Let’s say you want to enter a new market or introduce a new product. How can you tell what will and won’t work? How can you come up with plans to flourish in a cutthroat commercial climate? Fortunately, market analysis provides answers to these queries.

After all, entering the corporate world unprepared and lacking in understanding can expose you to pressure from competitors and other unknowns. Having a thorough market analysis can help you minimize risk and guarantee success.

This post will explain what a market analysis is, why you should perform one, and how to go about doing one.

What Is Market Analysis?

The qualitative and quantitative examination of your external company environment is known as market analysis. It provides a thorough analysis of the dynamics of your sector. You can forecast how your industry will change over time and how it will affect your business by using market analysis.

The Purpose of Market Analysis

You can learn vital information about what works and what doesn’t from market analysis. It also assists you in identifying unexplored markets and developing strategies to differentiate yourself from the competition.

You’re more inclined to make decisions based on assumptions in the absence of market analysis data, which raises the possibility of failure. A crucial step in determining the shortcomings of your solution is market analysis.

It assists you in response to the following questions:

• What much are they prepared to pay for your solutions?
• How big is your market target?
• Who are the people that compete with you?
• What are their strengths and weaknesses?
• What are your strengths and weaknesses?
• Which threats and opportunities are obvious?
• Who is your intended audience?
• What kind of purchases do they make?
• Which industry trends are prevalent right now?

How is Data Gathered for Market Analysis?

If you don’t have factual facts to support your statements, your market analysis is worthless. Primary and secondary sources are the two main sources which you can use to gather information for market research.

• Primary market research: Primary analysis of the market contains all the data that you can independently acquired by:

• Market Analysis
• Interviews with customers
• Focus groups
• Testing prototypes
• Secondary market research: Secondary analysis of the market It contains all of the information you get from outside sources, such as:

• Research
• Government web pages
• Results from experiments
• Books and trade journals

But sometimes the information you require isn’t easily accessible. If you have the funds available, you can think about working with a third-party data analytics firm in certain situations.

This can be costly, but it will provide correct data to enhance your study. Afterwards, you may utilize this information to outperform your competitors and increase your market share.

How is Market Analysis Done?

Your market analysis may be thorough and expensive, or it may be quick and low-cost, depending on the goal and scope of your investigation. Whatever the case, performing a market study involves seven processes.

Step 1: Clearly define the goals for your market analysis.

Prior to starting, clearly state the goals of your analysis. It determines the extent of your study, helps you stay on course, and controls your spending.

Among the following are some justifications for performing a market analysis:

• To obtain financing from investors or a bank
• To assess the feasibility of a new product
• To obtain a benefit over competitors
• To determine what obstacles stand in your way of progress
• To lessen dangers and uncertainty

Step 2: Research the future of your industry

You outline the existing situation of your industry in this stage and offer your projections for future developments. Metrics like market size, anticipated growth, industry life cycle, and trends can be used to get this data.

You can determine how these modifications will impact your product or service by using this data. This is particularly crucial if you’re looking for money or to apply for a loan. It also aids in product demand forecasting, which is necessary to guarantee profitability.

Step 3: Determine who is your target market 

After you’ve described your industry, you need to determine who is most likely to purchase your goods and services. Even while everyone might benefit from your product, there’s a good chance that not everyone will become a customer for a variety of reasons.

You can collect information via focus groups, interviews, surveys, and other methods to determine who your ideal client is. Next, you can exclude results based on the following demographics:

• Age and Gender
• Place of origin
• Employment
• Income 
• Way of Life

Step 4: Analyze competitors

The competition is one of the elements that directly affects your business. You will be up against two different kinds of competition in the market.

Direct competitors: These competitors provide comparable solutions to those that you do. For example, given that pizza is both companies’ main product, Pizza Hut and Domino’s Pizza are direct rivals.

Competitors who operate indirectly: Competitors provide alternatives to your solutions. For example, because both Burger King and Domino’s Pizza sell fast food, they are indirectly competitors.

You should not only identify competitors but also comprehend their business practices. To accomplish this, you can:

• Examining their promotional tactics
• Knowing what their USPs are
• Describing the extent of their threat to you
• Assessing one’s advantages and disadvantages
• Coming up with ideas to take advantage of their weaknesses
• Offering solutions that are superior to theirs

Step 5: Determine your market share

The percentage of the overall market sales that you are accountable for is known as your market share. You make up that portion of the market. Estimating your market share, also known as sales forecasting, is a crucial phase because it will determine whether your business venture will be viable.

Your business idea may not be profitable enough to proceed due to insufficient sales if your predicted market share is not high enough. By analyzing these metrics, you may forecast your market share:

• Total available market, or TAM, is the total demand that is there in the market. Stated differently, it represents the highest possible sales or revenue that the market can provide.
• The term “serviceable available market,” or SAM, refers to the portion of the total addressable market (TAM) that falls within your reach. These restrictions may relate to a company’s location, business strategy, product category, etc.
• The term SOM stands for “serviceable obtainable market,” which is the portion of SAM that you can access after accounting for your rivals, client preferences, manufacturing capacity, etc.

Your estimated market share is SOM. After you’ve calculated it, you may put it into practice with the right pricing techniques.

Step 6: Recognize the rules and limitations

It is important to be aware of the rules and limitations in your industry before venturing into new markets or launching a new venture. Gaining confidence from potential investors and avoiding legal problems can both be achieved by being aware of these. Among the rules you should be aware of are:

• Governmental directives
• Rules concerning taxes
• Trade agreements
• Environmental controls 
• Employment legislation
• Privacy and security
• Safeguarding intellectual property

Step 7: Arrange and use the information

Well done; you’ve finished the analysis’s research section. It’s now necessary to interpret all of the information you have acquired. Arrange all the information and draft a section on market analysis for your business plan.

Use the following framework to arrange and record your data:

• Summary 
• Market Overview
• Target market
• Competitive analysis
  • Direct competitors
  • Indirect competitors
  • Strengths and weaknesses of competitors
  • Competitive benefits along with weaknesses
  • Possibilities and threats

• The projections

Market share valuation

Estimated revenue 

• Guidelines

Utilize this information to further your strategic marketing strategy and create a marketing plan when you’ve finished writing the market study section.