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: A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental analysis.
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. How do you find your market size ? You can use a popular free tool Google Keyword Planner. It will provide you with enough data to make an intelligent decision.
- 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.
Here is a screenshot of a Google Trends market trends and related data to understand your market and how active it might be.
Google Trends Related Searches updated everyday with new data, it’s an excellent tool to include into your market research. You can do a personal search using their data base of specific market you are after.
As an entrepreneur it is your duty to stay up to date with markets and how it affects your business.
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 big 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.
Quick Tip: Part of doing a market analysis is to factor, That if a particular search term or phrase when doing a Google search on your browser it will give you the top ten sites for that specific term or phrase but more importantly if there are several ads on the margin, above or below the search results means that that term or phrase is 99.99% sure it is a profitable market.
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. If you are selling a physical product it is important to do a market analysis on what cost structure you should use based on feedback and production costs.
Cost Structure Tip: Industry business standards suggest that it is usually recommended that you have a 40% + margin between cost of production and sales pricing to ensure future growth.
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.
Today’s Distribution of Digital Marketing:
- SEO – Search Engine Optimization, it is the art of optimizing every aspect of your website or blog and I mean everything. Including every single blog post and its entirety, optimizing your images and its size, its alt tags and size, are you structuring your content properly for your audience to digest and more importantly search engines easier to crawl your website plus many other areas I will discuss more in depth SEO specific content. If you enjoy doing SEO and don’t mind doing a lot of market research then SEO will be good for you otherwise you could outsource to a reputable SEO specialist.
- Social Media – There are many social media platforms available and here are some of the more popular ones like Facebook, LinkedIn, Twitter and Pinterest. Each social media outlet is different and advise you to read and understand their terms and conditions, their marketing data to make it more targetable and direct to your specific market. Facebook has different paid marketing options depending on what is your goal. Besides complying to Facebook’s marketing terms you must also use a business page in order to use the paid ad platform.
- Search Engines Paid Marketing – Search engines like Google, Bing, Yahoo, others and the same applies, each search engine has its own way. Make sure to get familiar with their terms.
- Video Marketing – Creating videos and posting them on video marketing channels like YouTube, Vimeo, MetaCafe, Hulu, Vevo, YahooScreens, Daily Motion, Veoh, Flickr, Break and many others available online.
9. Marketing in Business – Business marketing is a marketing practice of individuals or organizations (including commercial businesses, governments and institutions). It allows them to sell products or services to other companies or organizations that resell them, use them in their products or services or use them to support their works. Marketing your business using social media recruiter is a very effective and powerful way to recruit people into your business and get immediate results. Get your free guide…
10. Success Factors – The key success factors are those areas that are necessary in order for your business to achieve its marketing objectives. Re-evaluating your business and its goals should be done to ensure your business profitability.