Blog / Perform market analysis: Analyze your market in 10 steps
Perform market analysis: Analyze your market in 10 steps
Maurice – August 10, 2023 – 10 min read
Market analysis is an essential step in understanding what your target customers really want and need. Therefore, in our article we will go into what should make up a good market analysis and how you perform market analysis. To this end, we answer the following questions, among others:
- What is a market analysis?
- Why are market analyses important?
- When should a market analysis be performed?
- How to conduct a market analysis in 10 steps?
What is a market analysis?
Market analysis serves as an important tool to understand the competitive landscape and target audiences in a particular industry. Therefore, a holistic market analysis also includes quantitative and qualitative components in equal measure to ensure that your products are optimally accepted in your target market.
What is the difference between a Quantitative Market Analysis and a Qualitative Market Analysis?
A Quantitative Market Analysis typically includes data such as the actual size of the target market, pricing information, sales forecasts and more. Qualitative market analysis, on the other hand, looks at factors such as consumers’ values, desires and motives for buying. By combining these two types of analysis, market analysis provides an important overview of the competitive landscape and can help you determine the profitability of your products or services in your target market.
Why you should do market analysis
It is important to conduct market research and analyze relevant data at regular intervals, because only then it is possible:
- Identify industry trends at an early stage,
- Identify growth opportunities and
- Develop necessary strategies,
to be able to seize potential opportunities as early as possible.
Thus, the market analysis also helps you to be one step ahead of the competition by giving you insights into their:
- Product range and
- Advertising tactics granted.
In short, by conducting a thorough market analysis, you will gain valuable insights into your target market, revealing the best way to position your brand to maximize success.
Market analysis is key to developing a successful business plan and can help you make smart, informed decisions about your business and product offerings.
When you should perform a market analysis
As noted previously, market analysis should be conducted regularly to stay abreast of trends and competitive in the marketplace. However, a market analysis should also be conducted whenever you are launching a new product or service, entering a new market, expanding into a new geographic area, or changing your pricing structure.
After all, a comprehensive market analysis before launch can help your business succeed and ensure that your offering resonates with your customers. After all, market analysis provides important insights that enable your company to tailor its products to consumer needs and better position itself in competitive markets.
Therefore, whenever any of the events described above occur or are planned, investment should be made in thorough market research, which can then provide valuable data for decision making and future growth.
The 10 steps of a successful market analysis
No two market analyses are alike, yet they all have similar fundamentals. Therefore, we have once summarized a list of 10 steps that everyone should take when conducting a market analysis. The 10 steps for a successful market analysis:
- Step 1: Set goals
- Step 2: Define the target market
- Step 3: Gather information
- Step 4: Analysis of market size, market development and market potential
- Step 5: Analysis of industry trends and developments
- Step 6: The competitive analysis
- Step 7: Define target group and personas
- Step 8: Market positioning and differentiation
- Step 9: Determining the marketing mix
- Step 10: Market entry strategies
Step 1: Set goals
When conducting a market analysis, it is important to set clear goals. After all, this is the only way to ensure that the analysis is targeted and that the information collected is in line with the company’s goals.
But what’s better than a simple step-by-step guide? Few, so here’s our step-by-step approach to setting goals for a holistic market analysis:
1 – Identify the problem or opportunity:
Begin by identifying the problem or opportunity that the market analysis is intended to address or even solve. For example, when a company wants to introduce a new product, it needs to assess the likely demand and competition in the market. To do this, simply list all the problems and opportunities.
2 – Set your analysis goal:
Be clear about what information you want to collect and why. Create specific and quantifiable goals related to the problem or opportunity. For example, to improve the chances of success of a new product launch, the goals might be:
- Recognize the size and volume of the market.
- Determination of the target customer segment.
- Identify customer requirements and preferences.
- Know the main competitors in the market.
- Understand the trends and dynamics of the market.
3 – Determine a main question:
Formulate specific questions that need to be answered to meet the objectives of the study. An example would be:
- How big is the market for the new product?
- What is the potential of the market?
- Is the market saturated?
- What are the requirements and preferences of your own ideal customers?
- What are the trends and dynamics of the market?
4 – Prioritize your analysis:
Prioritize your research activities based on the goals and questions of the study, selecting and completing the most important and urgent tasks first.
5 – Decide on one or more research methods:
Based on the previously formulated objectives and questions, determine which research methods are most appropriate. Examples of such methods would be: Surveys, experiments, observational studies, and competitive analyses.
In summary, clear and defined objectives are critical when conducting a market analysis, as this is the only way to quantify and evaluate the success of the analysis.
