Market analysis is a necessary part of planning a profitable business. Before investing any money in your business, you must gather information about your potential customers and the demand for your product of service.
BENEFITS OF MARKET ANALYSIS
1) Faster Cash Flow
Knowing who your customer is, what they need, and where to find them is vitally important. Targeting the right people is crucial for generating cash flow in the shortest time possible.
2) Greater Market Share
An examination of current market conditions tells you who your competition is, the size and location of the market, current competitor pricing and promotional strategies, and types of market niches which are underdeveloped.
Positioning your product for greatest exposure, while creating an image of quality and value for your product, allows you to become a serious player.
3) Reduced Expenses
A leading cause of business failure is lack of capital – the business runs out of start-up funds before becoming profitable. It’s important to make every penny count. You reduce expenditures by trying to predict outcomes before taking action. There is always a certain amount of risk with any business venture, however, analyzing your market reduces that risk.
ASK THE RIGHT QUESTIONS
To collect the kind of information which will be most helpful, you’ve got to ask the right kinds of questions. The more you know about the business climate you are entering, the more successful you will be at finding the right customers and making the sale.
1) Do you have a niche? Does your product or service fill a need or solve a problem? Can you appeal to cross-segments within your market by highlighting different aspects of your product?
2) How should you price your product or service? Should you price lower than the competition, or enhance your product’s value and charge a higher price? Is your pricing adequate to meet profit expectations?
3) Who are your potential customers? Where do they live? How much money do they make? What is their education level?
4) Who are your biggest competitors? What are they doing right? What are they doing wrong? What can you do better?
5) What type of media will you use to advertise? How will you measure the results of your promotions?
6) How will you deliver your product to the customer? Will you offer a guarantee? How will you handle complaints?
COLLECT USEFUL DATA
Where do you find useful information for your analysis? Here are some great starting points:
1) E-mail Discussion Groups
Congregate with like minds for an inside look at your market. Joining an active group will help you spot trends, gauge sentiments among market participants, and provides an avenue for you to make contacts for further research. Here are two good places to search for discussion groups:
http://www.topica.com
http://www.yahoogroups.com
2) Internet Search Requests
For a snapshot of demand by Internet users for your product of service, try the search tool at Overture.com. It shows how often people are searching for terms related to your market:
https://secure.overture.com/s/dtc/center/
3) Online Competitor Research
Investigate your competitors by doing an online search. ProFusion is an advanced search tool that lets you drill down to your search topic and can even automatically notify you when your competitors change or update their websites:
http://www.profusion.com
4) Trade Publications
Subscribe to magazines, newspapers, and ezines within your target market. Not only is this a great way to keep up with current market conditions, but you’ll also stay in the loop as your business matures. Find appropriate publications at these directories:
EzineLocater
http://www.ezinelocater.com
NewsDirectory
http://www.newsdirectory.com
KnowThis
http://www.knowthis.com/publication/professionalpubs.htm
5) Industry Surveys / Research
Here are several professional organizations which gather statistical, economic, and demographic data:
Annual Survey of Small and Mid-Sized Business
http://nsbu.org/survey/results/
Nua Internet Surveys
http://www.nua.ie/surveys/
Forrester Research
http://www.forrester.com
National Association for the Self-Employed
http://www.nase.org/
National Foundation of Women Business Owners
http://www.nfwbo.org/
Fortune Small Business
http://www.pathfinder.com/fortunesb
National Federation of Independent Business
http://www.nfib.com/
6) Public Libraries
Your local library has a wealth of information. Search for specific data within the Statistical Reference Index, the Wall Street Journal Index, and the Business Periodical Index. For economic data within an industry, or even a particular company, try the federal government’s Standard Industrial Classification Manual.
In conclusion, there is no substitute for analyzing your market. Spend as much time as you need using all of the above as a guide. All your time and effort will be rewarded with a business that does what it should… make money.
Brett Krkosska provides how-to advice on family and home-based work issues. Get start-up guidance, business ideas and inspiration at http://www.HomeBizTools.com. Become a subscriber for a fresh and original perspective on today’s business issues: enews@homebiztools.com
