The term “market analysis” is very confusing to entrepreneurs, especially those who focus on a specific market niche or market segment.
In fact, many small business owners do not understand the process or complain that conducting market analysis is too complicated or too expensive, and may be surprised that this is not necessarily true.
What is a market analysis?
In the most basic term, a market analysis is a study of:
- A particular problem or market opportunity
- The needs of a target market that requires solving a problem or an opportunity
- Ideas for marketing a particular product or service that meets the needs of a target market.
When should a market analysis be carried out?
- When you are starting a business
- When you are entering a new market
- When you are considering adding a new product or service
Why should you carry out a market analysis?
- To minimize the risk of your business
- To understand the problems and opportunities
- To identify sales opportunities
- To plan your marketing/or sales message
The process for conducting a market analysis can be divided into three parts:
Part 1 – Understanding Market Conditions
This will give you basic information about the entire market – the size, the competition, the customers.
Part 2 – Identify Market Opportunities
This will give you more specific information about your potential problems or opportunities in a target market, this includes information about growth, current and future trends, external factors, and more information about your competitors.
Part 3 – Develop Market Targeted Strategies
This is where market research leads the way. It will help you find growth opportunities for your business. By understanding the market and knowing the opportunities that are available, you will be able to create a strategy that will separate you from your competitors.
Here are 10 questions that can help you get started:
1. What is the market I want to reach?
- Who are they? (Basic Demographics)
- What is your main problem in relation to your market?
- Which of your needs can be covered by the products or services in this market?
2. Who are my competitors in this market?
- They are successful in this market?
- Do they provide a similar product or service?
- What is the market share of my three largest competitors in the market?
3. Is there capacity to grow in this market?
4. What is the size of that market?
- Is there room to grow?
- Is the industry growing? Is stable? saturated? Volatile? declining?
5. How is my product or service different from that of the competition?
6. How can I reach this market?
- How is my competition reaching that market?
- Is it the most effective way?
- What are alternative ways to reach that market?
7. What are the business models of my competitors in this market?
- Are they effective?
- Is there a way to do it differently or better?
9. What do customers expect from this type of product or service?
10. What is your competitive advantage in this market?
Knowing the answers to these questions will not only help you if your product or service is required, but it will help you find the best ways to reach your customers, price your products or services and ultimately make more sales!
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