A market analysis is one of the most important elements in the promotion of a business strategy and assesses the prospects as a whole.
This process covers the learning of consumer demand, competition, opportunities and threats present in your chosen field of activity, taking into account economic, cultural, political, geographical and other external factors. Knowing how to do a market analysis, you can understand how to build and grow your business, attract investments and minimize risks.
What is a market analysis?
A market analysis is an important element for any company but is especially needed when you launch a new product or service on the market.
You can do it in completely different ways:
- Someone just looks at competitors’ websites and uses their bells and whistles.
- Others look for reports in the public domain and analyze them.
- Others conduct a comprehensive analysis of competitors regularly. If you are one of them, congratulations!
Every other manager speaks about the analysis of the competitive landscape, but only one in every ten does it.
A comparative market analysis is the process of the acquisition of knowledge the following:
- Who are your potential clients?
- What are their buying and shopping manners?
- How many of them are there?
- How much will they pay?
- Who is my competition?
- What have their challenges and successes been?
We live in a closed market environment and observe how our competitors are developing, what they use to retain customers, and how it affects us and our successful future.
Therefore, it’s important to understand:
- Who is your rival in the fight for the client?
- What strategy does your competitor use?
- What part of the market is your company?
- What part of the market are your competitors?
- What is their unique selling proposition?
- Which way is better to go to earn more money?
Given the foregoing, a comparative analysis allows you to make more money and keep your niche on the market.
How to do a comparative market analysis?
So, the first thing you will do: explore the market, which is in the zone of your interests, and describe each of its components.
- Who is your client?
- What does he do to meet the needs?
- What alternatives does your client have?
The first step is to learn as much as possible about the potential customer. You can turn to market research. It is important to find out in what places he happens, what the size of his income is, what kind of people he contacts, what technologies he uses and what information source he trusts. When you understand who your customer is, you can evaluate the audience.
An additional tool is a content analysis of user messages on social networks and their profiling on the sociological, economic, psychological grounds.
- How many of your potential customers are on the market?
- Who is our opponent in the fight for the client?
- Where to get market information?
Using the model of segmentation, targeting and positioning, evaluate the size of the target, potential, affordable, and reachable audience.
There are many instruments you can use:
- TNS WebIndex
- Liveinternet Rating
Thanks to these tools you can understand the business direction and determine your market size.
When you are analyzing advertising channels, you need to understand;
- What channels do your competitors use to advertise?
- What target audience do your competitors attract?
Advertising channels analysis helps to find out which platforms a competitor uses to attract a client. Are you ready to fight with him for the client’s attention by paying for advertising on these channels? Or is it better to go where the competitor doesn’t place his advertisement?
The economic essence of the product
- Can do we stay afloat in the market situation?
- How much does a competitor earn on clients?
- Can we reorient the customer to our product?
It is important to calculate the economy of your product or service before you start to fight for the consumer. What does it make a profit? How much does each attracted client cost us? Is it possible to lure a client from competitors?
That is the only way you can understand whether your company will stay afloat, or get out of this struggle. We looked at what channels your customer is using to draw customers’ attention earlier. Learn the structure of opponents’ economy and estimate their advertising costs. If their company picks up and boost their audience, they are on the right road. How to repeat and even surpass their success?
Calculate profit and loss per client.
- Lifetime Value is the total profit the company receives from one client for the entire cooperation period.
- Customer acquisition cost is the amount we pay to attract a new customer.
- Gross profit is the total income that we receive from all customers fewer costs
- Return on investment is the return on investment for advertising.
Sometimes it’s easier and more profitable to beat off a client from a competitor than to spend money on finding a new one. Everything must be calculated. And it is important not to forget that the market size has an impact too.
Risks and limitations
- What market specifics should you pay attention to?
Depending on the location of your business, different market nuances will arise. Risks will arise too.
The main aspects you need to focus on:
- What time does the client behave more actively? Go back to the “A client’s portrait” section and add the necessary information to it.
- What is the competitive environment in the selected area?
- Are there any difficulties in selling goods in this region?
- Is there a representative office or is it necessary to add delivery to the services’ list?
- Weather conditions.
- Exchange rate.
- Lifestyle, traditions.
The classical market analysis relies on SWOT analysis. The advantages of SWOT analysis are that it allows you to quite simply, in the right context, look at the position of a company, product or service in the industry, identify weaknesses and strengths, opportunities and threats, and therefore is the most popular tool in risk management and management decision making.
- Identify the user problem that we want to close.
“The customer has the following problem.”
- We describe the solution.
“We can help the customer in this way.”
- We will understand which audience has a similar problem.
“Who has a similar problem?”
- Count them.
“How many people have the same problem?”
- We’ll select effective advertising methods to draw the attention of clients.
“What can we do to address their concerns?”
- Discover the benefits and drawbacks of your product/service.
“What are the advantages of your goods and what are the defects?”
- Pay attention to the specifics and calculate the risks.
“What are the specifics and risks connected with your company?”
It is essential to do a regular market analysis of the competitive landscape. Otherwise, it’s like playing Whack-A-Mole. Step aside and you are defeated.
Explore the market, use your advantages.
Good luck with your business!