An analysis of the dynamism of a market is called a marketing analysis. This is because a particular market provides the allure of a specific business.
An analysis of your marketing strategy is essentially a business plan that provides market data. Market analysis should not be confused with it because it takes into account various factors.
A marketing analysis is conducted to develop a business plan. You will know how to run your company if you consider specific factors.
This allows you to understand better the market’s value and volume, possible consumer categories and buying behaviors, the competitive environment, and the broader economic context.
Importance of Market Analysis in Business Plan
A marketing analysis shows you how to spend your marketing budget more effectively and efficiently.
Your understanding of your audience’s behavior and the messaging that resonates with them will be enhanced.
When you understand your audience and evaluate the limitations of your present marketing, you’ll gain a better insight into how to increase your marketing ROI.
According to Poulsen, “one possible reason why marketing is squandered is that no one understands how well or why it works.”. Therefore, analysis and insight are vital to the future funding of marketing visions, resulting in higher returns on investment.
Why should you conduct a market analysis?
A thorough market study is required to write a Lean Plan or a complete business plan for a bank or another investor.
You should not do a market analysis solely to create a business plan. Instead, this will help you develop a more intelligent growth strategy for your company.
You will be better equipped to develop products and services that clients will enjoy if you fully understand your market.
It is not difficult to conduct market research, though it may seem intimidating at first glance:
Your talk will focus on your industry’s current state and its prospects.
How many of your customers are paying customers? In your report, you will describe what they need, how many are there, and how their demographics are.
Pricing and forecast
You can determine how you intend to position your company in the market by deciding on its pricing, and you can figure out what portion of that market you hope to capture by determining your forecast.
Explain the positioning, strength, and weakness of your competitors.
What are the Benefits of Running a Marketing Analysis?
The marketing study can identify developing trends, mitigate risk, and forecast income.
You can conduct marketing analysis at various times during the life of your business, and it can even be helpful to do one annually to keep up with any market changes.
This allows you to learn more about your audience and competitors and thus develop a more targeted marketing approach.
The following are additional advantages of performing a market analysis:
Reduction of risk
Market knowledge may help you mitigate risk in your business by providing insight into major trends, key players, and what it takes to succeed. All of this information will help you make informed business decisions.
Also, you can conduct a SWOT analysis to assist you in further securing your organization. SWOT analyses evaluate a company’s strengths, weaknesses, opportunities, and threats.
It is essential to be the first to recognize a new trend or opportunity in business. Marketing analysis can provide insights into industry trends, thus positioning you to maximize the opportunities they present.
Standard Norms for Evaluation
There are many variables involved in determining a company’s performance outside of basic numbers. For example, you can use a market analysis to compare your company’s performance to your competitors and how well it performs compared to its industry peers.
An annual marketing analysis can assist with identifying where your marketing needs to be improved and which ones are performing well compared to the competition.
Products and services targeted towards a specific market
A strong understanding of what your customers want from you will enable you to serve them better. You can tailor your business’s services to meet the specific needs of your clients when you know who they are.
Predictions of revenue
Most marketing assessments consider market forecasts crucial components since they provide information about future size, characteristics, and trends. Therefore, you can adjust your business plan and budget based on the anticipated profits.
The context for past mistakes
You can use marketing analytics to understand your company’s past errors or industry peculiarities. For example, the analysis of a particular statistic or product can reveal how certain factors affected sales.
You will be able to identify the cause of those errors and prevent them from repeating themselves in the future.
What are the Factors of Marketing Analysis?
SWOT analysis refers to the strengths, weaknesses, opportunities, and threats of an organization.
You may focus on the most important factors by analyzing the company’s strengths and limitations.
You will focus on these factors if you have a strong labor force, sufficient investment, and competent advertising professionals.
If your technology is less advanced and you don’t have an online presence, you will avoid these things.
You also consider external elements like situations that might present a threat or an opportunity for you. For example, you may improve your performance due to economic causes, political instabilities, or social shifts.
Moreover, they pose a risk to your commercial dealings. You can make your marketing decisions based on the results of taking into account all of these variables.
