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The Business Plan – Deep dive into conducting and writing an Market Analysis

Conducting a comprehensive market analysis is a critical component of a business plan. It should provide insights into the industry, target market(customers), and the competitive landscape. Here’s a breakdown of what each part entails:

Here’s a plan of action with examples and references for each step:

1. Industry Analysis

We are looking for:

  • Trends: Identify and analyze current and emerging trends in the industry. This includes technological advancements, consumer behavior shifts, regulatory changes, and other factors that could impact the industry.
  • Size: Determine the overall size of the industry in terms of total sales, number of customers, or volume of products/services sold. This helps in understanding the potential market capacity.
  • Growth Rate: Analyze historical growth rates and project future growth. This includes understanding factors that drive growth in the industry.

Action Steps:

  • Research Industry Reports: Look for reports from reputable sources like IBISWorld, Statista, or industry-specific publications.
  • Analyze Market Trends: Use Google Trends, industry news sites, and trade journals to identify and understand emerging trends.
  • Evaluate Growth Rate: Find historical and projected growth rates in industry reports or economic analyses.

Example:

  • If you’re starting a coffee shop, you might refer to a report from the National Coffee Association or Statista for insights into coffee consumption trends and growth rates in the café industry.

2. Target Market Analysis

We are looking for:

  • Demographic Profiles: Analyze the age, gender, income level, education, and occupation of your potential customers. Demographics help in understanding who your customers are.
  • Geographic Profiles: Identify where your target customers are located. This can range from local, regional, national, to international markets.
  • Psychographic Profiles: Understand the lifestyle, values, attitudes, and interests of your target market. Psychographics provide deeper insights into why consumers might prefer your product or service.

Action Steps:

  • Demographic Research: Use government census data, reports from the Pew Research Center, or marketing databases like Nielsen for demographic information.
  • Geographic Analysis: Assess the location of your target market using tools like Google Analytics (for online businesses) or local government economic reports.
  • Psychographic Profiling: Conduct surveys, focus groups, or use social media analytics to understand the lifestyles and preferences of your target audience.

Example:

  • For a fitness app, you might identify your target demographic as individuals aged 18-35, who live in urban areas, and show an interest in health and technology based on surveys or social media trends.

3. Competitive Analysis

We are looking for:

  • Identify Major Competitors: List out your direct and indirect competitors. Direct competitors offer the same products/services, while indirect competitors offer alternatives.
  • Analyze Competitor Strengths and Weaknesses: Evaluate what your competitors do well and where they fall short. This can include aspects like product quality, pricing, marketing strategies, customer service, and brand reputation.
  • Your Competitive Advantages: Highlight what sets your business apart. This could be a unique product feature, a novel service model, superior technology, better customer service, or a more compelling brand story.

Action Steps:

  • Identify Competitors: Use tools like Crunchbase, Google searches, and industry directories to list out competitors.
  • SWOT Analysis: Conduct a SWOT analysis for each major competitor, focusing on their strengths, weaknesses, opportunities, and threats.
  • Determine Your Advantages: Identify what unique value or advantage your business offers compared to competitors. This could be based on product features, pricing, technology, customer service, or brand positioning.

Example:

  • If launching an online tutoring platform, analyze competitors like Chegg or Khan Academy. Identify their service strengths (e.g., variety of subjects) and weaknesses (e.g., pricing structure), and position your platform to address these gaps, perhaps with a more flexible pricing model or specialized subject offerings.

References and Tools

Final Tips

  • Stay Current: Market trends and consumer behaviors can change rapidly, so it’s important to keep your research up-to-date.
  • Network: Engage with industry professionals through LinkedIn, trade shows, or local business groups to gain insider insights.
  • Validate Assumptions: Use primary research (like surveys or interviews) to validate assumptions made during secondary research (like reading reports).

By following this plan of action, you can gather comprehensive and relevant data to inform your business strategy and make well-informed decisions.

