How To Do Market Analysis

When you are going to start a new business or a new product, it is important to do market analysis first. Proper understanding of customer is key to success for any business. Plan and research about your strategies is very important before diving in a bigger pool of market.

Market analysis and market research is very important part in business plan. It helps businesses in reducing risks, staying competitive, profitable through proper research and planning, and strengthening business on financial front.

Before diving into how to do a market analysis;

What is Market Analysis?

Market analysis is the qualitative and quantitative research and analysis of a certain market. A process of collecting detailed information about a particular market in an industry. Market analysis is a sub-domain of market research.

Market analysis helps you in;

• validating your idea
• understanding demand and volume of the market
• understanding value of the market
• calculating overall size and potential of the market
• understanding your potential customers and their demographics
• determining your own strengths, weaknesses and opportunities
• understanding competitors and their offerings
• understanding overall economic environment
• promoting your product
• securing funds from external investors
• understanding risks and returns associated with the market

How To Do Market Analysis

Market analysis takes a lot of time, effort and research. To make you guide through the whole market analysis journey, here are seven steps below;

1. Set Market Analysis Objectives

Firstly, identify and set market analysis objectives. There are several reasons to do market analysis for businesses. You can use market analysis to assess business risks and threats, reducing any problem, or identifying new opportunities.

Before conducting market analysis, know that it is for internal purpose or external purpose. Internal purpose is to enhance business operations, cash flows or any other internal related operations of the business.

External purpose is to gain market competitive edge, to convince lenders to invest in business, securing loans, researching on pricing, or identifying new business locations.

Internal and external data would be totally different from each other and you don’t collect the other one when you are conducting any of it. Identify the purpose (internal, external or both) of your market analysis before taking further steps.

Read more: How To Do Market Research

2. Conduct Industry Analysis

After understanding your market analysis purpose, it’s time to conduct the industry analysis as a whole. Conducting industry analysis will give you the bird eye view of the whole market and industry environment.

Here you will determine the conditions of your industry and where it is heading. You will need to include various parameters like industry size, growth, saturation and trends. It is different from market research.

When you are conducting industry analysis, you are researching about all the businesses that are like your business. Industry analysis will let lenders and investors know the worth and projection of your industry.

Lenders and investors will know that both their money and time is worth investing in your business or not. When conducting industry analysis, you should consider overall market size, market value, market demand, market growth and market need.

3. Define Your Target Audience

Understand that not every person will be your customer. When you are analyzing your market, determine your potential customers. Identify potential customers by identifying their needs, interests, and demographics.

It will help you in attracting and converting your potential customers to actual buying and loyal customers. You need to understand your customers and where they belong to. You can look at their demographics and other segmentations like;

• Age
• Gender
• Income
• Occupation
• Education level
• Location
• Behaviors
• Psychographics
• Marital status
• Family status
• Buying patterns and behaviors
• Other trends

After identifying your customers, you need to identify their needs, interests, and personalities. You can also create buyer personas on the basis of your market research. Many businesses have one buyer persona other have multiple.

When a business grows, its segments and target audience changes too. So, it is important to revisit again and again your strategy to identify right segments and target right audience.

4. Conduct Competitive Analysis

Almost every business has competitors. Market analysis is incomplete without conducting competitive analysis. Prepare a list of all of your competitors, and prepare their SWOT analysis.

Identify their competitive advantage that they have over your business, and potential threats that they can create for your business. After creating SWOT analysis of competitor, identify least to most threatening competitors for your business.

It is to know about your competitor, their offerings, their pricing strategy, their location, their target audience, their strengths, their weaknesses from which you can take advantage.

Read more: How To Do Competitive Analysis

5. Collect Additional Information

Collect as much information as you can from various sources because abundance of information will make your business take off easy. Information will be your greatest ally when you are going to compete in the market.

The data should be unbiased, relevant, based on facts and figures, and impartial. In this regard, you can conduct both online and offline (physical) surveys. Offline surveys through interviews, focus group meetings, and questionnaires. 

You can conduct online surveys of current customers through email, social media, and other platforms, and ask them about various aspects of your business like pricing, services, quality, how they get to know about the company, and share it with family and friends.

You can also use other sources to collect the relevant information like;

• The Bureau of Labor Statistics
• The Census Bureau
• State and local commerce websites
• Bureau of Economic Analysis Consumer Spending
• US Federal Reserve Consumer Credit Data
• US Consumer Product Safety Commission Research and Reports
• Trade Journal Articles

6. Analyze Your Findings

Once you are done with market analysis, it’s time to review the research findings. Review your research findings and divide them into different sections like your business, competitors, and target audience.

On the basis of your research, you will also be able to estimate and forecast many things for your business. Analyze how you can apply these research findings in business decisions, enhance sales, and increase customer step ins.

There are some ways through which you can categorize your findings;

• Industry overview
• Estimated market share
• Estimated growth
• Pricing of products and services
• Sales promotion for customers
• Market segments
• Projected cash flows

7. Take Necessary Actions

Now it is time to utilize your research findings to take necessary actions and make your business more efficient, competitive and profitable. You will have to spend a good amount of time on conducting market analysis but it will pay off later.

Conclusion

It is very important part of business plan and helps you in validating your idea, understanding market environment, and competitors. It also helps you in making an attractive business plan based on research and analysis.

Make it more convincing by adding charts, tables, bullet points, pictures and make information visible and interactive. So that you can attract the reader towards overall business idea.

FAQ

1. What are 4 types of market analysis?

Four types of market analysis techniques are;

• Surveys
• Interviews
• Focus groups
• Observation

2. What does a market analysis include?

Market analysis is the qualitative and quantitative research and analysis of a certain market. A process of collecting detailed information about a particular market in an industry.

3. What is purpose of a market analysis?

The purpose of market analysis is to help in;

• validating your idea
• understanding demand and volume of the market
• understanding value of the market
• calculating overall size and potential of the market
• understanding your potential customers and their demographics
• determining your own strengths, weaknesses and opportunities
• understanding competitors and their offerings
• understanding overall economic environment
• promoting your product
• securing funds from external investors
• understanding risks and returns associated with the market

4. What are the steps of market analysis?

The steps of market analysis are;

• Set Market Analysis Objectives
• Conduct Industry Analysis
• Define Your Target Audience
• Conduct Competitive Analysis
• Collect Additional Information
• Analyze Your Findings
• Take Necessary Actions