A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.
The purpose of a market analysis plan is to provide businesses with the information they need to create effective strategies for growth and compete in the marketplace. It helps them identify trends, uncover blind spots, understand their customers better, evaluate their competition, and develop products and services that customers will love. A market analysis plan can be created using a free sample business plan app and should include conducting surveys and undertaking an analysis of competitors.
Market analysis may seem complex, but it’s necessary if you want to lead your business in the direction of success. When you conduct a market analysis, you learn the following:
- Who are my potential customers?
- What are my customers’ shopping and buying habits?
- How large is my target market?
- How much are potential customers willing to pay?
- Who is my competition?
- What are my competitors’ strengths and weaknesses?
What are the Components of a Market Analysis Plan?
- Determine the purpose of the study: It is important to determine the purpose of the market analysis plan before beginning the study in order to reduce business risks, increase success in the past, or convince lenders to give a business loan. Knowing the purpose will help guide which type of research should be conducted so that only data relevant to that purpose is collected. This can aid in making decisions about what type of business loan may be best for an organization.
- Research the industry and its outlook: It is important to research the industry and its outlook when creating a market analysis plan in order to understand the current state of the market, as well as any potential implications for businesses like yours. This includes researching trends, organizing your research into sections that make sense, and looking at elements such as an overview of the industry, projected market share, customer buying patterns, and more. By doing this research you can get a better understanding of how competitive your industry is likely to be in the future, what demand there will be for your products or services, and more.
- Investigate the competitive landscape: Investigating the competitive landscape is important when creating a market analysis plan because it helps businesses identify where they stand in the market and what areas they need to focus on. Investigating the characteristics of the competitive landscape, such as market share, strengths, weaknesses, opportunities, and barriers can provide businesses with valuable insights about their competitors. Competitive intelligence provides even more detailed information about competitors' size, financial strength, ability to spend money on advertising promotions, and how to target buyers perceive their products or services. Gathering data from suppliers can also provide additional insight into their competitor’s strategies. All of this information can be used to create a comprehensive market analysis plan that gives businesses an advantage over their competition.
- Define the target market: It is important to define the target market when conducting market analysis in order to gain insight into the needs, wants, and characteristics of potential customers. By understanding the demographics and psychographics of a particular group, organizations can better cater their products or services to meet those needs. Additionally, understanding what drives demand within a certain group it allows for more effective messaging and marketing tactics that will resonate with members of that target audience. Finally, by recognizing values and motivations within the target market it allows businesses to create tailored messages or offers that have greater potential for success.
- Identify market gaps: It is important to identify market gaps in order to capitalize on opportunities that may not be readily apparent. By understanding the industry, competitive landscape, customer needs, and demographics, as well as by researching common words and phrases related to customer problems, it is possible to create products or services that meet a need that competitors are missing. Identifying these gaps allows for a more successful marketing strategy and can provide an advantage over the competition.
- Gather additional data: It is important to gather additional data when conducting market analysis in order to gain a better understanding of the target market. Gathering more data from potential customers allows for an unbiased, relevant, and factual analysis that can be used to make informed decisions. Gathering data from credible sources is essential in order to ensure the accuracy and reliability of the information collected. Resources such as the Bureau of Labor Statistics, the Census Bureau, state and local commerce websites, trade journal articles, and competitors' strengths and weaknesses can provide useful insight into the target customer base.
- Analyze the data: Data analysis is an important part of a market analysis plan because it provides insights into customer buying trends and helps businesses to better understand how much customers are willing to pay for their product or service. Data analysis enables companies to identify areas of opportunity, anticipate changes in the market, and make informed decisions. By analyzing data from various sources, companies can determine the size and structure of their target markets as well as potential competitors in the industry. Furthermore, data analysis can help businesses forecast growth rates and costs associated with maintaining or expanding their operations.
- Compare competition: It is important to compare competition when conducting market analysis in order to identify weaknesses in their positioning and strategies, as well as any potential barriers to entry. Comparing competitors can also help determine which areas of the market are still open to new competition and when would be the most advantageous time for a company to enter that market. Additionally, benchmarking against key drivers of demand will enable businesses to develop products or services that are superior to those offered by their competitors.
- Create a sales forecast: A sales forecast is an estimate of future sales. It helps business owners and investors make informed decisions, by providing them with information about future revenues. It can also be used to secure funding from lenders or investors. To accurately forecast sales, businesses must consider the products or services they are selling, how many units they expect to sell in a given period of time, and what price points will be set for each item. Additionally, businesses must factor in their pricing strategy when creating a market analysis plan. Forecasting initial sales volume is important in order to set realistic targets as well as track progress against goals established at the outset. Doing so allows business owners to quickly adjust their strategies if necessary due to changing market conditions or unanticipated events that may affect their bottom line.
- Put the analysis into action: It is important to put the market analysis into action in order to effectively develop business plans and improve marketing campaigns. The market analysis enables businesses to create products and services that are tailored to their target market, while also assessing their competition and understanding pricing trends. By carrying out a thorough market analysis, businesses can have a better understanding of their industry's current state and make informed decisions when creating strategies for the future.