Step 2: Define the target market
An important step in conducting a market analysis is defining the target market. The target market is the exact group of customers to whom the company intends to sell its goods or services.
Determining the target market allows the company to focus its marketing efforts, better understand its customers’ needs and preferences, and make more informed decisions.
We have also formulated a step-by-step guide for identifying the target market:
1 – Analysis of demographic data:
Age, gender, income, education and geographic location can be used to define the target market.
For example, a company that sells luxury watches would target customers who are 35 or older, have a high income, and live in a city.
2 – Analysis of psychographic data:
Psychographic data are the attitudes, values and lifestyle of consumers. Knowing these characteristics can help a company determine its target audience and tailor its marketing message.
For example, a company that offers environmentally friendly products can appeal to customers who are environmentally conscious, health conscious, and socially minded.
3 – Analysis of customers’ requirements and preferences:
Understanding the needs and preferences of the target market can help a company develop goods and services that are relevant to the target market.
For example, a company that wants to sell organic food should target consumers who like organic items, who care about healthy food, and who prefer organic food.
4 – Identification of customer segments:
Besides the actual target group, there may be other groups of people for whom one’s product could be an asset. You should include all of these groups in your customer segment and this can also be determined by demographic, psychographic and behavioral factors.
For example, a company that offers clothing for plus-size women may have different target audiences depending on age, income, and region.
5 – Define your target market:
After you have identified the target market, define it based on certain characteristics such as age, gender, income and lifestyle.
The following example should help: “Our target audience is environmentally conscious, health-conscious and socially engaged women between the ages of 30 and 40 with incomes of $50,000 or more.”
6 – Confirmation of the target market:
Once you’ve identified the target market, you need to validate it by analyzing data and consumer feedback. This phase is critical to ensure that the target market has been correctly identified and to make any necessary changes.
In summary, identifying the target market when conducting a market analysis is a critical step in understanding the target market’s needs and preferences and making more informed decisions. However, as the market and consumer tastes change over time, it is also important to regularly review and update the target market definition.
But where do you even get the information to do all this?
Step 3: Gather information
Gathering information is an important element in conducting a market analysis. This includes, among other things, collecting data on:
- The market,
- The competitors and
- Industry trends.
This data serves as the basis for subsequent corporate decisions and strategies.
But how to collect all the necessary data? Well, step by step:
1 – Identify the sources of information:
Determine the various sources of information to be used for data collection. These include secondary sources such as industry publications, government statistics, and Internet databases, as well as primary sources such as consumer surveys, interviews, and focus groups. Other sources include: third-party market analysis, online research, discussion forums, and social media analysis.
2 – Analyze the data obtained:
Analyze data using statistical tools or other means to uncover patterns, trends, and insights. This helps in understanding the target market, competition and market dynamics.
Data analysis is about deciphering the meaning behind the numbers and gaining important insights. Identify key market drivers and trends, as well as opportunities and constraints, to develop a holistic understanding of the industry.
You should also keep in mind that the methods and sources of data collection may vary depending on the research topic and objectives, as well as the target market and industry. Primary data collection techniques such as surveys, interviews, and focus groups, for example, may be more useful if the analysis is more related to customer behavior and preferences. Secondary data sources such as industry publications and government statistics may be more relevant if the analysis is more about market size and growth.
In summary, gathering information is a critical step in conducting a market analysis. Likewise, however, it is important to keep this data up to date, to constantly collect information, and to document the results for future use and reference.
Step 4: Analysis of market size, market development and market potential
Understanding the size, growth and potential of the market is an important part of a market analysis. This includes determining the current market size, understanding the development potential of the market, and identifying market trends.
To be able to determine the market size and development, you need to proceed as follows:
1 – Define your market:
Clearly define the scope, geography and target customers of the market. For example, consider the urban organic food market, which caters to health-conscious customers.
2 – Estimate the market size:
Estimate market size using data such as sales, revenue, and market share. This will give you an idea of the current size of the market and its potential.
3 – Recognize the market development:
Spot market developments by discovering trends and patterns in the data. For example, a growing trend in organic food consumption could indicate increasing demand and development opportunities.
4 – Identify the market potential:
Analyze growth potential, opportunities and barriers to determine market potential. For example, if the market for organic food is growing, this can mean an opportunity for new product introduction and market development.
To better understand the size, evolution, and potential of the market, you can use statistical methods such as regression analysis, forecasting, and trend analysis. This can help identify patterns and trends that may not be immediately apparent from the raw data.
5 – Determine external factors that could have an impact on the market:
Identify any external variables that may affect the market, such as demographic changes, technological developments, or legislative changes.
