What exactly is market analysis?
Market analysis is a thorough examination of your company's target market and competitive landscape within a specific industry.
This analysis allows you to forecast the level of success you can expect when you introduce your brand and its products to market consumers.
Market analysis includes both quantitative and qualitative data, such as the actual size of the market you want to serve, the prices consumers are willing to pay, and revenue projections.
Conducting a market analysis can help you in a variety of ways, including:
Recognize industry trends and opportunities.
Set your company apart from the competition.
Reduce the risks and costs associated with starting a new business (or pivoting an existing one)
Customize your products and services to meet the needs of your target customers.
Examine your successes and failures.
Improve your marketing efforts.
Reach out to new market segments
Keep track of your company's performance.
Change the course of your company.
You may come across terms with similar meanings while researching this topic, such as market research and marketing analytics. Here are some examples:
Market research is the process of gathering information about a target market's needs and behaviors in order to effectively market products to it.
Marketing analytics is the process of analyzing the metrics of specific marketing efforts, such as landing page sign-ups and social media engagement, to improve return on investment.
Here, we concentrate on market analysis as one component of a comprehensive business plan. Continue reading to get started on your market analysis and laying a solid foundation for your business.
How to Conduct a Market Analysis in 6 Steps
This section covers the six main steps of market analysis, including the purpose of each step and questions to guide your research and reflections.
1Conduct research on your industry
The goal of this step is to gain a general understanding of your industry so that you can enter it, spot trends, and compete with other brands.
Here are some starter questions:
● What statistical data about your industry can you obtain from sources such as the US Bureau of Labor Statistics, BMI Research, and professional associations?
● How many companies are there in this industry?
● What is the size of the market in terms of potential customers?
● How much money does the industry make?
● What are the industry standards that businesses and consumers must follow?
● What external factors, such as laws and regulations, new technologies, global events, and economic and social change, have an impact on how businesses in this industry operate?
● Where do you see opportunities for industry innovation?
2Examine the competitive landscape
This step progresses from broad industry insights to a closer examination of the brands you'll be competing against as you seek to attract potential customers in your target market.
Here are some questions to help you get started:
● What are the most well-known brands in your industry? Who establishes trends and attracts customers' attention?
● What are the offers, price points, and value propositions of these brands?
● What sales tactics, technologies, and platforms are these companies employing to create a customer journey?
● How do these companies use content to educate and engage their customers?
● What can you glean from these brands' customer reviews?
3Determine market gaps
With knowledge of how competing brands perform, you can identify market gaps, differentiate your products and services, and stand out in your industry.
Needs that are currently unmet by existing brands are referred to as market gaps. In the online education industry, for example, you may discover that learners are interested in topics that existing courses do not cover, in which case you could create a course to meet this need.
Here are some questions to ask yourself to help you identify market gaps:
● What will external factors such as social change and new laws mean for developing products and services, based on your industry research findings?
● Directly ask customers, "What do you want or need that you can't currently find?"
● In what ways do competitors' products and services fall short?
● Given your strengths and expertise, how would you be able to create better products and services?
4Establish your target market
Now that you understand your industry, the competitive landscape, and market gaps you can fill, the next step is to narrow down the types of customers you want to serve.
● Define your target market based on the characteristics that make individual consumers more likely to buy your goods and services:
● Which market segment of potential customers in your industry can you effectively target?
● What are the demographics (age, ethnicity, income, location, etc.) and psychographics (beliefs, values, aspirations, lifestyle, etc.) of this segment?
● What is their daily routine like?
● What problems and difficulties do they face?
● What words, phrases, ideas, and concepts do consumers in your target market use to describe these issues when engaging with your competitors on social media?
● What are the features and benefits of your offerings, and how will they meet the needs of your target market?
● What marketing messaging can you use to demonstrate empathy and understanding to this target market?
5Determine entry barriers
As you learn about your target market and tailor your offers and messaging to consumers, it's critical to be aware of the factors that could prevent you from successfully entering your market. You can then devise a strategy to deal with problems.
Here are some questions to ask to make entry barriers more visible:
● What are your startup costs, including product development, technology, suppliers, patents, and certifications?
● What legal requirements must you meet before launching?
● What political, economic, and social factors might influence customers' behavior and likelihood to purchase your products?
● How much do your top competitors spend on advertising to gain customer loyalty?
● What steps will you need to take to position your offerings as superior in terms of value, price, and ease of purchase?
6Make a sales forecast
Forecasting sales is the process of estimating future sales in order to make confident business decisions or secure funding from investors and lenders. Forecasts for specific time periods, such as the next three months, six months, or year, may be useful.
Answer the following questions to generate a sales forecast:
● What products and services do you plan to offer?
● Based on your market size and the behaviors of your target market, how many units do you expect to sell during each time period?
● How much will you charge for each product or service?
● How much does it cost to produce and market each product?
To quantify your forecast, use the following formula:
(Number of units to sell X price per unit) - (cost per unit X number of units) = sales projection
Your market research checklist
Use this checklist, in conjunction with the steps outlined above, to guide your market analysis process.
- Conduct research on your industry
Prepare to navigate your industry by gaining a comprehensive understanding of everything that is going on.
- Conduct a competitor investigation
Understand the major players and how you can differentiate your brand.
Locate unsolved problems and unfulfilled desires in your market.
- Establish your target market
Understand your customers' distinct characteristics and tailor your offers and marketing accordingly.
- Determine entry barriers.
Recognize the obstacles in your path and confront them head-on.
Make confident business decisions by estimating future sales.
