Quite a number of people get into business each year, but a large number of them do not make it through the two to five-year mark before crashing. A lot of things could lead to business failure. That is why you need to do a comprehensive market analysis before starting your business. This article considers 5 steps to conduct a comprehensive market analysis for your business.
What is Market Analysis?
Market analysis is a process of performing a detailed assessment of the target audience of your business, its industry, and its economic and competitive actors. When you do a good market analysis, you should be able to project the level of success with which you can introduce your brand into the market and get results.
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A typical market analysis contains quantitative data on target market size, optimal prices, and revenue projections. It also includes qualitative data such as target audience demography, buying motives, and consumer values.
Benefits Of Conducting Market Analysis
- You will be able to identify trends and take advantage of opportunities in your industry
- It’s a great opportunity to identify differentiation points and initiate further differentiation from competitors
- You can reduce the risks and costs associated with starting your business.
- You can use the analyzed data to tailor your brand to better meet the needs of your target customers
- A better grasp and knowledge of the strengths and weaknesses of your business will allow you to optimize your business efforts
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5 Steps to Conducting a Comprehensive Market Analysis
1. Perform Industry Research
You need a good understanding of your target industry in order to penetrate it. You should be able to spot trends from the top players in the industry and also know how to compete with other brands.
You can take steps to gather statistical information from sources such as Statistics Bureaus and professional organizations. Other needed information includes market size, revenue generated by the industry, industry standards, external factors, threats, and opportunities.
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2. Research the Market Competition
Now, it’s time to consider potential competitors in the market you wish to penetrate. After all, you wish to attract potential customers from the same target market as them. You should know what advantages you have over them and vice versa. Here are some tips on how to go about performing a competitive market analysis.
- Begin by identifying your primary, secondary, and other competing brands. A great clue is to consider brands that potentially share the same customer base with you.
- You may do a social media and Google search on your product or service.
- Other sources of competitor information include trade associations, local newspapers, and financial databases.
- One of the objectives of your competitor research is to research their content strategies and identify gaps in them.
- You should also have a good idea of their sales approach.
- The structure and content of their website should give you an idea of their SEO focus.
- Do not forget to consider their social media profiles. This includes their use of images and posting frequency.
- Pay attention to their price points, value propositions, customer reviews, and technologies.
- Always keep in mind that you are benchmarking them so try to identify areas you can improve on.
3. Identify Gaps in the Market
Competitive insight is not all you’re about. By now, you should be able to pinpoint market gaps or needs that existing brands are not currently filling up in the market space. If you make your products stand out, you may stand a good chance of filling those gaps. You should, therefore, pay attention to areas where the products and services of competitors fail to meet customer expectations. Then, you can research ways to create better and improved products and services.
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4. Define and segment your target audience
You may have done a bit of defining the demography of your audience during the industry research phase. However, it’s now time to be more specific. You should know the specific kinds of customers you’re targeting. Your ideal customer should be one who would want to patronize you so you can define their characteristics. What market segment are they likely to be in? How would you describe their demographics (age, income, location, etc.), interests, and behavior? You should also know their motivations, challenges, pain points, and communication patterns.
This information will go a long way in helping you define your offers and craft your messaging according to the needs of your target market.
5. Consider External Factors
Your market analysis is hardly complete if you do not include an analysis of factors that may hinder market penetration. When you’re aware of these factors, you will be better able to come up with a mitigating strategy.
In line with this, you should have conducted a Strength, Weakness, Threats, and Opportunities (SWOT) analysis on your business. Then under the Threats component of it, you would have done a Political, Environmental, Social, Tax, Legal, and Economic (PESTLE) analysis to identify these external factors that may pose barriers to market entry.
Fortified with these insights, you can then prepare an actionable strategy to better manage these barriers.
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Bonus Step: Prepare a Revenue Forecast
It can be useful to conclude your market analysis with a sales forecast. Sales forecasts can be made for the next quarter, half-year, or year. To create one, you should know what products and services you wish to offer, the projected quantity to be sold based on market size and expected customer behavior, and the target prices that are assigned to each product or service.
A well-quantified sales forecast can give you the confidence to plan and implement your business strategies. More importantly, it can provide an indication of the viability of your business idea to potential investors and partners.
Effective Market Analysis for Good Decision-making
A comprehensive market analysis is crucial for the success of your business. By researching your industry, analyzing competitors, identifying market gaps, segmenting your audience, and considering external factors, you can gain valuable insights that help you make informed decisions. Moreover, you will be better able to minimize risks and tailor your offerings to meet customer needs. Ultimately, it becomes easier to position your business for sustainable growth in a competitive environment.
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