Do you want a crystal ball? Because that’s pretty much what a market analysis is.
It’s a report that tells you what your industry looks like, who your target audience is, and which businesses you’ll be competing with over time. It’s an essential tool for launching products and services, and knowing how to conduct one is a must-have skill for small business owners.
Feeling like the kid who didn’t do their homework? No worries. We’ll explain what a market analysis is and how you can complete one in five straightforward steps.
The Guide to Winning
More Business Online
Want customers to find you online? A website is not enough.
What is a market analysis?
A market analysis is a report that breaks down the factors that influence the success of a product, service, or business. These reports gather information on your target audience, competitors, market opportunities, and more to provide a clear picture of the strengths and weaknesses of your product offer.
Simply put, a market analysis answers:
- Who is your ideal customer? What are they like?
- Who are your direct/indirect competitors?
- What is the size of your target market?
- Why would people want to buy your product/service?
- What will customers be willing to pay for this solution?
Why should you conduct a market analysis?
There are several reasons why small businesses should conduct a market analysis. First, it reduces risk. Before you put in the work crafting, creating, and launching a new product, a market analysis can tell you if it will be successful or not. At the very least, you have an idea of what you’re going up against before rolling out something new.
A market analysis will also help you stand out from competitors. You’ll see what other businesses currently offer, and where you can deviate from them. This is where you can fine-tune your product or service and personalize it your customers’ needs. If you’re noticing a common roadblock or an area where competitors are falling short, take advantage of that insight and solve that problem with your new product or service.
You can also use a market analysis to assess where existing products and services currently stand in your marketplace. For example, if one of your products isn’t selling as well as it should, you can analyze why it might not be resonating with your audience. This report compares your business to competitors in your industry, so you can see where to adjust your offers to be more in line with customer expectations.
Market Analysis Example
Here is a simple market analysis we created for a fictional plumbing company.
|
Target Market
|
Product/Service
|
|
Competition
|
Market Trends & Opportunities
|
Your market analysis can go into much more detail. But, this template should provide an idea of what you should include in this document and how to fill it out.
Free Market Analysis Template
Here’s the template that we used to create our market analysis. Copy the table below, then scroll down to the next section to learn how to use it.
|
Target Market
|
Product/Service
|
|
Competition
|
Market Trends & Opportunities
|
The Guide to Winning Want customers to find you online? A website is not enough.
More Business Online
How to Conduct a Market Analysis
1. Research your industry.
The first step is gathering information about your industry. Determine how large the potential market is and how many businesses are in it.
You should also take note of any standards or trends that affect how companies do business in this industry. If there are special regulations or restrictive laws, you should be aware of them before launching a product or service. Additionally, analyzing trends in your industry can highlight opportunities for your business to innovate and really stand out from the crowd.
2. Assess your competition.
Once you are familiar with the marketplace, you should look at the businesses that you are directly competing with. Write down what their products and services are, what they charge, and the strengths and weaknesses of each. This will help you identify gaps in your marketplace and where you can differentiate yourself from your competitors.
Pro Tip: Marketing tools can help you analyze your competitor’s local listings, customer reviews, and more.
3. Learn about your target audience.
The next step is to look at who you are selling your products and services to. This includes their age, location, profession, and any other information that you can find out about your customer base. The more information you have, the more you can tailor your content marketing and product offers to the specific needs of your target audience.
4. Review your products and services.
In addition to analyzing competitors, you should review your company’s products and services to see how they stack up. I would recommend conducting a SWOT analysis to see which parts of your business are strongest and which areas could stand to improve.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Take your flagship product and ask yourself, “What is the strength of this product? What does it do well?” Then, do the same for weaknesses, opportunities – you get the point.
A SWOT analysis is a quick and efficient way to see how one area of your business compares to its competitors. It’s a crucial step needed to perform an effective market analysis, as it shows you where your products and services currently stand in your marketplace.
5. Look for opportunities and roadblocks.
At this point, you should have most of the information needed to fill out the template above. This is where you start connecting the dots and highlighting opportunities for your business to take advantage of.
For instance, in our plumbing example, we found that YouTube is our competitor because some customers will opt for a DIY route and not call a plumber at all. While this takes deals away from our business, it also presents an organic way for us to get discovered online.
We can create YouTube videos that explain how to solve simple problems at home. When the video isn’t enough or a bigger problem pops up, people will be familiar with our brand because they’ve watched all our content. We’ll be at the top of their list to call if they ever need professional help.
This is just one example of how you can leverage a market analysis. The trick is – the more data that you have, the easier it will be to extract insights like these that will make your business a success.
Understanding Your Market Analysis
A market analysis is not going to revolutionize your business or produce thousands of sales overnight. In fact, it will probably confirm a lot of things you already know about your customers and your industry.
But, a market analysis is invaluable because it organizes information in one place. It provides an immediate, one-stop shop for everything you need to know about your products, your target customers, and the environment your business is operating in. Having this information at your disposal will help you make sound decisions and grow your business over time.