If a company knows the size, development and potential of the market, it can better decide whether it should expand its product range, enter new markets or change its pricing policy. In addition, using statistical approaches and examining external aspects can provide more accurate and in-depth insights into the industry.
Step 5: Analysis of industry trends and developments
Another essential part of a market analysis is the analysis of industry trends and developments. Indeed, understanding current and future market trends can help a company identify opportunities and challenges and make more informed decisions.
This is how you correctly analyze the trends in your own industry:
1 – Identify key trends and developments:
Research industry reports, the news and other publications to identify important trends and developments in your industry. Pay attention to data on technological advances, changes in customer behavior, and changes in the competitive landscape.
2 – Categorize trends and developments:
Break down trends and developments into categories such as technological advances, demographic changes, regulatory changes, and changing consumer behavior.
3 – Investigate the likely consequences of trends and developments:
Analyze the potential market and economic impact of observed trends and developments. As an example, the growing popularity of e-commerce significantly influenced brick-and-mortar retail.
4 – Recognize opportunities and threats:
Recognize opportunities and threats that may arise from trends and changes in the industry. For example, an opportunity could be a new product category that competitors have not yet explored, while a threat could be new legislation that negatively impacts a particular business model.
A company can make better assessments and develop more successful strategies if it knows the current and future trends and developments. In addition, constant analysis of industry trends and developments can help the company identify any changes that may impact the market and adjust its strategy accordingly.
Step 6: The competitive analysis
A competitive analysis is one of the most important elements of a holistic market analysis. This is primarily about identifying and evaluating market competitors and understanding your strengths, weaknesses and plans.
However, conducting a competitive analysis can be tricky at times, and that’s why we’ve written another step-by-step guide:
1 – Identify key competitors:
Conduct market research to identify key competitors in your industry. These may be direct competitors offering comparable goods or services or indirect competitors targeting the same customer group.
2 – Gather information:
Gather information about your competitors’ goods, services, target market, price, marketing methods, and key differentiators. This data can come from a variety of sources, including company websites, industry publications, and Internet reviews.
3 – Evaluate your competition:
Analyze your competitors based on the information you have received. Look for patterns and trends in the data to better understand the competitive landscape of the market. To organize and evaluate the data, you can use methods such as Porter’s Five Forces or SWOT analysis.
4 – Examine the strengths and weaknesses of your competitors:
Examine your competitors’ strengths and weaknesses relative to your company’s strengths and weaknesses. This will help understand your company’s competitive advantage and the areas where your company needs to improve.
5 – Recognize opportunities and risks:
Recognize all opportunities and risks that may arise from the competitive environment of the market. For example, an opportunity may be a gap in the market that the company can exploit, while a threat could be the entry of a new competitor into the market.
Step 7: Define target group and personas
Defining a target audience and developing personas are critical elements in conducting a market analysis. Personas are fictional characters that represent certain elements of the target audience. A target group is the exact group of consumers that a company wants to address.
But why define a target group at all?
A company can better understand its customers’ wants and preferences by identifying a target audience, creating personas, and then tailoring its merchandise and marketing activities to meet the needs of that group.
As follows, you will also succeed in defining a target group and personas:
1 – Identify the target market:
Identify the target market by going through the market analysis data. These may include information on the demographic and psychographic characteristics and behavior of the target market.
2 – Constitute the target group:
Determine the characteristics that define the target market to determine the target audience. The target market for an organic baby products line could be, for example, young parents who have a little more money to spend and are environmentally conscious.
Personas should be created through fictional characters that represent specific elements of the target audience. Personas should therefore be based on real facts and contain demographic, psychographic and behavioral information.
If you want to know exactly how to define your target audience, we’d like to refer you to our extensive guide“Defining your target audience“.
Step 8: Market positioning and differentiation
If you are well positioned and have enough differentiators, you will be remembered more easily, you will be able to communicate more easily and therefore you will find new customers more easily. This is why market positioning and differentiation are such critical elements of a market analysis.
But what does market positioning and differentiation actually mean?
Positioning is about how a company positions itself and its goods or services in the eyes of its target audience, while differentiation is about how a company distinguishes itself from its competitors.
Here’s how you should proceed if you want to differentiate and position yourself:
1 – Identify your target market:
One of the steps already described should help you here.
2 – Constitute your target audience:
Your target group should also already be defined, use the information gained for your positioning.
3 – Investigate your competitors:
The results of your competitor analysis should also be included in this step.
4 – Determine your competitive advantage:
Determine your company’s competitive advantage or USP, such as a unique product feature, exceptional customer service, or an established brand.
