What Is Market Analysis & How To Do It?
Marketing without market analysis is like driving with your eyes closed!
Whether you want to start a new venture or want to make changes to the existing one, the first and the foremost step would be getting well acquainted with the ever-changing, surrounding market scenarios. This requires a quantitative and qualitative assessment of the market or what in technical terms is known as market analysis.
What is Market Analysis?
Market Analysis is the study of changing dynamism of various factors that affect the growth of the market. It allows a business to fully understand the behavior of a market in order to develop a proper business plan that caters to the present needs.
In simple terms, market analysis is the qualitative and quantitative assessment of the target market.
With the help of market analysis, you can get valuable insights into the information of a specific kind of market and can accordingly design strategies. It also helps you to understand the needs of your customers in a better way. It provides you with a well- rounded picture of the market that you will eventually be operating in.
Importance of Market Analysis
Market Analysis is important because it gives you the ability to uncover opportunities within a market; to know what your customers think of your product, and improves your communication with them. While there are many reasons why a market analysis is necessary, let’s focus on the top three:
It Puts Customers First
Theodore Levitt once said, “People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.” Once you realize the reason the customers are hiring your services for, you will then be able to identify who your real competitors are! Market Analysis allows you to modify your services according to your customers’ needs, after clearly identifying your competitors.
It Makes Companies to Look Inward
It is quite difficult to look at your product or service critically, given the amount of time and money you have invested in it. Market analysis forces companies to look inward, with an objective perspective. It forces the companies to consider how their product makes their customers feel and the reason why they would want to buy it.
It Helps You Determine Your Unique Selling Proposition (USP)
Your USP is that feature of your product or service that differentiates it from other similar products in the market. Market analysis helps you determine your USP which is crucial for building a sustainable business model.
Factors Affecting Market Analysis
There are some key factors that one should consider before launching a fully-fledged market assessment plan as those factors can drastically affect the results of the assessment at the end. Following are some of those features:
Before you begin with Market Analysis, it is essential that you define very specific goals. Ask yourself, what does your business need and then work in the direction to fulfill that need. Eliminate the need to ask too many questions. Ask only those questions that would help you to reach your one or two defined goals.
You should never underestimate the power of data! Data as a catalyst in meeting your goals in this digital world. It could be anything, from the list of your products and all your competitors’ similar products, to products that you think people might want to consume.
When doing a market research study, the audience of people you want to target should be extremely well-defined. Factors such as age, gender, education, income, geographic location, and other demographic traits should not be ignored while conducting the analysis as that may adversely affect the desired result.
Interpretation of Data
Here’s the thing, if you don’t know how to interpret the data that you have collected, then all of the time and money you have invested so far will be for naught. All those numbers are useless if you don’t know what they mean to your goal and how you can make use of them. In this case, hiring a research expert or using market research tool such as AYTM is a good option.
Decisions and Actions
Analysis and Research is useless if you don’t take action based on the result. You must be quick enough to take necessary steps in the right direction at the right time otherwise, you may miss the opportunity for growing your business for which you conducted the analysis at first place.
Dimensions of Market Analysis
There are certain dimensions of marketing analysis that help one to understand the market in a better way. Some of those are as follows:
It’s a fact, the bigger the market the more competitors you are likely to have. And to get recognized in a big market you need to make sure that your product and services stand out. Otherwise, the customers can easily switch to the rival product. Not only this, but a bigger market also helps you to analyze your pricing policy as you begin to understand what kind of price is best suitable for a particular market. All these facts are kept in mind while conducting market analysis. Based on that you go ahead with your marketing plan.
Growth Rate of the Market
Before making an investment, you need to analyze a market’s growth rate. This is because you will get an idea of how long that particular market will last and accordingly you can decide the amount of investment you would like to make in that market.
Market trends help you determine the direction of the wave in which the market is currently moving. Having knowledge about the latest trends help you to decide what kind of product you should sell. Your focus should be on grabbing customer attention by introducing the products that they would like to buy and spend their money on. Market trends can change any day. That is why you must keep an eye on them in order to conduct a successful market analysis.
Before getting into a business you need to analyze the profitability of the market. If the market has high profitability then you invest in it, otherwise, it would be a waste of time and capital. Things like buyer power, supplier power, barriers to entry etc have to be considered to calculate the profitability of a market.
How To Do Market Analysis?
All said and done, conducting market analysis takes lots of time and research. It is not something that can be achieved overnight. To guide you through your market- assessment journey, here are some of the steps given below:
Identify the Purpose of Analysis
Before beginning market analysis, you first need to find out whether the analysis if for internal or external purposes. Internal purposes are improving cash flows or business operations and external purposes include convincing lenders to give you a business loan. The kind of research varies accordingly with the purpose. So, make sure whether your study will be internal, external or both.
Find Your Target Customers
Not everyone is your potential customer and that’s completely fine! When you analyze a market, you must determine who your customers are. This process is called target market analysis. Once you find who your customers are, find out their needs, interests, personalities, and demographics. As your business grows, your potential customers may change. Therefore, you need to revisit your target market from time to time to make sure they still fit your business.
Conduct a SWOT Analysis
A SWOT analysis helps you determine your business’s strengths, weaknesses, opportunities, and threats. Use a SWOT analysis to establish goals for your business and do this on regular intervals.
In fact, you should conduct a SWOT analysis not only for your business but for your competitor’s business too. This will help you identify what their business has that yours lacks. Accordingly, you can determine your current market position and predict what your position in the future might be.
Gather Data and Analyze Your Findings
Information is one’s greatest ally when it comes to market analysis. The more information you are able to gather, the better position you are on. Your data should be unbiased and factual, relevant and to the point. Once you are done with gathering information, it is time to look at it critically and make use of it. Based on the research, you will be able to forecast other things for your business.
Put Your Analysis Into Action
Don’t just box up your analysis and pack it away for “later”. Do not put all the extensive research to waste. The last and the most important step is to take action and use you market analysis process to increase the efficiency of your business. Keep a close eye on the developments of your target market as you may have to change your plans according to the needs of the scenario.
When you conduct market analysis you discover a lot of things. You get to know who your present customers are and who can be the prospective ones. You learn where you are spending your time and money and what worth is it adding to your business. Also, you get a chance to do some major sleuthing on your competitors. Moreover, and most importantly you learn about your flaws and at the same time find solutions to fix them. Market analysis is learning the most you can about the market and then using that knowledge to your advantage and therefore, your analysis should be thorough, clear and comprehensive.
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