target Markets for Your Business Plan

Noah Parsons

9 min. read

Updated November 22, 2024

A good business plan describes the specific target markets that your product or service is designed for. But coming up with these target market segments can be challenging. 

This is where tools like ChatGPT can help. Providing a shortcut to identify targeted, insightful, and actionable target markets. 

This article will show you how to harness ChatGPT’s capabilities to generate comprehensive market segmentation that impresses investors and guides your strategic planning. 

Benefits of using ChatGPT for customer segmentation

Researching your target market takes time, and sometimes the most profitable market segments aren’t the most obvious. You must have a good mind for research and a creative eye to sift through all the noise.

This is where tools like ChatGPT can be a game-changer.

Quick insights

Let’s be honest: not everyone has the time to dig through tons of data or read market research reports. With ChatGPT, you get nearly instant feedback.

Type in a question about what kind of customers might be interested in your new line of organic pet food, and you’ll get a list of potential customer segments like “health-conscious pet owners” or “eco-friendly shoppers.” 

Creativity

Sometimes all you need is a different perspective to find new target markets for your business. ChatGPT may not always get everything right, but it is an excellent brainstorming partner.

Ask for a list of 10 potential target markets for your craft brewery marketing agency, and you’ll get ideas like: “Homebrewers Turned Entrepreneurs”, “Non-Alcoholic Craft Breweries”, and “Beer Tourism Companies.”

Affordability

Startups and small businesses typically don’t have the budget to hire marketing consultants or research analysts. $20 per month to access the more powerful AI model that ChatGPT offers is a bargain by comparison.

How to start using ChatGPT for customer segmentation

Crafting a good prompt is the key to getting the most out of ChatGPT. Think of the prompt as your question to ChatGPT – it’s how you guide the conversation to get the answers you need.

Following are some tips to help you get started with your own prompt. In the next section, we’ll provide you with specific examples.

1. Identify your objective

Before you start typing away, have a clear goal in mind. 

Are you trying to determine what age group is most interested in your product? Or are you exploring which geographic regions are untapped markets for your services? 

Knowing your objective will help you formulate a direct and specific question.

2. Be clear and concise

ChatGPT is smart, but it can’t read your mind. 

The clearer and more direct your question is, the more accurate the answer you’ll get. Avoid jargon, complex language, or ambiguity. 

For example, instead of asking, “What demographics should I consider for optimizing the reach of my artisanal coffee blends?” you could ask, “What kinds of people would like artisanal coffee?”

3. Use open-ended questions

While yes-or-no questions can be helpful, open-ended queries often lead to richer insights. 

Instead of asking, “Should I target young people for my new fitness app?” try asking, “What customer segments would be interested in a new fitness app?”

4. Experiment with multiple prompts

Don’t be afraid to ask the same question in different ways. Sometimes a slight rephrase can yield new or more nuanced insights. 

For instance, after asking about customer segments for your fitness app, you could follow up with, “What are some unexpected customer groups that might use a fitness app?”

5. Refine based on feedback

As you receive answers from ChatGPT, you’ll get a better sense of how to tweak your prompts for even better responses. It’s an iterative process – each round of questioning can help you hone in on your target customer segments more accurately.

Setting up your prompt isn’t just about asking a question; it’s about asking the right question in the right way.

Related Reading: 9 Best AI-Powered Business Plan Generators Ranked

Step-by-step guide to generate customer segment ideas

Crafting a good prompt is just one part of the process for using ChatGPT to help with customer segmentation. You also need your prompting to produce something usable in your business plan.  

Follow these steps, and tailor our example prompts to your business idea, to turn your ChatGPT brainstorming into customer segmentation that you can actually use.

1. Craft your prompt—examples you can use

To get actionable information, you have to ask actionable questions. Here are some prompt examples to get you started:

• •What types of people are most likely to buy eco-friendly products?
• •Describe customer segments interested in a subscription box for home cooking.
• •Who are the potential audiences for a fitness app focused on mental well-being?

For each prompt, be sure also to include specifics about how you want the market segments to be explained. Add the following to your prompt to get additional details: 

“For each market segment, explain why the market is a good fit for my business and provide an example of a product or service offering that would be a good fit for that market.”

2. Interpret responses

After you’ve sent your prompt, ChatGPT will respond with some answers. You must know how to interpret these. 

Look for patterns or recurring themes. If “busy professionals” or “stay-at-home parents” keep popping up as answers to your questions about a home cooking subscription box—that’s worth noting. Some of these target markets may still seem a bit broad. After all, the more focused your target market is, the easier it will be to reach them and craft the right marketing message. 

If you find that ChatGPT is suggesting market segments that are too broad, ask it to break a specific segment down further: 

• •“Break the ‘busy professionals’ market segment further into more specific segments.”
• •“Be more specific about the ‘stay-at-home parents’ target market that you suggested and divide that market into more specific target markets.”

3. Dig deeper with follow-up prompts

Sometimes you’ll need more details to make sense of the customer segments you’ve discovered. Asking follow-up prompts is a major part of Using ChatGPT to surface deeper insights about your customers.

