A market analysis is a quantitative and qualitative assessment of any given market. It evaluates market size, customer buying patterns, competition, and the possible barriers to entry and regulation.
You’ll want to be meticulous while conducting a market analysis. It is a vital piece of your business plan that shows you have expert-level knowledge about your market. This will come in handy when speaking with investors; they’ll take you more seriously because of your commitment to your research.
How do you conduct a market analysis?
Once you understand that your main goal is to learn all that you can about your market, you can research your potential customers more. Conducting a thorough market analysis will undoubtedly give you a competitive edge.
What topics should you include in your market analysis? Here are ten of the most important subjects to explore.
10 Crucial Topics to Include in Your Market Analysis
Industry Trends and Details
It’s vital to know what your industry looks like. What are the typical trends in the industry? What is the predicted growth? You’ll also want to include industry size and life cycle. Knowing your industry’s outlook gives you a solid foundation to begin your other research.
Does your business target more than one market segment? If so, you’ll need to look into the demographic segmentation of the market. This means breaking down the demographic as much as possible. So you know the age of your market. But where do they tend to live? Does your market skew to one gender?
Knowing the demographic segmentation will allow you to budget efficiently. You’ll save money and time on advertising to the wrong people. You’ll ensure the needs of your targeted group are satisfied fully.
Determine Your Target Market
Your target market is like your industry description, but a lot more specific and focused. Now you will be able to determine the precise person your product is for. You’ll want to be as descriptive as possible. Envision the exact person you intend to sell your product to.
What are they wearing? What is their career? What are their passions? Do they have pets? How old are they?
The more descriptive you are, the better. It’ll help you winnow out the people who don’t fit the description and focus entirely on people who do. Remember to include market size in this part of your research as well.
Potential Customers (TAM)
The total addressable market (TAM) examines how much potential growth your business has. It’s one of the hooks to get investors interested. They’ll have a hard time convincing themselves to invest in a company that isn’t targeting a vast market. If it doesn’t create rapid growth for you, it won’t create rapid growth for them.
So you’ll need to make sure that you’re solving a massive problem in a prominent market.
And be careful not to mix up potential with reliable facts. Just because someone will potentially use your product doesn’t mean they will actually use it. TAM puts things into perspective, and it also shows you how you can get more people to buy.
Needs of Your Market
Market need involves figuring out why your product would be in demand. Look at why your possible customers will spend money on your product. Why will they buy it in the first place? How does it serve their needs?
You’ll want to examine the current trends and behaviors in your market. This will help you validate the need for your product.
Results of Market Test
Were you able to conduct market tests? Did you find someone else’s market test results? Great. Include them in this section. Make sure you come to a detailed conclusion about your research. Ask yourself why you came to that conclusion. If you have any experts that can confirm this decision, include them too.
Determine Your Competition
Who are you in competition with? This is a vital part of your research. A few ways you can figure out who your competitors are is getting to know who already exists in your industry, talking directly to customers, attending events, and using social media.
Knowing your competition means you know where they excel and where they fall short. Knowing their strengths and weaknesses allows you to compare your own business to the competition. How do you compare? Do you have all the strengths they do? Where are you lacking? What do you have that your competitors lack?
What Are Customers Willing to Pay?
Make sure you know the value of your product. How much are customers spending for products similar to yours? Be careful how you set your price range. If you undervalue it, people may think it’s low quality. And by overvaluing it, customers may think you’re trying to rip them off. And so will investors. So, choose wisely and be practical.
Identify Barriers to Entry
What is keeping the small business down the street from completely taking over your market position? What gives you the competitive edge to keep them out? What other factors are preventing them from entering?
These are fundamental questions to consider. You want to ensure that you are the best company at what you do. One reliable way to validate this is by identifying the barriers to entry for your market and how you are breaking them down--and how other businesses are not.
Are there any regulations for your market? Find out what government regulations affect your sector. Make sure you know exactly what the principles are so you can be compliant with them; get professional help if you need it.
Your market analysis revolves around your customer’s needs and your competitors' trends. Becoming an expert in your market is the quickest way to success for your startup or small business.