Wednesday, May 21, 2008
When asked why people buy your product, do you draw a blank or launch into a drawn out explanation of your company’s mission? Do you wish you had a powerful yet simple statement that provided a very compelling answer to this question?
If you aren’t able to concisely explain how your company competes and why people buy your product, you may have a tough road ahead of you. Arming yourself with this information is the main reason you should perform a market analysis. A market analysis reviews four factors:
The Market Environment
Top Competitors
Market Growth Forecast
Target Customers
Before launching a new product or service, it is often recommended that you perform an analysis of the market environment you plan to become a part of. If you are getting a business loan, an analysis may be required by the lender as part of your business plan. Perhaps like many of us though, when you launched your product, you didn’t perform one at all and jumped in head first, fingers crossed.
Regardless of whether you did it in the beginning, though, how many of us perform an analysis a year into operation, or five years? A market analysis is something some of us do once, but in a constantly changing environment it makes perfect sense to do it routinely. In fact, there is no better way to gauge your product’s current market position and plan for future changes than a market analysis.
Doing some basic research on the four subjects listed above and compiling what you find into a report for your shareholders or just for yourself will help you define a business path where before one might not have been so apparent.
The Market Environment
The market environment in which you are selling is made of macro-influencers and micro-influencers. The macro-influencers, meaning the national economy, cultural trends, legal implications, changes in law, and multi-national competitors often do not affect your day to day operating ability. However, review of these factors can explain changes in sales trends and help forecast years to come. If you sell polycarbonate bottles, for example, you might be in real trouble right now if you didn’t do a market analysis in the last five years to see what was coming. On the flip side, if you sell good old stainless steel, well your opportunity has arrived—but did you find out too late? If you performed a market analysis in 2003 and found that in studies, scrubbing polycarbonate baby bottles increased the level of dangerous BPA, you would have had the opportunity to revise your product and possibly position it as the market leader in safe—and environmentally friendly—packaging.
Micro components of your market environment include your specific industry’s growth pattern, how big the industry is, how many competitors there are, and what percentage of the total industry your product’s niche comprises. These factors are crucial to establishing a baseline for deciding what portion of the market is realistic to go after. It is also important to study your industry’s past growth and current patterns in order to forecast the industry’s future growth.
Top Competitors
There is a fine line between watching your competitors as if you were all on The Apprentice and turning a blind eye. We do not endorse spying, copying, or generally speaking, obsessing over what your competitors are up to. We find that companies that focus too intensely on the competition end up looking like unimaginative copycats whose products play second fiddle to the leader. With that said, you need to know who is competing for the same target customers and how they are winning business. Knowledge is power!
Competition exists in two tiers: Products that compete directly with yours by offering similar benefits, and “same occasion” competitors, that offer a different product completely but competes for the same dollar in your customer’s wallet. For example, if you own a movie theater, your competition is not only the other movie theaters in town, but the other activities your customers might do on a Friday night instead of going to the movies, like a late dinner or mini-golf.
We recommend choosing no more than five of your top competitors to review. You might be surprised at the patterns you find when you review all five together, such as taglines that address the same benefit and similar tools on their websites. Turn a critical eye to these similarities when you review your target customers: Is your competition a bunch of copycats or have they stumbled on some critical benefits the customers are seeking? An analysis of how your competition responds to the needs of your target customers will give you insight to where you can improve your own strategy.
Tip: Typing in key words into a search engine that you use to sell your product will bring up competitors that are actively seeking to fulfill the same needs for your target market.
Market Growth Forecast
Forecasting the growth of your market is often completed as part of your market environment analysis, however, it’s important enough to warrant separate attention. You’ll want to understand the growth pattern that has taken place over the last five years in your industry, and what are the major influences, how much competition there is, and whether that is changing, and whether the face of the marketplace is changing or not—are new products poised to enter the market? From there you can ask the following questions in order to forecast the future for your market:
Target Customers
What need does your product satisfy? If your product is a fast, black sports car, is that the need it fills—a need for fast, black sports cars? Unlikely. More than likely the customer who buys your fast, black car has a need for status or image. If that is the case, then you are selling status and image—not fast or black. Ultimately, selling the features of your product will not result in revenue. It’s about appealing to the needs of the customers and giving them the benefits they are seeking. It’s not about you. It’s about them.
In your market analysis, review the following to make sure you have a good understanding of who you are selling to:
Do some research to find the answers to these questions and then set your sights on making sure your product fits the answers you find.
How Should You Get Started?
There are a couple of options for performing a market analysis for your product or service. You can do it on your own using the internet, databases available through your local library, and by interviewing customers and vendors. One of the trade associations you are a member of might have some of the work done for you—you just need to ask. You’ll want to research all of these free resources, compile the information then look for repeated patterns, or trends in what people and data tell you.
The second option is to hire an objective marketing firm to do it for you. There are three major benefits to this option:
Many of us are guilty of making assumptions about the marketplace, which can lead us into dangerous territory. Why not take the time to perform an analysis and back up those assumptions, and make sure we are doing everything we can to hit the mark? Whether you decide to go it alone or with a marketing firm, the important thing is to do it. You’ll be surprised by the clarity a marketing analysis can bring to business decisions.
If you or someone you know would benefit from a professional market analysis, contact Elevator Marketing Store today at 760-230-8407.
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