How to Conduct Market Analysis

Either starting a new business or making a review of an existing business operation, conducting a market analysis is the easiest way to understand what revolves around a specific market. With market analysis, business owners are able to determine the reality about any specific market.

Additionally, market analysis gives the business owners extensive knowledge about the market, in which they are operating in or want to enter.

For more understanding of the importance of a market analysis for business expansion or development, this article describes its meaning, why it is essential and what to cover when conducting the analysis.

What is market analysis?

Market analysis is the process of collecting information regarding a particular market for business development and decision making. The information collected helps to determine whether the market being analysed is viable for the business idea being developed.

Doing a market analysis is the very first step when determining the condition of a market for business development or new entry. When data are collected from the right people and the right sources, it will help make accurate decision on the next move for your business.

Market Analysts should bear in mind that there is no one straight or perfect model for conducting a market analysis. The method you employ depends on the market, industry and the overall goals of the analysis.

For more, check out this interesting book: New Methods of Market Research and Analysis

Why does it matter?

Conducting a market analysis give you the ability to better know an existing market or new one before stepping in. In simplicity, business owners will get to know how businesses should be operated to match the current trends within the market.

One of the key reasons of conducting a market analysis is to help avoid or minimise risks. With this in mind, managers prepare for any unforeseeable negative events that may hamper business operations.

Before embarking on business development strategies, foresee the following: (1). Who are your products or services for? (2). What problems are the products or services going to resolve? (3). Are the products or services suitable for the market? (4). What are the market needs?

What to learn when conducting a market analysis

The primary purpose of conducting a market analysis is to collect and analyse data in order to make informed decision. In addition, conducting this analysis puts owners, especially the companies, on a good track about market trends.

When it comes to having market knowledge, the following are the most important aspects of a market that needs to be known.

• Understanding the market suitability and needs
• Knowing who the potential customers or clients will be
• Knowing the buying behaviour and capabilities of potential customers or clients
• Knowing the numbers of potential competitors and how they operate in the market
• Knowing the channel of distribution i.e. how to connect with customers or clients
• Knowing the entry barriers for new market, possible challenges and success factors
• Knowing when and how to exit the market if needed

Conducting market analysis

The overall process of conducting a market analysis begin by stating the goals and what the business intends to achieve. Has the business identified certain problems that it intends on solving in order to provide value? Perhaps, a new product is about to be introduced and the market need for the product needs to be established?

In any case, conducting a market analysis requires gathering data about the target market as a whole. To help understand which data are relevant for the analysis, see the below structure. However, which data to gather will absoluetely depend on the business needs.

As shown in the structure above, there are different elements on each segment of the analysis. For this, business owners can concentrate on analysing the aspects of the market which is most relevant to the business goal.

A comprehensive analysis will require touching all aspects as indicated in the above figure. For the purpose of simplicity, the key elements of conducting a market analysis are described as follow.

1. Describe the industry

This assessess the attractiveness and dynamism of the industry. In this regard, Market Analyst endeavour to gather metrics such as: the size of the industry, shares of all the key players in the industry, foreseeable growth rate and the industry trends.

Measuring and quantifying the industry data helps to understand the complexity of any given industry. In additon, it provides clearer information about the present, and gives powers to predict future scenarios.

In the case of new entry, if the industry is still emerging or already established, industry assessment uncovers that. With regard to the trends, it helps you to understand any changes in consumer tastes and needs.

2. Define the target customers or clients

This aspect establishes the group of customers or clients the business will be going after. Factually, not every member of a given market will become your customer or client. But you need to target a portion of the total population within the target market.

These target portion becomes the group which the business will connect with and offer its products or services. Within the market, there are ways by which target customers can be defined.

3. Classify the market into segments

In this aspect, the focus should be to classify the already defined customers into different segments. This is essential because it gives companies the ability to personalise their marketing campaigns and to use different market approach for different segments.

For instance, if a company produces both baby and adult wears, it must place baby and adult in different market segments. Therefore, the marketing strategies that will be used for selling babies’ wears will differ from adults’ strategies.

4. Analyse any potential competitors

This section of the analysis allows you to understand which companies are already operating in the market, and strategise on how to compete with them. Through market analysis, you gather information about potential competitors’ market strategies, the price they offer and their channel of distribution.

A more robust way of doing a competitor analysis is to analyse both the direct and indirect competitors. Direct competitors are those that offer similar products as yours, while indirect competitors are the companies that offer alternate products.

Analysing your competitors gives you an hedge on how to approach the market. Moreover, you know their weaknesses and capitalise on them. Always have at the back of your mind that competing means doing better than the other producers.

5. Determine possible price

At this stage, you already know all about your competitors and understand the industry. Therefore, you need to come up with the right price for your products or service. To do this, you need to keep in mind industry price and offers from competitors.

One of the key factors to success is to price products according to the buying capabilities of your target customers. Although there are several elements to consider when determining price, it can also be done using these three pricing scheme.

6. Know the market regulations and costs

As important as the above points are, so is this point. Know the rules and regulations governing the production and distribution of goods and services within the territory of the country you are operating in.

More importantly, find out if there are any government regulations that may prevent any form of business operations. Identify and fix these problems if any. Government regulations could pose as a barrier to entry if not known.

Another thing is to evaluate how much cost will be incurred for the day to day running of the business, including government or agency dues.

7. Determine the distribution channels

In wrapping up the analysis, determine what channels will be used in distributing your products to the potential customers. Will you be selling directly to them or will you be selling through a middleman?

Equally, it is neccessary to know where your customers can be reached i.e. connecting with them through advertisement or promotion.

For more, check out this interesting book: New Methods of Market Research and Analysis

Conclusion

Market analysis is like an eye that helps in sighting and understanding all that revolves within a target market. It also helps to foresee the future of a market. Depending on the reasons for conducting the market analysis, it help business to identify problems and quickly find solutions to the problems.

With market analysis, business owners will be able to spell out the facts about doing business within a specified market. Additionally, it provides the best approach for operating in a new market or restrategising within an existing market.

The beginning of conducting a market analysis, is the beginning of a successful business operation within any industry or market. Should you need assistance with your business development project, contact for support.