7 Ways to Conduct a Market Analysis for Your Business
Market analysis is an in-depth assessment of a market within one industry. A market analysis can have many benefits, including lowering your risk and providing better information to help you make business decisions. Here are seven steps in conducting a market analysis.
Understanding your customers is key to business success. Your business may struggle to develop a marketing strategy that works. Without understanding your customers, their needs, and what they want, you could be in danger. Market analysis is a great way to get this information. Although a market analysis is time-consuming, it can be done in seven easy steps.
What is a Market Analysis?
Market analysis is an in-depth assessment of a market within one industry. This analysis will help you understand the market dynamics, including volume and value, customer segments, buying patterns, and competition. These are the questions that a thorough marketing analysis should answer:
- Who are my potential clients?
- What are my customers’ purchasing habits?
- What is the size of my target market?
- What price are my customers willing to pay?
- Which are my main competitors
- What are the strengths and weaknesses of my competitors?
What are the advantages of running a marketing analysis
Marketing analysis can help reduce risk, identify emerging trends, and project revenue. A marketing analysis can be used at any stage of your business. It can also be useful to do one each year to stay on top of market changes.
An extensive market analysis is a part of any business plan. It gives you an in-depth understanding of your audience and competitors, which will help you to create a more targeted marketing strategy.
Also read: What is Financial Analytics A full Guide?
These are just a few of the many benefits that market analysis can bring:
- Risk reduction: Understanding your market will help you reduce risk in your business. You’ll be able to identify major market trends and the key players in your industry. This information will also inform your business decisions. A SWOT analysis is a tool that helps you identify the strengths, weaknesses, and threats to your business.
- Targeted services or products: Your customers will be happier when you are in a better position when you are able to clearly understand what they want from you. Knowing who your customers are will allow you to tailor your business’s offerings for them.
- Trends in the future: Being ahead in business often means being first to recognize a new opportunity. Using a marketing analysis to keep up with industry trends is a great strategy to position yourself to capitalize on this information.
- Revenue projections: A market forecast is an integral part of all marketing analyses. It projects future trends, characteristics, and numbers in your target market. This will give you an estimate of your profits and allow you to adjust the budget and business plan accordingly.
- Evaluation benchmarks: It can be hard to measure your business’s success beyond numbers alone. Market analysis gives you benchmarks against which to judge your company’s performance and compare it with others in the industry.
- Context for past mistakes: Marketing analytics can help you understand your industry’s past failures or anomalies. In-depth analytics, for example, can help explain how a product’s sale was affected or why a particular metric performed as it did. You can avoid repeating the same mistakes or experiencing similar anomalies by being able to analyze and explain what went wrong.
- Marketing optimization: An annual analysis of marketing can help you to understand your marketing and identify areas that need improvement. It also shows you how your marketing is performing in comparison with other companies in the industry.
How to conduct a market analysis
Although a marketing analysis isn’t difficult, it requires a lot of research. So be ready to spend a lot of time on the process.
These are the seven steps to conducting a market study:
1. Your purpose should be determined
Market analysis can be conducted for many reasons. You may need to understand the market or gauge your competitors. It doesn’t matter what reason you have, it is important to identify it immediately to ensure that you stay on track. First, decide whether your purpose is internal (such as improving cash flow or business operations) or external (such as seeking a loan for a business). The type of research that you do will depend on your purpose.
2. Find out the current state of the industry.
It is vital to provide a detailed overview of your industry’s current state. You should include a detailed description of where your industry is headed, including metrics like size, trends, and projected growth. There should also be plenty of data to back up your findings. To find your market’s competitive advantage, you can conduct a comparative analysis.
3. Identify your target customers.
Not all people in the world are your customers. It would be a waste to try and get everyone to buy your product. Instead, focus your efforts on the people most likely to buy your product by conducting a target market analysis. This will help you understand the market size, your customers, their origins, and how they might be influenced by your product.
- You have to be there
You might create a persona or customer profile that represents your ideal customer during your research to use as a template for your marketing efforts.
4. Learn from your competitors.
You need to have a solid understanding of your competition. This includes their market saturation, their unique market strategies, their strengths, and weaknesses, as well as their advantages and disadvantages in the market. First, list all of your competitors. Next, go through the list and do a SWOT analysis for each competitor. What do they have that you don’t? What would make a customer choose your business over the other? Try to imagine yourself as the customer.
Next, rank your competitors in order of most to least threatening. Finally, decide on a time frame to conduct SWOT analyses of your most threatening competitors.
5. Collect additional data.
Marketing analysis is all about information. You can never have enough data. You must ensure that the data you use is reliable and accurate. Be careful where you source your data. These are some reliable business data sources:
- U.S. Bureau of Labor Statistics
- U.S. Census Bureau
- Commerce sites for state and local governments
- Trade journals
- Do your own SWOT analysis
- Market surveys or questionnaires
6. Analyze your data.
Once you have collected all of the information and verified that it is accurate, it’s time to analyze it to make it useful. You can organize your research into sections that make sense for you. However, it is important to include sections that are relevant to your target market, purpose, and competition.
These are the key elements of your research:
- A snapshot of the industry’s growth and size
- Projection market share for your business
- A sector outlook
- Trends in customer buying
- Your projected growth
- What price customers will pay for your product/service
7. Use your analysis.
After you have done the research to create a market analysis it is time to make it work. Look within your company to see where your findings and research can be used to improve your business. Are there things you admire in other companies? Is there a way to improve the effectiveness of your marketing strategies?
To make it easier for lenders to read and understand if you did your analysis for an external purpose, organize your data and research into a readable and easily digestible document.
Keep all your research and information for the next analysis. Consider making a reminder on your calendar each year to ensure you are always in control of your market.