Market analysis is a necessary part of planning a profitable business.
Before investing any money in your business, you must gather information about your potential customers and the demand for your product of service. This information, or market analysis, is a necessary part of planning a profitable business.
BENEFITS OF MARKET ANALYSIS
1) Faster Cash Flow
Knowing who your customer is, what they need, and where to find them is vitally important. Targeting the right people is crucial for generating cash flow in the shortest time possible.
2) Greater Market Share
An examination of current market conditions tells you who your competition is, the size and location of the market, current competitor pricing and promotional strategies, and types of market niches which are underdeveloped.
Positioning your product for greatest exposure, while creating an image of quality and value for your product, allows you to become a serious player.
3) Reduced Expenses
A leading cause of business failure is lack of capital – the business runs out of start-up funds before becoming profitable. It’s important to make every penny count. You reduce expenditures by trying to predict outcomes before taking action. There is always a certain amount of risk with any business venture, however, analyzing your market reduces that risk.
ASK THE RIGHT QUESTIONS
To collect the kind of information which will be most helpful, you’ve got to ask the right kinds of questions. The more you know about the business climate you are entering, the more successful you will be at finding the right customers and making the sale.
1) Do you have a niche? Does your product or service fill a need or solve a problem? Can you appeal to cross-segments within your market by highlighting different aspects of your product?
2) How should you price your product or service? Should you price lower than the competition, or enhance your product’s value and charge a higher price? Is your pricing adequate to meet profit expectations?
3) Who are your potential customers? Where do they live? How much money do they make? What is their education level?
4) Who are your biggest competitors? What are they doing right? What are they doing wrong? What can you do better?
5) What type of media will you use to advertise? How will you measure the results of your promotions?
6) How will you deliver your product to the customer? Will you offer a guarantee? How will you handle complaints?
COLLECT USEFUL DATA
Where do you find useful information for your analysis? Here are some great starting points:
1) Join Like-Minded Groups
Congregate with like minds for an inside look at your market. For instance, joining an active online forum will help you spot trends, gauge sentiments among market participants, and provides an avenue for you to make contacts for further research.
2) Internet Search Requests
Get a snapshot of demand by Internet users for your product of service with a look at the keywords people use on search engines. Investigate how often a phrase is used in searches and the competition for those phrases. You can use services like Google Keyword Planner, Bing Ad Intelligence, Google Trends, and WordTracker.
3) Online Competitor Research
Investigate your competitors by analyzing what they are doing right and what they are doing wrong. You want to know what works and what you can improve upon. A good way to find, investigate, and out-maneuver your competitors is by keeping an eye on keywords common between you and the competition using a tool such as UrlTrends.
4) Trade Publications / Media
Subscribe to magazines, newsletters, and follow social posts from those within your target market. Not only is this a great way to keep up with current market conditions, but you’ll also stay in the loop as your business matures.
5) Industry Surveys / Research
Here are several professional organizations which gather statistical, economic, and demographic data:
6) Statistical Data
Search for specific data within the Statistical Reference Index, or the Census Bureau’s Economic Indicators Reports. For economic data within an industry, or even a particular company, try the federal government’s Standard Industrial Classification Manual.
In conclusion, there is no substitute for a thorough analysis of your market. Armed with this information you have the basis for a sound marketing plan. Your time and effort will be rewarded with a business that does what it should: make money.
ABOUT THE AUTHOR
Brett Krkosska provides how-to advice on small business and home-based work issues. He is the founder of HomeBizTools and the publisher of Straight Talk, a syndicated column that offers a unique perspective on today’s business issues.