You will learn why a market analysis is the first step to your success and how to carry it out.
If a product flop, you’ve not performed the correct market analysis homework. Before companies enter a particular target market, you should examine and evaluate every tiny details to predict how profitable and successful the market entry will be.
What is a market analysis?
As part of market research, the market analysis describes the systematic investigation of the target market at a particular time. External variables include competitors, the target group, and the special conditions of the market—the market analysis help to determine the opportunities and risks of market entry.
The advantages of a market analysis
Whether you are planning a new market entry or want to launch a new product: Market analysis forms the basis for every business plan. Derive the essential insights that serve as a marketing and sales strategy decision-making aid.
A well-researched market analysis protects you from making wrong decisions and supports you in accurately assessing opportunities and risks before entering the market. Thus, it considerably influences the four Ps of marketing (product, price, place, and promotion). The market analysis provides essential clues as to how to send your product to the target group, what price you can determine, where you should best distribute the product and how you ideally promote it.
Market Analysis Methods
Data and information are the essential components of meaningful market analysis. Different methods are available to procure: You can examine your product or commission a market research institute. However, the latter may be associated with high costs.
To carry out the analysis independently, you can rely on primary and secondary market research, which we would like to explain in more detail below.
In the primary research, procure information and statistics in a purpose-oriented manner; standard methods are:
- Conduct Surveys
- Survey of focus groups,
- Conduct expert discussions and interviews,
- Survey of employees,
- Analyze social media platforms,
- Examine customer data (a CRM system) and
- Conduct workshops.
Secondary research looks at data from internal and external sources that are already available. These can be critical company-internal figures such as sales, customer data, or other metrics. You can also use representative data from existing studies, annual reports, research, or national offices. Since the information is already available with this method, it is often more cost-effective than primary research.
Of course, Companies can also combine the quantitative and qualitative approaches. For example, you can enrich secondary data with your interviews or underpin the expert discussion with representative information.
How to perform a market analysis
Every company should prepare a market analysis. It is an integral part of the business plan and creates a solid foundation for further considerations. But looking at the target market can be worthwhile even for new or product changes.
Market analysis helps you decide on strategic and operational processes and answers the overarching question of whether your product or service has an opportunity in the market. The first thing you need to do is find your suitable target market.
Segment the market
Determine the specific criteria of your market based on market segmentation. The focus is on target group analysis. Identify socio-demographic and geographic characteristics to find the people you want to target for your product.
In addition to defining the target group, price segmentation is also one of the first steps of market analysis. If you know exactly who your target person is, you can conclude how much they will be willing to pay for your product.
Determine market size and market dynamics
The next step is to find the market size and current market developments and trends. You can use these key figures to make initial sales forecasts.
You should also not ignore future developments. Forecasts help you to get an idea of how long-term your product could be in demand. The growth rates within your industry or product segment over the next three to five years are fascinating.
Analyze competition and customer industries
The next step is to perform a competitive analysis. Take a close look at your competition and industry to see how your product compares to the competition. Analyze customer industries, and determine which area is most attractive in the corresponding target market and where to achieve the highest sales.
Determine and identify key players in the target market to see if there are already products customers may prefer to replace with your products and why? It will give you a comprehensive view of where you can price yourself, typical distribution channels, and how competitive the market is.
Determine market potential
At the end of your analysis, draw a summary of the conclusions. Determine the market potential and the barriers to market entry. Weigh the risks against the opportunities and use the insights from the market analysis to determine your product’s success.
The market analysis allows you to predict the success or failure of your product and serves as the basis for your entire marketing strategy. Use primary and secondary research methods to determine market size, dynamics, potential, and competition, and define exactly who your target audience is. Nothing stands in a strategically sound marketing strategy.