Search engine spiders can only spider through text. They will use the content on your site to determine what your site is about, which in turn will help to decide how highly your site will be ranked for specific keyword phrases when visitors type them into the search engines. For this reason, keyword research is critical to obtaining natural search engine placement and should be at the top of your list when mapping out your SEO strategy.
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I completely agree that defintion of a target audience isa great first step, but would ask if adding in competitors to the analysis (mentioned here as a later step) helps draw out who your target audience would be via comparisons, i.e. showing who you are an who you are not - would be very interested to hear opinions on how this tactic can be used within the overall step in coordination with targeted keyword discovery.