In Summary

Conducting market research for a business plan involves a systematic approach to gather, analyze, and interpret data about your industry, target market, and competition. Start by defining the scope of your research to focus on relevant areas.

First, delve into industry analysis. Utilize industry reports from sources like IBISWorld or Statista to understand market trends, size, and growth rate. This step helps in identifying the overall market potential and industry dynamics. Pay attention to emerging trends, technological advancements, and regulatory changes that could impact the market.

Next, target market analysis is crucial. Identify your potential customers by researching demographic, geographic, and psychographic characteristics. Government census data, marketing databases, and social media analytics are valuable resources here. Understanding your target market’s preferences, behaviors, and purchasing patterns is key to tailoring your product or service effectively.

Finally, conduct a competitive analysis. Identify your direct and indirect competitors using tools like Crunchbase or Google searches. Analyze their strengths, weaknesses, market positioning, and strategies through a SWOT analysis. This will help you understand the competitive landscape and carve out a unique value proposition for your business.

Throughout this process, use a mix of primary research (surveys, interviews, focus groups) and secondary research (industry reports, academic journals, online databases) to gather comprehensive data. The goal is to gain a deep understanding of the market environment to make informed business decisions and demonstrate the viability of your business idea in your plan.

Blog

The Fiction of Market Research

Your professors sit there and wonder what they can get you to do as coursework, and yes the best they can come up with a market research assignment, predominantly based on desk research. This keeps you in the library and out of trouble while making it easy to compare this academic years’ marketing students in one easy process.

In the real world…

The majority of market research is done by people who know little or nothing of the product or service. Their job is to research and make nice pretty reports. This research takes months to gain any form or quality. In olden times, 1960’s when marketing was discovered by Theodor Levitt this was fine, but in the post Steve Jobs days, it is not. Data must flow faster than money for it to make money. Otherwise its value is zero. The stock exchanges of the world have long understood this, free data feeds on stock value are delayed by only 15 minutes. Most marketing data is at normally on average one year old. So how valid could then be?

So off you go and ask some random sample of people on the local high street and ask them a series of questions, do you like my product?, how much would you pay?, would you recommend it? and finally their demographics.  You ask me these questions on a Saturday afternoon while I am out shopping and I tell you anything you want to hear to get rid of you, especially if you are offering me and my family an IPAD 3 or a trip to DisneyLand (The LA one and not the cheap one across the channel).

The true and ONLY test to see if someone will buy it is to offer it for sale. Steve Jobs knew it. Never once did he do market research, how would you know if you want to use a tablet which is made of glass and aluminium when the only tablet you have ever used went into your month and you swallowed it. Its just one step too much for the man on the street. So spend the money on the hype and not on the research which will just out of date data.

If you have the product then sell it, if you don’t have the product then allow pre-orders. Marketing has to generate leads which generate sales, whenever you do marketing, research, strategy, planning, analysis, its have a single destination, a sale. If it’s your assignment then the payment is a 1st class honours degree.

Offer it for sale, ask for orders, what modifications would they require to part with their money today. You take the money on a product delivery or return basis, so they never loose out. You take their email and telephone numbers, so they can become in and be part of your focus group, beta test users. You make them part of your user community and send them updates on everything that is happening. They have brought into you and your business and therefore are part of your new family, these are called loyal customers.

If you can’t get 10 people to buy into your concept, parting with real money then its time to go back to the concept drawing board, looking at the business model, customer needs, the products features and benefits and how you will get access to the right group of people who will part with their cash.

Yes, I hear all of you out there saying you need to understand your market, but we need to teach students about action and not information research paralysis. It’s the doing that makes the business and not the research. You don’t see Alan Sugar saying “go and research who will buy cup cakes at Westfields shopping centre”, he just says go out and have a go and come back, someone will get fired. And you know who that will be, it will not be the one doing the sales, it will be the one who spent the last few days researching what to do. In Dragon’s Den, the one with the letter stating they will purchase the product gets funding, the one who saying they have spent £450,000 on research, prototyping and further analysis gets a kick up the back side.

So decide now which one you are going to be?