A business plan is essential for any business, especially a startup business. However, writing a selling business plan requires an intensive market understanding. Market analysis refers to the detailed quantitative and qualitative evaluation of your target market in its present state.
It helps you determine the success rate you can expect from the industry you plan to join. You can achieve this by understanding the market value and volume, your potential customer patterns, and their purchasing patterns and power. A proper market analysis will give you the industry regulations and any entry barriers.
Nonetheless, you must be keen with your research to achieve this. Here is a step-by-step guideline on how to conduct a detailed market analysis for your business plan.
Key Takeaways
- You need to understand why you need a market analysis to conduct an effective one.
- Understanding your industry is crucial for a practical market analysis for your business plan.
- Competitive analysis is vital to your successful entry into the industry
- The market analysis enables you to understand your target market hence creating goods and services that meet the demand
- Every industry has entry barriers, a proper market analysis enables you to identify these barriers and forge ways to counter the challenges
Why Do You Need Market Analysis?
A proper market analysis helps you develop a solid business plan but also helps you make better decisions and a winning strategy. Understanding your market enables you to develop better services and products that satisfy your customers’ needs. Market analysis can be daunting, but breaking it down into the following elements makes it easier.
- Target market– know who your customers are. Here, you determine the customers’ demography, geographical locations, and needs.
- Competition– describe the positioning, weaknesses, and strengths of your competitors.
- Forecast and pricing– while pricing will determine how you position your business in the market, forecasting will help you know the size of the market you command.
- Industry overview– an overview describes the present state of the industry you want to venture into and where it is going.
However, it would help to understand the various types of market research before going to the field.
Steps to Conduct a Proper Market Analysis
After understanding market analysis and its essence, here are steps to make it worthwhile:
a.) Understand Your Industry
Understanding your industry puts you in a better position to proceed confidently, as you can identify trends and compete well with other brands. Here are some questions to spearhead your industry analysis.
- How many businesses dominate the industry you are eyeing?
- What is the market size in potential customer numbers?
- How much revenue do businesses in this industry generate?
- What are the operating standards for consumers and companies in this industry?
- Where can you spot business gaps in this industry?
- What are the external factors affecting businesses in this industry?
Industry analysis will help you decide whether to proceed with your venture after learning if the demand for your product is falling or rising.
b.) Conduct a Competitive Analysis
After the overall industry, you need to narrow down to the brand you are offering. Here, gather all the valuable data about your competitors’ businesses. That way, you can create winning strategies to counter competition and attract more potential customers to your company.
Below are critical questions to guide you through:
- What are the most popular brands in this industry?
- Who sets the standards that capture most customers’ attention?
- What platforms, technologies, and sales tactics do your competitors use to win customers?
- What are the brands’ price joints, values, and offers propositions?
Customers are ideal sources of information in analyzing your competitors. In addition, your competitors’ suppliers can provide valuable data for your research.
c.) Find All Market Gaps
Once you have insights into the competitive landscape, you can identify market gaps that will set your services and products above your competitors. A market gap is a need that the existing brands are not satisfying to the consumers.
The following questions will help you spot business gaps in your industry.
- From your industry analysis, what is the possible impact of external factors like new laws and social change on growing brands?
- Ask the consumers directly what they need or want but are still waiting.
- How exactly are the current product and service providers failing?
- How will your expertise and strengths help you create better services and products that satisfy the consumers?
d.) Know Your Target Market
Define the specific consumers you wish to serve with your products or services. While defining your market, you must understand the characteristics that will make particular consumers more likely to come for your products.
Here are a few guiding questions in defining your target market.
- Of all the customers in the industry, which section can you satisfy effectively?
- How can you define this section in their demographics?
- What are the daily challenges and problems your target customers face?
- What are the common ideas, phrases, and words your target consumers use to describe these problems?
- What is the most understanding and empathetic message you can use to market your brand to your potential customers?
e.) Identify Entry Barriers
While trying to understand your target market, you must focus on all the likely entry barriers to the industry. Knowing the barriers allows you to devise ways to counter the challenges. Therefore, answering the following questions will make the barriers more visible.
- What are the initial costs of starting your business in terms of technology, product development, certifications, patents, and suppliers?
- What are the legal requirements you must meet before starting your operations?
- What social, economic, or political factors will affect your business?
- What advertising costs do your competitors incur to win the customers’ loyalty?
- What must you do for your product to appear as the better alternative to the consumer regarding ease of purchase, value, and price?
Essential Checklist for Market Analysis
Before stepping out to start your market analysis, you must know what exactly you want. Here is a checklist to help you out:
- Competition
- Industry Overview
- Favorable market gaps
- Sales forecast
- Industry entry barriers
Final Thought
While market research can be overwhelming, the outcome is worth the pain. It helps you better prepare to counter market competition by unmasking all the blind spots. Moreover, it gives you a chance to understand your target consumers better hence delivering the best products that solve their problems.