Market Analysis Techniques
A comprehensive market analysis is an essential part of any business plan. This analysis will help you determine whether or not there is a profitable niche in your industry and provide a foundation for your marketing plan.
It is also important to review and evaluate current trends regularly. This is because markets shift in unpredictable ways.
Market segmentation identifies groups of consumers that are similar in some way and then tailoring products and marketing strategies to meet those needs. Common methods of market segmentation include geographics, demographics and psychographics.
Another method is field trials, which involves testing a product or service on a small scale to gauge market response. This can be done either on your own or by hiring a consulting firm.
Once the research is complete, create an organized document that outlines your findings and includes charts and graphs to make the information more digestible. This document should also contain a forecast, which is an estimate of sales over a period of time, such as the next three months or year. This is an important piece of information when securing financing from lenders or making confident business decisions. It can also be used to help predict future profits and growth rates for your company.
Market trends are the upward or downward movements of a market over time. They can be caused by a variety of factors, including changes in demographics and customer buying habits. Knowing what these trends are can help businesses prepare for future business opportunities.
Surveys are one popular method of collecting market trend data. They can be conducted online, in-person, or by mail and phone. This data can be used to identify the needs of a target audience and create more effective marketing campaigns.
Other market research techniques include regression and correlation analysis. Regression analysis is a prediction technique that quantifies the relationship between dependent and independent variables, while correlation analysis studies how closely two variable are related.
Staying ahead of market trends can help a business reduce risk and generate new ideas for their products or services. For example, by identifying shifts in market trends toward social consciousness, companies like P&G have been able to leverage their brand to connect with new customers and drive sales.
One of the most important things a new business needs to know is how big its potential market is. This enables it to formulate efficient and safe marketing and business strategies that reduce the risk of significant monetary loss.
There are several ways to measure a market. A top down approach is based on governmental departments, trade associations and other public entities that collect data related to specific industries. This information can be gathered on an annual, quarterly or monthly basis to give a clear picture of the current market size.
Another method is a bottom up approach that estimates your target market by asking what it can realistically produce and sell. This can be a time-consuming process, but it is crucial to understanding your customer and the profit-based feasibility of any new products or services.
The market price of a product is the current price at which it can be bought or sold in the marketplace. This price is determined by the forces of supply and demand, with a product arriving at its market price when quantity supplied equals quantity demanded. This concept is most familiar in financial markets, where market prices change quickly as buyers and sellers adjust their bid or offer price to complete a trade.
The method of determining market prices involves observing actual consumer preference and using standard economic techniques. However, this method may overstate the benefits of ecosystem goods and services by failing to deduct the value of other resources used to bring them to market.
Conducting a market analysis helps you understand how your competitors are pricing their products and what the average consumer expects from those products. This information is vital to adjusting your own pricing strategy. It also helps you identify unforeseen opportunities to introduce new products into the marketplace.