Identify market – 7 Steps to Performing a Market Analysis
A market study is a complex procedure that requires a large amount of data and understanding. This data originates from both within and outside of your organization. It contains information about your products and services, competitors, and news from people on the front lines. A thorough market analysis can take weeks or months, depending on where you are in the product life cycle, the category you sell in, your target market, and a variety of other considerations. However, some crucial steps to conducting a market study are essential in most circumstances.
A market analysis is a process of determining if your product or service is well-positioned for market success. A market analysis performs when establishing or assessing product strategy, confronting a new competition, or offering a new product or service. The market analysis consists of at least seven essential steps:
- Identify unmet needs
- Identify which barriers to entry exist
- Identify the size of the market
- Identify the customer
- Identify the competitors in this space
- Identify the current price points
- Identify the distribution model
Identify Unmet Needs
Your items or services should either meet or create an unmet need in sales. Are you encountering an existing condition or developing a new one? Both entail informing and educating the consumer on the benefits of your product or service. On the other hand, creating a need necessitates significantly more consumer education and, perhaps, more resources. Regardless of which approach you to pursue, the first step is to discover what the marketplace demands are and whether your product – whether made or identified – fulfills these needs. Suppose your product isn’t yet in production or you want to improve your market position. In that case, you can also see if there are any additional needs that your product or service could meet.
If you already have a product on the market, ask your current customers what they enjoy about it. Alternatively, if someone else is in the area, inquire about their customers. If no one else is in the space yet, you’ll need to determine your target market and approach them.
As you receive responses in each scenario, you will refine your target. Collect as much information as possible about those providing feedback so that you can create segments if you have enough data.
Identify Which Barriers to Entry Exist
Understanding entry barriers can aid pricing, distribution, product revisions, and other areas. When you have a product with minimal entry barriers, it is considerably easier for competitors to enter at any time and produce a competitive offering. Adding value to your goods can assist you in building competitive barriers to entry while also helping you separate yourself from the competition. Higher entry barriers imply that you’ll have less new competition and less price elasticity because competitors aren’t eating into your margins. A high barrier to entrance, on the other hand, can be advantageous if you are uniquely positioned to decrease the obstacles to entry that others do not have.
For example, suppose you already have a plant capable of producing a product with minimal retooling or 2,000 retail locations from which to sell a new product. In that case, you have an obvious advantage in overcoming production or distribution barriers to entry.
Identify the Size of The Market – Identify market
There may be a market for garlic-scented perfume, but how big is it? Launching a new product is pointless if you have a half-dozen potential clients. Understanding potential clients, or the “magnitude of the prize,” is crucial to assessing whether or not it is worthwhile to pursue. Use reliable resources, such as statistics from business associations or government data. Many research organizations employ economists who can create industry size and seasonality models based on the variables used in these computations.
Trade publications will regularly calculate market size through subjective debates with their readership. Many of these ways will offer you a general estimate of the industry rather than an exact one; however, at the very least, you’ll know whether you’re aiming for millions or just a handful of clients.
However, market size is not the only factor to consider. While not crucial, having a good market projection is a great plus. For example, a product may be popular right now. Still, its popularity may be declining, or the market may be saturated. If the market is expanding but still tiny, now could be an excellent time to join.
Identify the Customer
There are three primary methods for identifying and comprehending your customer: demographic, geographic, and psychographic.
Demographic differences provide essential information. Consumers of different generations, races, or genders have diverse reactions to competition products or services. It may lead to holes in the market that your company can fill, or it may narrow the target market for your products or services. Understanding which demographics are purchasing which products/features and the purchase reasons for those categories can lead to effective messaging to target groups.
Geographic: Understanding trends in a particular geographic area provides quick insight into how the market is likely to act. Prices vary by geographic location in a brick-and-mortar market, and understanding those metrics allows businesses to balance profitability with the competition. Using trends from your other target markets’ similar demographics can help you determine how consumers could act in a new geographical area.
Identify the Competitors in This Space
It goes without saying that to do a market study, you must first identify your competitors. This procedure is more involved than simply searching Google for other organizations that offer similar products and services. You need to know which companies sell identical items and try to meet the exact demands as you; what their capacity to sell their products is compared to all other competitors (market share); and what qualities of those products sell best.
Identify the Current Price Points
There have been numerous articles written on how to price your product. While it may appear to be a customer component of your competitive strategy, it is also essential for conducting a market study. Understanding the current price points available allows you to evaluate profitability and determine if there is an opportunity for another competitor in the market.
According to the Harvard Business Review, a positioning map can determine who is in the market and what price points they occupy. It provides a great graphic that positions you in the perspective of your market’s competitors. Understanding how and where your competitors operate can assist you in locating yourself on that map.
Identify the Distribution Model
The idea behind a distribution model is not simply loading a product into a truck and delivering it to a store or end-user. Nowadays, almost everyone sells their brand online. Determining how you want to get the product to the customer strategically is crucial to ensuring you don’t compete with yourself (or against your best retailers). There are numerous methods available, ranging from direct distribution to more traditional distribution. There may be advantages to direct distribution, and lowering store costs may be crucial for the approach. Still, it may also imply that you lose access to salespeople who can promote the benefits of your product.
Conclusion
The steps to conducting a market analysis may appear daunting. Still, by starting with a framework like this one, you will see where the pieces fit together – and, more importantly, where they don’t. Speak with others who are familiar with your market and can provide insight. Do your study by hiring a research firm or meticulously preparing and researching yourself.