5 – Position your company:
Position your company and its goods or services in the eyes of target customers by emphasizing your competitive advantage and highlighting its unique value proposition. The organic baby products industry, for example, can present itself as an environmentally friendly and high-quality alternative for new parents.
Want to know exactly how to find your USP in just a few steps? Then our guide can help you: USP Marketing Guide.
Step 9: Determining the marketing mix
After you’ve completed all the previous steps, it’s time to determine your marketing mix. The marketing mix refers to the four main components of a company’s marketing strategy: product, price, place (distribution), and advertising. By defining the marketing mix, a company aligns all its activities with the requirements of the market.
But how are these four main components determined?
First and foremost, as always, the target market and competitors are considered, then the following steps are still taken:
- Investigate the current product line:
Examine the current product offering and how well it meets the needs of the target market.
- Identify opportunities for improvement and set strategies to take advantage of them:
Identify areas for improvement and develop plans to address them.
- Evaluate and update the product offering at regular intervals:
Review the product offering regularly and make changes as needed.
The primary objective here is to determine whether the current product offering still fits the target market and whether opportunities for new products are opening up somewhere.
Again, for this aspect of the marketing mix, the previous analyses are taken to hand and based on these you should still do the following:
- Examine your current pricing strategy:
Review the current pricing strategy and how well it meets the needs of the target market.
- Identify opportunities for improvement and establish strategies to take advantage of them:
Identify areas for improvement and develop plans to address them.
- Analyze and update pricing strategy on an ongoing basis:
Continually assess pricing strategy and update as necessary.
Analogous to the product analysis, the market suitability of the price is examined here.
The space analysis is not very different from the previous analyses:
- Examine your existing sales strategy:
Review the current sales plan to determine how well it meets the needs of the target market.
- Determine the areas that need improvement:
Determine areas for improvement and develop tactics to address them.
- Review and change the sales strategy regularly:
Review the sales plan regularly and make changes as needed.
This is about finding out if your distribution and placement are still up to date. Or whether it might be time to digitize distribution channels.
The advertising analysis also works analogously to the previous analyses:
- Examine the current advertising strategy:
Review the current advertising plan to see how well it meets the needs of the target market.
- Identify opportunities for improvement and set strategies to address them:
Identify areas for improvement and create plans to address them.
- Evaluate and modify the action plan regularly:
Review the advertising approach regularly and make changes as needed.
In summary, any company can gain a competitive advantage by analyzing its marketing mix. This allows it to adapt its goods, prices, sales and marketing activities to the requirements of the target market. It is also important to remember that market trends, customer preferences and other external variables can change over time, so the company should constantly analyze and adjust the marketing mix to ensure its effectiveness.
Step 10: Market entry strategies
An important element in conducting a market analysis is the development of a market entry strategy. A market entry strategy is the action plan by which a company enters a new market or grows in an existing market. A market entry plan can help a company increase its chances of success in a new market while reducing the risks associated with entering that market.
Here is a step-by-step guide to developing market entry strategies:
1 – Evaluate the market:
Evaluate the market by examining the data collected during the market analysis. This may include information about the size and growth of the market, the target market, and competitors.
2 – Identify your opportunities:
Your company has various options for entering the market, such as exporting, licensing, franchising, joint ventures or wholly owned subsidiaries.
3 – Assess your risks and opportunities:
Assess the risks and opportunities associated with each market entry strategy. Consider the cost of entry, the degree of control, and the degree of risk.
4 – Choose the best option:
Choose the best option by weighing the risks and opportunities against your organization’s goals, resources and capabilities.
5 – Create an action plan:
Create an action plan for market entry. This can include information such as the budget, schedule, and resources needed.
6 – Identify key partners:
Identify key partners such as suppliers, distributors or agents who can help the company enter the market.
7 – Monitor the market continuously:
Monitor the market on an ongoing basis and adjust the plan as necessary.
A company looking to enter the Chinese market with a line of organic baby products is a good example of a strategic approach:
According to the company’s market analysis, the market is on the rise, new parents have high budgets and an environmentally conscious trend is developing. The company weighs up the risks and benefits of licensing, franchising and its own subsidiaries before deciding to set up its own subsidiary. The company then develops a strategy that includes establishing a subsidiary, a digital marketing campaign, and cultivating relationships with key partners such as distributors and suppliers.
Conclusion why market analyses are so important
No matter what your goal, a holistic market analysis is always a good basis. The market data gained from this helps you to better localize your customers, address them more effectively and offer them even more precisely tailored products. Every business idea and product launch should go through the fire of a market analysis, because only then you know if it is a good idea and a good product.