Guide to Market Research and
Analysis
Summary
Successful businesses have knowledge
about their customers and their competitors. Acquiring accurate
and specific information about your customers and competitors
is a critical first step in market investigation and development of
a marketing plan. Accurate market assessment and development of an
effective plan is critical to the success of both new and existing
business alike. The market impacts and directs all aspects of the
company's activities and ultimately will lead to success or failure
of the business. In developing a market plan, your primary functions
are to understand the needs and desires of your customer, select or
develop a product or service that will meet that customer need,
develop promotion material that will make the customer aware and
ensure product or service delivery.
Market Analysis
Who is your customer?
Knowledge of the customer enables you to determine the market size
and what determines their buying decision. It provides information
which will assist in choosing a location, determining product or
services to be offered, establishing pricing and planning a selling
strategy.
Key issues to consider are:
- Who will buy your product? Primary and secondary target groups.
- Where does the buyer live and what is their profile?
- What factors influence the decision to buy?
- Who is involved in the purchase decision?
- How often will buyers buy?
- Where do they buy, when and how much do they buy?
- What are the buyer's preferences and needs?
What product or service are you selling?
An important aspect of market analysis is to ensure that the product
or service meets the market (customer) needs. Product or service
focus must at all times be the customer.
Issues to address are:
- Specifications of all your products and or services and key
features relative to what prospective buyers in your target market
are saying they need.
- Comparison with competitors and how customers perceive your
product relative to others available.
- What are the current trends, what stage of maturity is the product
life cycle at?
- What regulations apply to your product or service?
- What packaging is required?
Who is your competition?
Are there competitors that exist now and what new competitors are
likely to enter the market in the immediate future? How will your
product or service compare and what is the probable reaction of your
competitors once you enter the market?
Issues to consider are:
- Who are your major competitors?
- What share of the market do they have?
- What are their strengths and weaknesses e.g. quality, price,
service, payment terms, location, reputation, etc.?
- How do you compare to your competitors and how will they react to
your entry to the market?
- What factors are there that could increase or reduce your
competition?
What is your target market?
Accurate identification and analysis of the target market enables
you to develop an effective overall marketing strategy. The
information will assist in determining business size (output
requirements), distribution channels, pricing, promotion strategy
and other marketing decisions.
Target market issues include:
- What is the overall market size? Number of potential customers and
physical boundaries?
- Which segment of the market is the most attractive in terms of
future growth potential, ease of entry, competition, profit
potential and overall risk?
- How do products generally get to the customer?
- What is the current $ value or quantity of product/service being
sold into each segment of the market?
- What social, technical, environmental or economic changes are
taking place within the market and how will they impact sales?
What are your distribution channels?
There may be many options for moving your product to the customer
such as direct retail, wholesale, consignment, broker etc. The
method of distribution has important implications affecting your
pricing structure, advertising message, cash flow, etc. You will
want to choose the distribution method best suited for your product
and where you want to be positioned in the marketplace.
Key issues are:
- What methods of distribution are best suited for your product?
- What methods of distribution do your competitors use?
- What are the costs relative to market coverage?
- Does your level of available capital or production capacities
restrict your choice of distribution methods?
Pricing
The objective is to maximize profits while remaining competitive in
the marketplace. Pricing can be based on either the cost price or
market price (What will the market pay?). Regardless of the pricing
method used, it is critical to know all of your costs involved in
delivery of your product or service to avoid possible underpricing
and operating losses. If the market will not support a price level
sufficient to cover cost, it will be necessary to investigate
whether costs can be lowered or alternatively, it may be necessary
to abandon your plans to proceed.
Issues to consider are:
- What control do you have over the product price? e.g. exclusive
product, no competition, high market demand, etc.
- What are competitor prices and how do they price their products?
- What price and sales volume are needed to achieve profit
objectives?
- Can you sell your product at different prices into different
markets?
- Can you maintain your prices over time and what do you expect to
happen to competitors prices?
- Are your prices quantity sensitive?
Promotion and Selling
Promotion of your product or service and development of a promotion
strategy is part of the market analysis. It is important to analyze
what are the best methods of making your customer aware and what
message will motivate them to buy. From the promotion strategy the
advertising budget and overall sales plan are then developed.
Items to consider are:
- What media of advertising and sales do your competitors use?
- What media of advertising is best suited to reach your customer?
Primary and secondary media. e.g. Primary - newspaper and radio;
Secondary - flyers and trade shows.
- What sales tools and training will be required for staff?
- What image are you attempting to build through your promotion?
- Packaging?
Note: While customer service, in store display and merchandising are
not part of the market analysis, they are an important part of the
business image and promotion package. Ongoing attention should be
given to these areas to assure maximum promotional benefit is
achieved and that the desired image is portrayed.
Primary / Secondary Data Sources
Primary data is the information you will obtain through your own
efforts or by hiring someone and can include observation, surveying,
and experimentation.
Secondary data consists of information which has been gathered by
someone else and is relevant to the venture you want to establish.
Examples of sources and types include:
- Demographics and Income Statistics for Postal Areas
- Household Figures for Non-Letter Carrier Offices
- Local, Municipal, State, and Federal Government Departments and
Agencies
- Business and Industry Associations
- Business and Industry Trade Publications / Periodicals
- Business and Industry Trade Shows and Exhibitions
- Local Public, Business, and Educational Institution Libraries
- Business and Popular Press
- Business Professional Services, eg. Accountants, Lawyers,
Consultants, Insurance Brokers, Financial Institutions
- Business and Educational Seminars / Courses, etc.
- Other Business People / Known Acquaintances / Competition
- Internet
When researching your business idea, it is important to do as
thorough a search for information as is possible. It is also
recommended to do as much of it as you can on your own. This will
help you to know the market for your idea better, and can help to
keep the costs down at the start. Once this initial research has
been completed, you may then feel the need to contract professional
services to collect additional information for you, or to verify the
information you have collected so far. The information you have
gathered yourself can form an important base of information from
which a consultant can work from, and as well, will allow you to
identify more specifically what you want them to do for you,
particularly when there will be costs associated with their
services.
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