Whether you’re just starting out your small business or looking to revamp your business plan, you should be conducting market analysis. Being able to properly collect and analyze market data can help you to manage your business more effectively and improve your chances of turning your business into a success.
If you’re unsure of where to start, here’s everything you need to know!
What is market analysis?
Market analysis is a full assessment of your business’s target market and competitors within a specific industry. Through doing market analysis, you can gain a better understanding of the size of the market you want to serve, the kinds of prices customers are willing to pay, and other buyer trends. Market analysis can also tell you more about how competitors tend to position themselves and how the economic landscape operates at a broader level. When done properly, this kind of analysis allows you to better predict the level of success your business can expect when introducing your brand/products within the market.
Why should you do market analysis?
Analyzing your market is an essential part of the business planning process. Proper analysis can give you better insight into your audience’s habits and the positioning of your competitors. Having this kind of information can help you to create more accurate projections and plan more effectively.
Some specific benefits of market analysis include:
- Staying ahead: By analyzing your market, you can easily spot new or emerging trends. Being able to spot this activity quickly allows you to incorporate these new trends into your business planning more efficiently, which helps you to stay one step ahead.
- Reducing risk: The best way to feel secure in any business decisions is by having research and data to back them up. Analyzing market trends and incorporating them into your decision-making increases the likelihood of your business moves paying off.
- Improving your products: Market analysis can help you to better serve your customers by giving you insight into what exactly they want from your company and your products. These insights can help with adjusting your services to better serve customers’ needs.
How to conduct market analysis
Before you begin to do any analysis, make sure you know what your purpose is. Every business has a different reason for doing market analysis. Maybe you’re starting out and want to know more about your customer’s wants. Maybe you’re trying to grow your business and want to find out how to better position yourself against your competitors. Regardless of what your purpose is, make sure that you have it clearly defined before you start your research. By having a clear understanding of where to direct your efforts, you’re more likely to stay on track and be successful in your analysis.
Once you understand your reasonings, market analysis can be broken down into 3 categories:
1. Industry analysis
Your market analysis should start with a broader analysis of your industry. What is the current state of the industry? Where is the industry headed? How fast are companies expected to grow within the industry? What are any big changes being made? This kind of analysis can help to give you insight into how your business can best fit into the larger market.
2. Customer analysis
Your business should be catering to a specific target audience. When doing analysis on potential clientele, make sure you’re focusing specifically on those who fit within this target market. You can specify your target market with demographics such as gender, age, location, occupation, interests, and needs. Use these details to create a customer model and focus your analysis on customers who would fit within such demographics.
3. Competitive analysis
In order to better understand the advantages and weaknesses of each of your competitors, you can conduct SWOT analyses. SWOT stands for strengths, weaknesses, opportunities, and threats. List out all of your competitors, and compile a SWOT for each one. This kind of data can help you to see the unique advantages of each of your competitors, as well as the ways in which you can set your business apart from the rest of the crowd.
Putting your market analysis to work
Once you have all the necessary information to complete your analysis, it’s time to put your analysis to work. Use the data you’ve collected to guide your business decisions and determine your business’ trajectory moving forward. Your market analysis can also be used to secure business loans or investors by showcasing your business’s potential and demonstrating your expertise in the market.
Make sure you’re running a new analysis annually. In doing so, you can continuously evaluate the effectiveness of your business plan and pinpoint any new opportunities. This way you can ensure that your analysis is always up-to-date and is best able to drive your business forward!
By Michaela Lenahan in Small Business
