A market analysis is a thorough assessment of a market within a specific industry. These analyses have many benefits, such as reducing risk for your business and better informing your business decisions. A market analysis can be a time-intensive process, but it is straightforward and easy to do on your own in seven steps.
To perform a market analysis for your business, follow the steps outlined in this guide.
In a market analysis, you will study the dynamics of your market, such as volume and value, potential customer segments, buying patterns, competition, and other important factors. A thorough marketing analysis should answer the following questions:
A marketing analysis can reduce risk, identify emerging trends, and help project revenue. You can use a marketing analysis at several stages of your business, and it can even be beneficial to conduct one every year to keep up to date with any major changes in the market.
A detailed market analysis will usually be part of your business plan, since it gives you a greater understanding of your audience and competition. This will help you build a more targeted marketing strategy.
These are some other major benefits of conducting a market analysis:
A market analysis can benefit your business in many ways, especially if you conduct regular analyses to make sure you have current information for your marketing efforts.
The below drawbacks of running a market analysis pertain less to the method itself than the resources it requires.
Where market analysis is broad and comprehensive, conjoint analysis focuses on how customers value what you offer. Surveys are often the backbone of conjoint analysis – they’re a great way for customers to share what drives their purchases. Product testing is an especially common application of conjoint analysis. This method can yield insights into pricing and product features and configurations.
Sentiment analysis goes beyond number-driven market and conjoint analysis to identify how customers qualitatively feel about your offerings. It can show you what customers are happy and unhappy about with your offerings or buying process. You can also wade into deeper emotional territory such as anger, urgency and intention, or you can dig up descriptive feedback. It’s a great tool to use alongside market analysis, whereas conjoint analysis is all but included in market analysis.
While conducting a marketing analysis is not a complicated process, it does take a lot of dedicated research, so be prepared to devote significant time to the process.
These are the seven steps of conducting a market analysis:
There are many reasons you may be conducting a market analysis, such as to gauge your competition or to understand a new market. Whatever your reason, it’s important to define it right away to keep you on track throughout the process. Start by deciding whether your purpose is internal – like improving your cash flow or business operations – or external, like seeking a business loan. Your purpose will dictate the type and amount of research you will do.
Map a detailed outline of the current state of your industry. Include where the industry seems to be heading, using metrics such as size, trends and projected growth, with plenty of data to support your findings. You can also conduct a comparative market analysis to help you find your competitive advantage within your specific market.
Not everyone in the world will be your customer, and it would be a waste of your time to try to get everyone interested in your product. Instead, use a target market analysis to decide who is most likely to want your product and focus your efforts there. You want to understand your market size, who your customers are, where they come from, and what might influence their buying decisions. To do so, look at demographic factors like these:
During your research, you might consider creating a customer profile or persona that reflects your ideal customer to serve as a model for your marketing efforts.
To be successful, you need a good understanding of your competitors, including their market saturation, what they do differently than you, and their strengths, weaknesses and advantages in the market. Start by listing all your main competitors, then go through that list and conduct a SWOT analysis of each competitor. What does that business have that you don’t? What would lead a customer to choose that business over yours? Put yourself in the customer’s shoes.
Then, rank your list of competitors from most to least threatening, and decide on a timeline to conduct regular SWOT analyses on your most threatening competitors.
When conducting marketing analyses, information is your friend – you can never have too much data. It is important that the data you use is credible and factual, so be cautious of where you get your numbers. These are some reputable business data resources:
After you collect all the information you can and verify that it is accurate, you need to analyze the data to make it useful to you. Organize your research into sections that make sense to you, but try to include ones for your purpose, target market and competition.
These are the main elements your research should include:
Once you’ve created a market analysis, it’s time to actually make it work for you. Internally, look for where you can use your research and findings to improve your business. Have you seen other businesses doing things that you’d like to implement in your own organization? Are there ways to make your marketing strategies more effective?
If you conducted your analysis for external purposes, organize your research and data into an easily readable and digestible document to make it easier to share with lenders.
Retain all of your information and research for your next analysis, and consider making a calendar reminder each year so that you stay on top of your market.
If you have the time to conduct a market analysis yourself, go for it – this guide will help. If you don’t have the time, hiring an in-house expert or outsourcing your analysis is often worth the cost. Your analysis will help you figure out who to target and how – and that’s a huge part of business success.