Dimensions of Marketing Analysis
We can conduct a marketing analysis by taking into account specific dimensions. We can use these factors to gain a better understanding of the market in which we operate. The dimensions are as follows:
- Size of the market
- Market growth rate
- Trends of the market
- Profitability of a market
- Success factors
- Channels of distribution
- The cost structure of the industry
Size of the market
Marketing analyses must consider the size of the market. You will almost certainly face more competition if the market is enormous.
You must stand out from the competition in a vast market. A competitor’s offering can quickly attract customers in the case of an inadequate offering. Furthermore, you must reconsider your pricing strategy when you face a larger market.
You risk losing customers to your competitors if you set your price too high. Conversely, customers will think you are offering lower-quality products at a lower price if you set the price too low.
You can charge a premium if the market is small. The marketing analysis incorporates all of these details. Your next step is to devise a marketing strategy.
Market growth rate
Every marketing analysis needs to consider the rate of market growth. The market analysis allows you to evaluate how long the market will last over time. Therefore, an investor should conduct a market analysis before investing to determine the market’s growth rate.
Increasing your investment is possible if the asset has a possibility of growing over time. You may be discouraged from investing if it does not succeed. The growth rate of a market determines how much time and attention you should devote to it.
Trends of the market
Market trends make up a large part of marketing studies. Therefore, you can determine what type of product to offer based on current trends.
A firm’s launch requires knowledge of current trends. What do customers like? How much money are they willing to spend?
What might other developments be of interest to them? You will include this type of information in your analysis.
A daily alteration in market patterns, on the other hand, is inevitable. Your company may have a great opportunity here. You should take advantage of the opportunity and make the most of it if that is the case.
You may be at risk if trends change. For example, if you manufacture only one type of product, a market trend change will greatly affect you.
Profitability of a market
Businesses exist primarily to make a profit. Therefore, their business model is to generate profits. A market analysis is consequently vital before entering a new firm. You will only invest heavily in the market, which is profitable.
If not, you’ll waste both time and money. There are a few things to consider when determining a market’s profitability. Buyer power, supplier strength, and entry restrictions are among these factors.
An organization’s critical success factors determine its market success. Components such as these are essential for differentiating from competitors. Your outstanding achievements were the result of the things you did well. The following are some key success factors:
- Progress in technology
- Economy of scale
- Resource efficiency
Channels of distribution
A company’s distribution channels are crucial to its success. You will not be able to distribute your products without them. Therefore, marketing analysis becomes significantly influenced by it.
You must determine the effectiveness of the channels. The existing ones are adequate, or you may wish to develop a newer one. Sometimes, you develop entirely new channels, such as web marketing.
The cost structure of the industry
Running a business requires an understanding of the industry’s cost structure. This determines how much it costs to prepare your products. The price of a product can sometimes be increased without reducing the costs incurred by corporations.
An analysis of your marketing activities will allow you to identify new ways to cut costs. It simultaneously helps you develop tactics for overcoming your competitors’ competitive edge.
How to Conduct a Marketing Analysis?
A marketing study requires significant time and effort, so be prepared to put in a considerable amount of work.
The marketing analysis includes the following steps:
Overview of the Industry
You will outline your industry and discuss its future direction in this step. Analysis should include essential industry parameters like size, growth, and trends.
Market research and industry analysis are two different activities. You examine all businesses similar to yours when you conduct industry research. On the other hand, a market research study uses the information you have about your customers, unlike this one.
You demonstrate that you understand the broader context of your industry in your industry overview.
Furthermore, it will allow you to determine whether future demand for your items will increase and how competitive the industry will be.
You may want to know if the demand for mobile phones is increasing or decreasing, for instance. In addition, you need to understand the broader trends in dining out if you are considering opening a restaurant.
Is eating out becoming more popular as time goes on? Do consumers use grocery delivery services to contract the market?
The United States Census Bureau has good statistics on industries if you live in the United States. I have also found Statista helpful.
A business association can also provide a wealth of information about the current business climate.
