With a professional market analysis, you spare yourself the efforts of launching a new product that no one wants. When it makes sense to perform such an analysis, which methods can be used and how you can best leverage them are explained here.
What is a market analysis?
A market analysis is a complex process within the market research field. It shows how successful a product or service could presumably be in a market. For start-ups, an analysis is an indispensable component of their business plan. But established companies, too, which want to launch a new product or new service onto a market, profit from a market analysis. Just as much so as companies that want to tap into new markets, for example in the course of internationalising their business.
The market analysis provides valuable information about the industry, customers and competitors, as well as the level of supply and demand in the specific area. In this way, opportunities and risks are shown and insights gained, which are helpful for marketing and sales strategies.
Various market analysis methods: primary research vs. secondary research
Generally speaking, a market analysis consists of two forms of research: primary research and secondary research.
- Primary research: covers all the information that is newly captured, for instance through surveys or analyses of certain environments such as social media.
- Secondary research: covers the analyses of already existing internal and external data and insights. This includes existing customer data, business reports from other companies, studies or insights from special interest publications.
A comprehensive market analysis combines both of these research approaches. If you have just a limited budget available, you should start with secondary research, as this is much less expensive.
Important steps of a market analysis
A professional market analysis has a clear structure, regardless of the industry. The basis always covers an objective and a target group analysis. Should you find out if there is even need for an innovation? Should the competition to a certain service be analysed? Who could even be interested in a certain offer, and which needs, preferences and behaviour is characteristic of this target group?
Afterwards, the market potential is estimated: how big is the overall market, does it have growth potential, and which current market trends could have an influence on it? How strong is the competition, in which price range are similar products or services offered, and what could a unique selling point be?
Various references are suitable for estimating the size of the market, for instance your respective country’s statistical office, the chambers of trade and commerce, and the latest press reports. For an industry structure analysis, the Five Forces Model has become the standard method. This model assumes that five forces of competition are relevant for market appeal:
- Bargaining power of suppliers
- Bargaining power of customers
- Threat from new competitors
- Threat from replacement products
- Intensity of competition within the industry
The results provided by this model shows which forces within the industry the company will have to face and which opposing forces they must reckon with.
Barriers to entry and SWOT analysis
If there is nothing speaking against a market launch, additional barriers to entry should be broken down. For instance, these could be extremely high investment costs or regulatory or legal barriers.
Once the basic characteristics of the market have been analysed, it can be helpful to define your own position within this structure, with the aim to develop a strategy for the entry to market. To achieve this, the so-called SWOT analysis can be suitable: Strengths, Weaknesses, Opportunities and Threats. These four areas are frequently visualised in a SWOT matrix. The insights gained from this enable you to assess your own competitive position as neutrally as possible.
