A market analysis is necessary for businesses. It involves gathering data from various sources, identifying potential problems for the business, understanding the target market, the competition, the industry, and much more. It helps you understand your industry in depth, and enables you to make informed data-driven decisions that can make the difference between success and failure.
A market analysis involves detailed research. The more data you have, the better you’ll understand the market. The market includes everything from your customers to your competitors, the industry as a whole, as well as projected trends. Conducting a market analysis can be time-consuming, but it’s always worthwhile.
Businesses conduct a market analysis before they put their products or services to market. It’s also an essential part of a business plan.
What is market analysis?
A market analysis is a detailed study of a specific sector within a larger industry. It helps businesses position themselves in the market, and enables them to make good decisions in the long run.
Conducting a market analysis involves gathering data from multiple sources – such as reputable governmental sources, industry trends and insights etc. Other sources include surveys and questionnaires, interviews, observations etc.
A market analysis looks at variables like market dynamics, product/service prices, the target market, consumer buying patterns, and more. The analysis helps businesses:
- Identify how they’re positioned in the market.
- Identify customers, their buying habits and patterns, what informs their buying decisions etc.
- Mitigate business risks.
- Increase ROI.
How do you conduct research for market analysis?
You can divide your market research into two categories: primary and secondary research.
Here, you’ll be gathering data about the market and the customers. Primary research comes directly from the source.
Surveys, questionnaires, interviews, and other direct sources will help you gather information. Primary research is further divided into exploratory and specific research.
During exploratory research, you’ll be identifying potential problems that could negatively affect your business. Problems such as whether you’ve priced your products or services too high, whether you’ve been marketing to the wrong consumers etc. are considered here. By the end of this stage, you should be able to segment your research into specific categories.
This includes reputable sources such as data from the government, industry leaders, surveys and statistics etc. This informs you about industry trends, your competition, and more.
How do you conduct a market analysis?
Conducting a market analysis will take time. It should ideally be done before you’ve taken your product or service to market. You can either do it once at the beginning, or annually. An annual market analysis will help you stay on top of industry trends and position your business to succeed.
- Identify the consumer base
Your products or services will be aimed at certain consumers. Focusing and narrowing the portion of the market that are most likely to buy your products or services will help you focus your marketing efforts. In this phase, you should conduct research that answers questions like:
- Who are my target customers?
- What kind of products and services in my industry do they buy?
- How much are they willing to spend?
- Who are my competitors?
- Which competitors do my potential customers prefer, and why?
Once you’ve identified your target market, create buyer personas. A buyer persona contains information like:
- Pain points
This will help you identify your customers.
- Identify competition
Your main aim should be to surpass your competition and be the preferred product or service provider for your customers. To that end, understanding your competiton is necessary.
Once you’ve gathered data on all competitors, list them out in the order of ‘greatest competition’ to competitors you feel you can surpass easily.
Using the data you’ve gathered, do a SWOT analysis on all your competitors.
- Purpose of market research
Businesses usually conduct market analysis with a certain purpose in mind. This can be anything, from increasing sales, getting leads or writing a business plan.
The purpose of your analysis will determine where else you focus your research. Boosting sales requires research on consumer buying habits, while a business plan will require a thorough but general market analysis.
- Analyze your data
Use the data you’ve gathered to understand your industry. You should first segment your data into different categories. This will help you analyze each section better.
Here, you’re studying a general overview of the market, your place in it, industry growth and trends, price structures etc. Your purpose will help you isolate specific questions that you can answer in this phase.
- Apply analysis
The last phase includes implementing the suggestions for the improvements your market analysis has given you. Look for actionable solutions that you can utilize to scale your business and increase ROI.
Also, consider getting business insurance is a good way to protect your business from unexpected risk. Find out more here.
- Farese, DF, January 27th 2021, ‘How to Do Market Research: A Guide and Template’, viewed February 15th 2021, https://blog.hubspot.com/marketing/market-research-buyers-journey-guide
- Kerr, MK, 2019, ‘How to Write a Market Analysis’, viewed February 15th 2021, https://articles.bplans.com/how-to-write-a-market-analysis/
- Kuligowski, KK, August 3rd 2020, ‘How to Conduct a Market Analysis for Your Business’, viewed February 15th 2021, https://www.businessnewsdaily.com/15751-conduct-market-analysis.html
- Uzialko, AU, September 4th 2020, ‘How to Conduct a Marketing Analysis’, viewed February 15th 2021, https://www.business.com/articles/how-to-conduct-a-marketing-analysis/