Why Should You Do A Market Analysis ? And What Are The Components Of A Thorough Market Analysis ?
First, What is the definition of a market analysis ?
According to Wikipedia:
The market analysis is also known as a documented investigation of a market that is used to inform a firm’s planning activities, particularly around decisions of inventory, purchase, work force expansion/contraction, facility expansion, purchases of capital equipment, promotional activities, and many other aspects of a company. Read more…
So why is it so important to do a market analysis ?
Well, The fact is that those who don’t, 95% of them fail and out of those 5% only 1% make it past 5 years in business. On the other hand, those who have done a thorough market analysis enjoy greater success with less surprises or obstacles to stop progress.
A smart marketer always analyzes their entire business plan and market to strategically target the right market with precision and surgical marketing strategies to a market in demand.
Here are some areas you need to consider when doing a market analysis:
- Market Size – The market size is defined through the market volume and the market potential. The market volume exhibits the totality of all realized sales volume of a special market. By placing your search in quotes in the Google search box it will give you specific amount of volume of market size. Read more about market size…
- Market Trends – Market trends are the upward or downward movement of a market, during a period of time. The market size is more difficult to estimate if one is starting with something completely new. In this case, you will have to derive the figures from the number of potential customers, or customer segments. Read more about Market Trends… Here is a screenshot of a Google Trends market trends and searches below:
Google Trends Related Searches below:
4. Market Growth Rate – A simple means of forecasting the market growth rate is to extrapolate historical data into the future. While this method may provide a first-order estimate, it does not predict important turning points. A better method is to study market trends and sales growth in complementary products. Such drivers serve as leading indicators that are more accurate than simply extrapolating historical data. Read more about Market Growth Rate…
5. Market Opportunity – A market opportunity product or a service, based on either one technology or several, fulfills the need(s) of a (preferably increasing)market better than the competition and better than substitution-technologies within the given environmental frame (e.g. society, politics, legislation, etc.).
You find your market opportunity by doing a Google search to see how big your market is and is anyone paying for advertising for your niche or product. This indicates that more than likely it is a profitable niche or product.
Study this search for a week or so and see if you see the same product or website advertising daily to confirm this analysis.
Use Google Keyword Planner to see exactly how bug your market opportunity is and exactly how many people are searching for your product and learn how competitive your niche or product is. See a search screenshot of Google Keyword Planner on sba.gov/market-analysis and notice all of the data within this quick search.
6. Market Profitability – Is this market profitable and how to find if it is ? Find your competitors websites and go to Ahrefs.com, Alexa.com and SimilarWeb.com and enter your competitors site to analyze your competition. The screenshot above also tells you that there are others paying for advertising which means these search terms are likely to be profitable.
7. Industry Cost Structure – How you structure your cost according to your market can determine how competitive your market will be while maintaining a profitable margin.
8. Distribution Channels – What channels will you be using in your marketing efforts ? What markets are your competitors using and are they profitable ? By checking sites like Alexa.com you can check your competitors marketing channels and it will immediately tell you marketing data if they are in the top 100K sites.
9. Success Factors – The key success factors are those areas that are necessary in order for your business to achieve its marketing objectives.
Here is a video on how to do a market analysis:
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