Identify your target market.
Your target market is the most important part of your industry study. In this section, you describe your ideal customer.
Your investigation may reveal that there are several types of clients. A market segmentation strategy is used when a company has more than one type of customer.
You are describing the characteristics of similar types of clients in this section.
You should begin broad and then narrow your focus by outlining the following elements.
Market size refers to the number of prospective customers for your product or service instead of industry size, typically expressed in dollars. You can read about our excellent method for determining your market size here.
Where do your customers live? Of course, you’ll want to describe a specific country, region, state, city, or county here. There’s even a chance that if you look at the location of your customers, you’ll be able to determine where you will be doing business.
You are extending some of the information you provided in your psychographic profile. Your customers should explain how they purchase your products.
You need to describe the typical age, gender, income, education, and more of your customers. Then, it’s where you’ll describe the characteristics of your ideal customer if you could.
When you get inside your client’s heads, anticipate their reactions, and understand their needs, you can best serve them. What are your clients’ preferences and concerns? What do they do for a living? What is their personality like?
You may find that this article will assist you in analyzing competitors more effectively.
Changes in customer behavior are constant. Here you can describe trends you’ve noticed in your target market.
Your market study is incomplete if you don’t consider your competitors. A thorough study of your competitors will determine who your competitors are and identify potential weaknesses in those competitors.
You can differentiate yourself by looking for ways to fill gaps left by competitors using the above information.
You should consider the following points when conducting a competitive analysis.
Consider the possibility of indirect competition as an alternative solution to the problem you are trying to solve. For example, a business that develops novel products and services stands to benefit significantly from this.
The initial online task management software was not competing with other online task organizers; it competed against paper planners, sticky notes, and other analog to-do lists.
Businesses that offer remarkably similar products and services. There is a good chance that your prospective customers currently purchase from these businesses.
How you’re different
Don’t be a carbon copy of your competitors. Instead, make sure you point out how your competitors’ organizations, products, and services are different.
A typical company type, such as a hair salon, may differ by location, hours, service types, atmosphere, and pricing.
Barriers to entry
Describe how you prevent new competitors from entering your market. For example, you may have an excellent location or patents that protect your business.
Identifying your competitive environment is best accomplished by interviewing potential clients and asking which companies they purchase from and what alternative solutions they use to solve the problem you’re dealing with.
A good idea is also to spend some time on Google to see what else is available.
Pricing and forecast
The final phase in doing a market analysis is determining your pricing strategy and developing a sales forecast to understand better the market share you believe you can capture.
How to price your product or service?
Start by considering your pricing strategy. You should ensure that your product or service price is higher than the cost of manufacturing and delivering it. You should also think about how your price communicates with consumers.
Customers often associate high prices with superior quality. However, you must ensure that the rest of your marketing conveys the same message: you are offering a high-quality product or service.
Your brand, your physical appearance, and your customer service experience should be high-quality to complement the high-priced items you sell.
You may be competing as a low-cost substitute for another product or service. If this is the case, ensure that all marketing and advertising convey the same cohesive message.
Estimating the volume of initial sales
If you have set a price, take into account how much you expect to sell. Then, you can use your industry study to determine the percentage of the total market you hope to capture.
You should know how much money local consumers spend on groceries before launching a new type of grocery store. The amount you predict should be proportional to the total expenditure. I think it is unrealistic to expect to capture 50% of the market in your first year.
Don’t make the mistake of assuming obtaining 1% of a vast market is easy. It doesn’t matter if a 1% share of a $3 billion market seems minor; you must understand and explain how this volume of clients will be gained.
Use your forecast as a goal for your business and compare your actual sales to what you had anticipated. Fortunately, tools like LivePlan can automatically compare forecasts with accounting data. However, it is still imperative to track your results, even if you use a spreadsheet to focus on what works and minimize what does not.
Prepare your business strategy with a marketing analysis
It is a worthy endeavor to produce a compelling market study. Your business will be prepared to compete against others when you can identify your blind spots.
However, it will also assist you in understanding your customers better so you can provide the best service to them.