Any time you enter a new market, you’ll want to understand the ins and outs of that space. How many consumers exist here? What are their traits and characteristics? What does the competition look like? Learning this information is essential if you want to become and remain relevant to your target customers.
While it might seem overwhelming at first, analyzing a new market is simpler than you might think. Here’s our guide to conducting a market analysis for your business.
Market analysis versus market research: What's the difference?
Many people confuse market analysis with market research. In fact, part of a market analysis includes market research, which focuses mainly on building a strategy for your marketing efforts. However, a market analysis digs much deeper into various factors, like competitors and industry regulations.
There are two types of market analysis:
- Internal market analysis deals with how you do business
- External market analysis involves how your environment or market affects your business.
These approaches are equally beneficial and depend on your needs as a business. You might even find yourself conducting both at the same time. This is similar to a SWOT analysis, which assesses your business’s Strengths, Weaknesses, Opportunities and Threats. [Related: 6 Strategies to Steal Your Competitors' Customers.]
As with all business development efforts, it’s important to understand why you are conducting a market analysis in the first place.
Conducting your market analysis
Here are three steps you should take to ensure a thorough and accurate analysis of your intended market.
Establish the purpose of your market analysis
As with all business development efforts, it’s important to understand why you are conducting a market analysis in the first place. Perhaps you want to familiarize yourself with the regulations in your industry, or maybe you’re curious how your business compares to others in your market.
Ask yourself what issues or concerns you have, and make them part of your purpose to conduct a market analysis. That way, you aren’t blindly researching without an end goal in mind.
Identify your target audience and competitors
Your market analysis should focus on two main groups: your customers and your competitors.
You’ll want to know who your customers are and how many of them exist, and understand their buying habits and how much they’re willing to pay. As for your competitors, you should know who they are and understand their challenges and successes, so you can tactfully compete and stand out from them. Recognizing both sides will help you form a more efficient business plan.
[Related: How to Create a Business Development Strategy.]
Gather and analyze market data
There are many ways to gather your market data, from state and local commerce sites to customer interviews and surveys. From there, find trends to understand where you might be lacking and where you might be succeeding.
Then, organize your findings into your market analysis. Patriot Software recommends including these points:
- Size, growth rate, major customer groups and other industry details
- Target market and their needs, demographics, buying trends, size and forecasted growth
- Your expected market share percentage, pricing, gross margin and discounts you might offer
- The results of your analysis
- How you will follow regulations and practice compliance
What to do with your market analysis
Your data won’t benefit you if you don’t put it into action. Once you gather all the information you need and organize it into a cohesive document, review it and find ways to reach the goals you set from the start.
If you conducted an internal market analysis to find ways to outshine your competition, translate your data into processes that might help you better compete. Maybe you found out where your competitors are lacking — take advantage of this information and execute. Brainstorm with your team and ask questions that lead to viable solutions.
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