What is Market Research?
Market research is the process of collecting data about different aspects of your business. These data include your buyers’ personas, target audience, and customers. This is to figure out how feasible and successful your product/service would be when launched.
What is Market Analysis?
A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the market both in volume and in value, the various customer segments and buying patterns, the competition, and the economic environment in terms of barriers to entry and regulation.The Business Plan Shop
Market analysis is a significant part of market research. It is also an important segment in a business plan. When you do a market analysis, you are assessing a market within an industry thoroughly.
To conduct a market analysis, you will want to look for information about your:
- Prospective customers
- Customers’ buying behavior
- Target market size
- Target market buying power
Steps in Conducting a Market Analysis
1. Industry Research
Before you start your analysis, gather information about the industry you want to enter. You are looking to know the size, trends, and forecasted growth in the industry. To do this, you will assess similar businesses like yours.
With industry research, your investors will be confident about investing in your business. This is because it shows that you understand your industry and you are ready to compete.
Note: This is not market research because market research is about gathering customers’ information.
2. Describe your Target Market
The aim is to get to know the section/category of customers you want to serve. You are looking at different aspects like:
- Behavior: You are looking at how they purchase similar products. Also, look for the reason they purchase similar products.
- Demographics: This includes age, education, gender, income, interest, occupation, and so on.
- Location: When you figure out where your target market resides. Is it a physical or virtual location?
- Psychographics: This is when you try to understand how your target market thinks. You will want to know about their personality, likes/dislikes.
- Trends: This involves recording the trends in your customers’ behavior because it changes always.
3. Your Competition
Understanding your competition will make you competitive and also successful. You will want to identify all your competitors and do a SWOT analysis for each. This SWOT analysis will help you understand them and also help you stand out. Look out for these competitors:
- Direct Competitors: They are currently serving similar products/services to your potential customers.
- Indirect Competitors: They provide an alternative solution to the issues you are planning to solve.
This is an important aspect of your market analysis. So, you will want to determine your pricing and forecast your sale.
5. Data Collection
This is important because you will get factual information from reliable sources. There are two ways to get data:
I. Primary Data
This is the collection of data directly from your target market. You can also get information from customers within your market. This information will help you determine your customer personas. There are two types of primary data you can collect.
- Basic Data: This is when your focus is on finding possible issues within your market. You may at this point get data by using surveys or communicating with different people.
- Specific Data: This follows the basic data you have collected. You will want to ask questions regarding the identified issues to solve them.
II. Secondary Data
This is the collection of data from available public documents. You need to gather these data from different market statistics, trends, reports, and so on. This will give you an edge over your competitors. You can get data from:
- Public Sources: These are government documents that are accessible by the public. Refer to the U.S. Bureau of Labor Statistics and the U.S. Census Bureau for a start.
- Commercial Sources: This is a compilation of market reports by some agencies. Refer to trade journals and state and local commerce sites.
- Internal Sources: This is the data you have gathered internally. Refer to your SWOT analysis, questionnaires, or market surveys.
6. Data Analysis
This is the final part of your market analysis. So far, you have been collecting data from different sources. You will want to analyze the data then conclude.
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