Market analysis is a thorough evaluation of the market within a particular industry. These analyzes have many benefits, including reducing business risk and better informing business decisions. Market analysis can be a time-consuming process, but you can easily do it yourself in 7 easy steps.
To perform a market analysis for your business, follow the steps outlined in this guide.
How to conduct a market analysis
Conducting a marketing analysis is not a complicated process, but it does require a lot of dedicated research, so be prepared to spend a significant amount of time on this process.
Here are seven steps to perform market analysis.
1. Decide on your purpose.
There are many reasons to conduct market analysis, such as evaluating competitors or understanding new markets. Whatever the reason, it's important to define it right away to stay on track throughout the process. Start by determining whether your objective is internal, such as improving cash flow or business operations, or external, such as seeking a business loan. Your purpose will determine the type and amount of research you conduct.
After conducting a market analysis, use our guide to choosing a business loan to make the right decision. Visit our business loan reviews page to discover your options and learn more about how easy it is to get approved.
2. Research the current state of the industry.
Map out a detailed overview of the current state of the industry. We include where we think the industry is headed using metrics such as size, trends, and projected growth, along with rich data to support our findings. You can also perform comparative market analysis to find competitive advantages within a specific market.
3. Identify your target customers.
Not everyone in the world can be your customer. Trying to get everyone interested in your product is a waste of time. Instead, use target market analysis to determine who is most likely to want your product and focus your efforts there. You want to understand your market size, who your customers are, where they come from, and what influences their purchasing decisions. To do this, look at demographic factors such as:
- What I'm interested in
During your research, you may consider creating a customer profile or persona that reflects your ideal customer to serve as a model for your marketing efforts.
4. Understand your competitors.
To be successful, you need to have a good understanding of your competitors, including market saturation, how they differ from you, and their strengths, weaknesses, and advantages in the market. Start by listing all your major competitors, then review that list and perform his SWOT analysis of each competitor. What does that business have that you don't? Why would a customer choose your business over yours? Put yourself in your customer's shoes.
Next, rank your list of competitors from most threatening to least threatening and decide on a schedule to regularly conduct a SWOT analysis of your most threatening competitors.
5. Collect additional data.
Information is your friend when performing marketing analysis. There's no such thing as too much data. It's important that the data you use is reliable and factual, so be careful where you get your numbers from. Below are some trusted business data resources.
- US Bureau of Labor Statistics
- US Census Bureau
- State and local commercial sites
- trade magazine
- Your own SWOT analysis
- Market research and questionnaires
6. Analyze the data.
Once you have collected all the information you can and verified that it is accurate, you need to analyze the data to make it useful. Organize your research into sections that make sense to you, but be sure to include sections based on your objectives, target market, and competition.
The main elements that should be included in the study are:
- Overview of industry size and growth rate
- Predicted market share percentage for your business
- Industry outlook
- Customer purchasing trends
- your growth forecast
- How much are customers willing to pay for your product or service?
7. Run the analysis.
Once you've created your market analysis, it's time to put it to work. Internally, we look for where we can use research and discovery to improve our business. Have you seen other companies doing something that you would like to implement in your own organization? Is there a way to make your marketing strategy more effective?
If you conduct your analysis for external purposes, compile your research and data into an easy-to-read and digestible document to make it easier to share with your lender.
Consider creating an annual calendar reminder to save all your information and research for your next analysis and stay up to date with the market.