How satisfied are you with the current performance of your business? Has it reached its stated objectives or have previous efforts failed to yield tangible results? Addressing these questions is essential in terms of both short- and long-term success. One of the most effective ways to appreciate the status of any organisation is to perform a thorough market analysis.
Unfortunately, some approaches are rather nebulous while others fail to identify key pain points that may warrant further attention. It is therefore prudent to better understand how to do a market analysis as well as what discrete steps are involved. Let us begin by highlighting the fundamentals.
What is a market analysis?
As the term may already suggest, a market data analysis involves assessing the performance of a marketplace associated with a specific industry. It is ultimately intended to provide stakeholders with a greater degree of clarity and insight regarding any changes that can help to maximise their efforts. Here are some of the metrics that will be examined by a market study:
- Identifying new and existing customers.
- Understanding their buying habits.
- Gauging the size of the target market.
- Recognising any competitors.
- Determining the strengths and weaknesses of this competition.
- Appreciating how much customers are willing to pay for a specific product or service.
Please note that this type of research is very different to a company analysis (a study designed to examine the performance of ongoing business operations). However, both methods can be used in synergy to obtain even more accurate results.
What is the best way to do a market analysis?
There are essentially two main goals of any market study plan. It is intended to better appreciate specific market conditions and to determine whether or not these conditions are conducive to sustaining ongoing business operations. However, this is often easier said than done if a strategy is not clearly laid out from the beginning.
It is therefore wise to segment this analysis into easily digestible portions. Each can thereafter be given due diligence without overlooking crucial data points. For the sake of this article, we have created a market analysis template in six discrete stages. Without further ado, let us describe each in greater detail.
Segmentation and demographics
It is first important to accurately assess the size of the market (referred to as a market size analysis). This will depend upon the business in question. For instance, a boutique hotel will likely focus its efforts upon a local demographic, while a multinational organisation will address a much larger audience.
Once the size and location of the demographic are determined, the notion of segmentation will need to be addressed. A market analysis example will help to cement this point. Let us imagine that a firm has a choice to target two different regions. The total value of region A is £200 million pounds while the net worth of region B is £100 million pounds. There are approximately 1,000 customers in region B, while region A hosts just over 500. Although region A may appear attractive in terms of overall revenue generation, there are fewer customers when compared to region B. Region B could therefore represent the most logical choice. This is the essence of marketing segmentation.
The target market itself
An effective market analysis will always involve appreciating the target market itself. What type of customers will resonate the most with the products and services being offered? Have they already expressed an interest in what the organisation has provided? Other factors to identify when establishing a target market include age, location, gender, and previous buying habits (all demographic variables). Assuming that the subsequent market research analysis is able to clearly define these variables, it is next crucial to appreciate the needs of the audience itself.
The needs and desires of potential customers
As this article notes, the needs and desires of a consumer are often considered to represent the qualitative side of market research. Simply stated, why do customers buy a certain product? What solutions are they looking for? What pain points can the service in question address?
Perhaps the target market is more interested in low-cost alternatives that revolve around practical needs. Consumers might instead be focused on quality and reliability. Identifying these and similar variables will require a fair amount of market assessment research, and naturally, the size of the target demographic will have an influence on the results.
A competitive analysis represents yet another core component of any well-planned approach to market research. This type of assessment will instead focus on the performance of relevant competition. Without such insight, it would be nearly impossible to appreciate their strengths and weaknesses. Here are some of the steps involved:
- Identifying potential competitors.
- Examining their product offerings.
- Calculating the market reach and share of these competitors.
- Establishing their customer satisfaction rates.
- Product-specific details such as the most popular items and their price points.
- Analysing their approach to SEO (such as keywords and social media portals).
Note that this is only a competitive market study outline. More variables may need to be defined in relation to the type of business in question.
Possible stumbling blocks to overcome
What barriers may prevent a business from entering a specific marketplace? Common examples include a lack of capital, few investors, poor brand recognition, and a lack of access to physical resources. Once these have been identified, they will be much easier to overcome. Once again, different businesses are associated with their own unique challenges. The main takeaway point is that identifying a problem is needed before a solution can be leveraged.
Finally, a market analysis will need to address potential regulatory and/or compliance issues. For instance, a business operating within the European Union must adhere to all relevant GDPR guidelines. International organisations may likewise be concerned with trade restrictions or tariffs that will be applied after a sale. Therefore, it is wise to consult with a professional project management firm. From strategic mapping to multi-jurisdictional tax advice and compliance concerns, no stone will be left unturned.
The benefits of a thorough market analysis
Now that we have taken a look at a basic market analysis meaning as well as the associated mechanics, it is wise to conclude by recapping the benefits that businesses can enjoy. These include:
- Fully understanding the target market.
- Appreciating which products and services are the most popular.
- The ability to allocate time and resources in the right direction.
- Remaining cognisant of competitors’ actions.
- Superseding potential market barriers.
- Compliance with all governmental regulations.
The fundamental goal of any market analysis is to ensure a higher return on investment (ROI) and to remain confident that ongoing efforts are not being squandered.