It’s no secret that marketing is an important aspect of business success. Effective marketing is all about understanding the market and how your product or service meets the needs of that market. A company cannot exist without customers, so understanding what drives consumers to purchase a product is essential to business success. If you don’t have an understanding of what you’re looking for, you could end up doing just a ton of data collection and not really get anywhere.
There are a lot of reasons why you might want to conduct a market analysis. If you don’t know what that is, basically is when you’re monitoring and evaluating all the market trends of your industry. It’s a thorough assessment of the overall market. You have to make assessments like who are your potential customers, what your potential customer’s buying habits are, how large your target market is, how much the customers are willing to pay for your product and who your main competitors are.
A market analysis aims to anticipate or predict the directional prices or growth in a market. Most analysis focus on what is to come; that is, they are forward-looking. Some, on the other hand, attempt to explain why something occurred.
So when should you run a market analysis? Well, that’s really all up to you. Before you actually do one, think really carefully about if you really need to spend resources on conducting the analysis. In many cases, especially a very very small business, you really don’t need one, but if you expect to grow your business and have a high growth rate, it suddenly becomes a need. That’s why the first step of doing your marketing analysis is to figure out what you need from the market analysis to help you grow your business.
You will need to know as much as possible and these will assist you in doing an effective market analysis:
The market size
The size of the market is a key factor in a marketing analysis. The bigger the market, the more likely that you are going to have more competitors in the market. Therefore, for bigger markets, you need to make sure that your products stand out from the rest, otherwise the customers can easily switch to other products. A bigger market means that you need to rethink your pricing policy because if you set your price too high, you’ll lose your customer base to your competitors, and at the same time, if you set your price too low, people will think that you are just providing a cheaper quality product. Therefore, you need to set a pricing policy that will be attractive to your potential customers. If the market size is small, you can charge fairly high prices.
The growth needs of the market.
This is a huge factor in any sort of marketing analysis because the growth rate can give you an idea of how long the market will last. Before you start making investments, you need to analyze the growth rates of the market. If the market is likely to grow over a period of time, then you can invest more in it, but if the market has no growth, then you are likely to be discouraged from investing anything at all.
Having knowledge about the trends will help you to decide what you are going to sell in the market. When you are starting a business, you need to know what the current trend is, what the things that customers like, how much they are willing to spend, and what the trends are.
On the other hand, market trends can change at any time and this can turn out to be an opportunity for your business. If that is the case, you need to think about how to capitalize on that and make the most out of it but note that changes in trends can also become a threat to you. So your analysis must consider both in order to formulate strategies that will enable you to handle either situation that can happen.
The purpose of doing business or starting a business is to make a profit, so before getting into any business, you need to analyze the profitability of that market. If the market has good profitability, then you can invest heavily in it. But if the market is not going to be profitable, then it will be a waste of time and capital to invest in the market. To calculate the profitability of the market, there are a few things that we need to consider, which include:
- Buyer’s power suppliers
- Power barriers to entry
- Threat of strategy
- Threat of the competitive rivalry
Key sources of factors in the industry
For this, you need to understand the key sources of the industry in which you have an interest. They will assist your business in obtaining resources from the market. These elements are required to stand out from the rest of the competitors and will enable you to do well and produce great results in the market.
The key sources of factors include:
- Technology process
- Economies of scale and effective
- Utilization of resources
Distribution channels are extremely important to early-stage businesses. Without an effective distribution channel, it will be difficult for you to get your product out to your customers. You need to assess how well the distribution channels are in the market in order to identify if the existing ones are good enough for you or if you need to develop new ones.
Industry cost structure
This is about considering how much it will cost to produce and sell your products in the industry. With this, you’ll be able to think about if there is any way you can reduce the cost to make a bigger profit without increasing the market price. Your marketing analysis will help you to come up with new ways to reduce costs in order to make bigger profits without increasing your marketing price. At the same time, it will help you to create strategies for developing competitive advantages for your business in the industry.