How To Conduct a Market Analysis To Make Better Business Decisions

Interpretation of the market is proportionally crucial to the successful business strategy. Whether you are starting a company, changing industries or adding new offerings, a market analysis allows you to achieve your goals more efficiently by providing the information you need to make better decisions. But where do you start?

Conduct a Market Analysis to begin understanding your environment, competitors, and opportunities.

Here’s a step-by-step guide to help you perform your own market analysis. By the time you’re finished, you’ll know how to identify your ideal audience, evaluate the competition, and identify where the growth opportunities are. Let’s get started.

What Is a Market Analysis?

Market analysis is when you become familiar with who your industry players are, what consumer behavior looks like, what prices are like, market trends, competitors, barriers to entry, etc. What it really does is it answers your business’s four fundamental questions:

• Who is your audience?

• How big is your market?

• Who are your competitors?

• What are some of the trends shaping your industry?

When these are understood, companies can mitigate their risks, invest better, and develop a distinct competitive position.

To truly benefit from these insights, it’s essential to conduct a market analysis at each strategic decision point.

Why Market Research Matters

Performing a comprehensive market analysis offers a host of advantages that are more than just the figures. These include:

• Risk Mitigation

• Customer Insights

• Competitive Advantage

• Markets

• Strategic Decision Making

Every time you enter a new market or refine your approach, you must conduct a market analysis to guide your decisions with data.

How to do a Market Analysis

1. Clear road map for market analysis

For your market analysis to be successful, you need a clear road map.

Define Your Goal

Begin with some concrete objectives regarding the purpose of your market analysis. Do you have an R&D project that involves testing the viability of a new product? Looking to get to know your audience more? Or studying market saturation before entering a new region?

A small clothing retailer might want to ascertain whether or not developing a sustainable fashion line would be of interest to their existing customers, for instance. Establishing a clear goal for your research keeps it focused and actionable. That’s why it’s best to conduct a market analysis before making major moves.

2. Identify Your Target Audience

Identifying your perfect customer is the most critical part of your market analysis. Because you can’t serve every potential customer, so focusing your audience helps you funnel resources toward the people who are most likely to engage with your business.

How to identify your ideal customers:

• Demographic characteristics: Age, sex, income, education, occupation, and marital and cohabiting status.

• Psychographics: Value, interest, attitude, lifestyles and buying behavior.

• Geographics: Where in the world are your customers?

PDI (Product Design & Innovation) tools such as Google Analytics or social media insights can churn out customer data juice that is something worth perusing.

Understanding your audience allows you to create messaging and products that best appeal to them. To do this effectively, conduct a market analysis with your target demographics in mind.

3. Analyze Your Industry

Industry analysis is looking into the bigger market dynamics that are influencing your company. Ask yourself:

• How are things in your industry now?

• Any fads or upsets?

• What are the forecasts for growth?

For instance, if you’re in fitness, you could look at the increasing interest in personalized wellness apps or at-home exercise options. Services such as IBISWorld, Statista, and government websites often have useful reports to help guide your research.

Use these tools to conduct a market analysis that reflects both current performance and future expectations.

4. Evaluate Your Competition

You can never get too much of the who-is-on-first routine with competing companies. It helps you identify the problems as well as the opportunities.

Steps to analyze competitors:

• Define your direct and indirect competitors.

• Educate yourself on their strengths and weaknesses.

• Consider their pricing plans, feature differences and read customer reviews.

A SWOT analysis (or Strengths, Weaknesses, Opportunities, Threats) might be a useful tool to compare where your business fits against your competition and help shape where you can be different. To do this well, conduct a market analysis with a focus on your competitors’ positioning.

5. Review Market Trends and Opportunities

Don’t just look at competitors but look at what is happening on the outside that is affecting the industry. Can you use any new technologies? Have consumer tastes changed?

Stay ahead by:

• Reading industry journals and blogs

• Networking at industry gatherings and trade shows

• Using tools like Google Trends to gauge and monitor changes in consumer demand

A thorough way to stay informed is to conduct a market analysis regularly, not just when planning something new.

6. Pull Information from Reputable Sources

Market analysis is based on data, but not all data is created equal. Leverage a blend of primary research (information gathered directly via surveys, interviews and focus groups) and secondary research (reputable reports from the industry).

Here are some great data collection tools/resources:

• Online surveys from SurveyMonkey or Typeform

• Customer interviews for qualitative understanding

• Marketing reports by Nielsen or IBISWorld

• Yelp or Google Business Profiles online reviews

These tools ensure that when you conduct a market analysis, it’s built on verified, high-quality information.

7. Interpret the Data

Gathering information is only the start. The true value is digging into the reporting and finding actionable insights. For example:

• If you collect data suggesting that 60% of all consumers seek eco-friendly packaging, it might affect packaging decisions.

• If purchasing from mobiles is growing at a 20% CAGR, an investment in an optimized app becomes an imperative.

To make this interpretation meaningful, conduct a market analysis with your specific business context in mind.

8. Consider the Implications for Decision Making

And lastly, make decisions about your business based on what your market analysis tells you. Whether that means adjusting your product offering, sharpening your marketing approach, or entering a new market, your findings should be influencing what you do next.

Smart companies conduct a market analysis before every key investment to validate the need and maximize ROI.

Reap the Benefits of Market Analysis

Market analysis does to be precise mean something more than facts and figures. It gives clarity, helps in decision making and prepares your company to face challenges. Whether you want to optimize your offerings or want to spread into new markets, you can use these steps to give yourself what you need to pull through.

Need extra guidance? Our library of resources also contains more advice, templates, and insights from experts about all aspects of your business strategy.

You can also read this: Understanding a CMA