The backbone of every successful service or product is a journey and story of substantial market analysis on customers and competitors.
Before turning an idea into a product and entering a new market, you probably plan and research the viability of your product in a particular market. If there is no market for your product or if your product creates confusion, your idea may not survive long-term.
You could end up meeting the fate of businesses which initially show promises but later on fail to deliver the expected results due to flawed market analysis and research. That’s why brands today leave no stone unturned in conducting a market analysis.
What is market analysis?
Market analysis is a process that helps to answer:
- Who are my potential customers?
- What is my customer’s shopping pattern?
- How much are they willing to pay?
- Who are my competitors?
- What were their challenges and successes?
In short, it’s gathering possible information about your market. It helps you launch viable products and helps you understand what tick’s your customers.
So, use these seven strategies and use a market analysis template to create a compelling market assessment for your business.
Step 1: Understand the purpose of your study
Understanding the purpose of your market analysis is essential as you will describe your industry that can help you assess your business risk, reduce issues, and create new opportunities.
You can look at the past problems to reduce your risk for the future. It can help you decode your past success to see what you should continue doing to impact your bottom line.
So, before starting your market analysis, determine if you want analysis for internal or external purposes. External purposes may include convincing lenders or investors to invest, and internal purposes include improving cash flow for business operations. This analysis is essential for explaining that your business has growth potential.
Step 2: Know your industry overview
The next step is outlining the current state of your industry and discussing the direction where your industry is heading.
That’s why you should conduct an industry overview. It shows potential investors that your business cares about the larger landscape in which you’re competing. More importantly, it showcases that there is a potentially large market for your products. So, use different metrics
like size, projected growth, and trends.
For example, if your business is selling project management SaaS software, you’ll want to understand whether the demand for the software is growing or shrinking. If you’re a service-based B2B business and sell CRM software, you will want to understand how consumers are using your services. Are companies preferring CRM software over other business software? Or are businesses preferring software offering capabilities of a CRM, project management, and collaboration all under one roof.
Step 3: Define your target customers.
Regardless of breakthrough innovation, not every person will be your customer. That’s completely fine!
This is why you define your target customers, and it’s important to build knowledge of your target customers early on.
For example, if you offer network security to companies, you’re not targeting “all businesses” just because every company uses the internet. You want to connect with a specific market segment, such as IT infrastructure companies or companies providing IoT services. This makes it critical to define your target customers to enhance your sales and marketing efforts. Also, it helps you get in touch with customers who are most likely to make a purchase.
Most importantly, by narrowing down your target audience, you direct your marketing dollars where they will reap the maximum benefits and attract loyal customers while spreading the word about your B2B business.
- Market size: Unlike industry size that you measure in dollars, market size defines how many customers there are for your products or services. So, when creating your market analysis plan, include: how much does your target customers spend on the types of services or products you plan to offer in one calendar year.
- Psychographic: Describe your customer’s psychographics to know their purchase behavior, interests, and buying habits. It also explains why your business is in the best position to meet your needs.
- Customer persona: Creating a customer persona is essential as you can market to your customers instead of data on paper. After creating one, mold into your target customers and try to understand and address their problems. It can help you decode why your target customers prefer other brands over yours.
Step 4: Conduct competitor analysis
In this section of your marketing plan, you dissect your competitors and understand their weaknesses that you can take advantage of. Using competitor analysis, you can know what other businesses are not offering to your customers. With this knowledge, you can easily differentiate by offering products and services that fill the gap your competitors have overlooked or failed to address.
Include the following components in this section:
- Direct competitors: Mention companies that offer very similar products or services. These are potential customers who are currently buying from your competitors.
- Indirect competitors: These are competitors with whom you’re not directly competing with similar companies but combining with alternate solutions. For example, when Henry Ford created Ford cars, he wasn’t competing with other car companies; instead, he competed with other forms of transportation of walking and horses. Some B2B examples could be to-do-list applications competing against hand-written lists and notebooks.
When this section of your marketing analysis, provide answers to the following questions:
- What are the strengths and weaknesses of your competitors?
- How can you address your competitors’ weaknesses in your product?
- Can you solve a given problem differently or better than your competitors?
- How can your business leverage technology to provide a seamless service to customers?
- If you open your business or launch a new product, is your competitor a potential threat?
Step 5: Understanding your pricing
The next step is to understand pricing to know what portion of a particular market you can capture. Laying out your pricing structure is essential to determine the profit and revenue your business is likely to generate. You need to ensure that your pricing is more than what it costs you to manufacture or build your products and services.
Also, keep in mind that customers usually link higher prices to high quality. So, if you plan to position your products or services for this segment, your marketing should reflect that you’re delivering high-quality products.
If your product’s pricing is based on the results obtained from the market research, including the testing process and supporting statistics. Furthermore, only if your target market promises high profitability, it makes sense to continue with the product or business; otherwise, it will only result in losses.
Step 6: Identify your barriers to entry
When conducting a market analysis, you will learn about various barriers that could stop you from launching a new product or starting a new business. It’s important to know these barriers as they can prevent business mistakes.
When creating your marketing analysis plan, try to address many barriers to entry, including:
- Technology: How rapid is the technology in your field evolving, and whether it can render your product obsolete in the coming years?
- Cost of entry: Renting office space, hiring employees, and purchasing equipment are costly and can prevent a business from starting.
- Competition: If competition in your target market is fierce, creating a market share in such situations is an uphill battle.
Step 7: Ensure compliance with regulations.
When starting a new business or launching a new service or product, research your industry’s various governmental rules and regulations. Some regulations are tax codes, data privacy, advertising, environmental regulations, employment, and labor laws.
Remaining compliant with both state and federal rules prevent hefty lawsuits. If you are a new entrepreneur, it might be a daunting task, and you have to consult legal professionals.
Also, mention any governmental regulations or restrictions on your market. If there are any restrictions, discuss in your market analysis plan and write down a strategy to overcome the restriction.
Learn more about the market analysis plan
Woodcutters always sharpen their axes when cutting trees. In other words, businesses just starting need to prepare thoroughly to ensure their new business or product tastes successful. Creating an excellent market analysis plan helps uncover blind spots and removes the guesswork from business decisions.
More importantly, it helps you understand your target market and create solutions that resonate with their requirements and answers their pain points. Today, with cutthroat competition in the market, businesses that leverage the power of market analysis are the ones that survive profitably. It could be the difference between a thriving and struggling business.
Including a marketing analysis plan in your core business plan separates you from businesses that don’t complete their homework. Use these seven steps to create a successful marketing analysis plan and grow a fruitful business.
Did you follow these seven steps to create a market analysis plan? What was the outcome?
Share your experience by commenting below.