Don’t hesitate to use follow-up prompts like:

• •“Tell me more about why busy professionals would be interested in a home cooking subscription box.”
• •"How can I market eco-friendly products to budget-conscious consumers?"
• •“Suggest different types of fitness classes my gym could offer for teens and young adults.”  

These follow-ups can provide deeper insights into what makes those segments tick, allowing you to tailor your marketing strategies more effectively.

4. Prioritize customer segments

Not all customer segments are created equal. Some might be more lucrative or easier to reach than others. You can ask ChatGPT to help you prioritize with prompts like:

• •"Which customer segment should I focus on for maximum profitability?"
• •"What is the easiest customer segment to target for quick sales?"

5. Validate the ideas with your own research

It’s critical to remember that ChatGPT is not always accurate. At this stage (fall 2023), a general rule of thumb is not to trust any data provided by ChatGPT without fact-checking it yourself to ensure its accuracy. 

While ChatGPT is great at generating creative ideas, it can play fast and loose with the truth, often inventing “facts” and even sources. ChatGPT often sounds confident and convincing, so it’s tempting to trust it. Just remember that it doesn’t fact-check itself. 

You’ll have to invest some time to run Google searches to verify any facts that ChatGPT provides. Human judgment is crucial, as ChatGPT is not a trustworthy source. You can get ChatGPT to sometimes avoid this issue by adding the following to any prompts:

“Cite sources whenever possible, and include URLs if possible. List URLs at the end of your response, not inline.”

6. Take action

You have your customer segments, understand their nuances, and prioritized them based on your needs. The final step is to take action.

You can use the target market segments in your business plan to: 

• •Create targeted marketing campaigns.
• •Adjust your product offerings.
• •Rethink your business strategy based on what you've learned.

Examples of target market segmentation using ChatGPT

Here are two fairly basic market segmentation examples for hypothetical companies—where we prompted ChatGPT to create market segments for their business plans. 

We also include examples of marketing strategy adjustments that an owner of these businesses could make based on ChatGPT’s responses.

Example 1 – GreenEco Home Solutions: Targeting the Sustainable Building Market

Objective

To penetrate the market of eco-friendly building solutions with a new range of sustainable insulation materials.

Initial prompt

“What specific customer segments would be most interested in sustainable insulation materials?”

ChatGPT response

• •Green home builders
• •Commercial developers focused on sustainability
• •Municipalities aiming for green urban development

Follow-up prompt

“How can we strategically appeal to commercial developers focused on sustainability?”

ChatGPT response

• •Develop case studies showcasing the long-term cost savings and environmental benefits of using your sustainable insulation.
• •Offer volume discounts and long-term partnership benefits.
• •Initiate a thought leadership campaign in industry-specific journals to establish your brand as an authority in sustainable building solutions.

Outcome for your business plan

Dedicate 40% of the marketing budget to create a series of in-depth case studies and thought leadership articles. Assign a sales team trained in sustainable building solutions to approach commercial developers. Set a 2-year target to become a preferred supplier for at least three major commercial developers in the sustainable building space.

Example 2 – FinTrack: Personalized Financial Solutions for Businesses

Objective

To identify high-potential customer segments for a new AI-driven financial analytics platform tailored for businesses.

Initial prompt

“What types of businesses would benefit the most from an AI-driven financial analytics platform?”

ChatGPT response

• •E-commerce startups
• •Supply chain management firms
• •Venture capital firms

Follow-up prompt

“How can FinTrack strategically position its analytics platform to appeal to venture capital firms?”

ChatGPT response

• •Integrate features that allow for real-time portfolio tracking and predictive analysis of startup investments.
• •Offer customizable dashboards that can specifically display metrics relevant to venture capital decision-making.
• •Develop white papers addressing venture capital firms' specific pain points in financial analytics.

Outcome for your business plan

Allocate 25% of the development budget to create specialized features tailored for venture capital firms. Establish partnerships with venture capital industry events to sponsor sessions and distribute white papers. Set a milestone to acquire at least 20 venture capital firms as long-term clients within the first year of this strategic initiative.

LivePlan takes the guesswork out of prompt writing

If messing around with ChatGPT prompts doesn’t sound appealing, you may want to try a dedicated business plan tool like LivePlan. 

LivePlan has built-in AI features that can use the entire context of your business plan to help you develop market segments. It will suggest ideas, and with one click, you can add them to your plan.

If you’re writing your business plan independently, use a tool like ChatGPT, Google’s Bard, or Anthropic’s Claude to help you brainstorm market segments for your business. 

Remember to guide the process and decide what’s right for your business. AI tools are great at generating ideas but need human input to make the right strategic decisions to grow a successful business.

Noah Parsons

Before joining Palo Alto Software, Noah Parsons was an early Internet marketing and product expert in the Silicon Valley. He joined Yahoo! in 1996 as one of its first 101 employees and become Producer of the Yahoo! Employment property as part of the Yahoo! Classifieds team before leaving to serve as Director of Production at Epinions.com. He is a graduate of Princeton University. Noah devotes most of his free time to his three young sons. In the winter you'll find him giving them lessons on the ski slopes, and in summer they're usually involved in a variety of outdoor pursuits. Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.