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June 2018

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The Need for a Market Analysis Business Plan

By | Intelligence Analysis

In this article, we explain the need for a Market Analysis business plan. We will discuss why you need Market Analysis and what you need to provide the reader. And as you may know, it takes time and effort to build a business plan. Working out what you do, what funding you are looking for and lots of fingering the air to determine the numbers and future performances

The most important part of the business plan is not looking internally, but looking beyond your business. Where your customers and competitors live, without a serious look of what your external environment looks like, you can forget about your business plan making an impact. And it’s not good enough to list potential competitors and tell the reader that the value of the market is around £2 billion per annum and you can take 1% of it. You may laugh, but many plans say just that. 

You will need to pay careful attention to your market analysis. To understand your target market and how you can win within it. And it must be a learning experience for you, not just the reader. If you have not learned something new, you may not have looked hard enough.

What Is a Market Analysis?

Comprehensive Market analysis in a business plan shows that you have put the work in and to prove to stakeholders like investors that you know your market thoroughly. And there is an excellent opportunity to create a sustainable business, Firstly, resulting in the investor getting their money back and a decent Return on Investment.

It should also:

  • Firstly, assess the size of your potential market both volume and value
  • Secondly. determine whether you can fill a gap
  • Assist your marketing strategy by defining your ideal customers and their buying habits
  • What makes your future customers tick?
  • And prove that there is a need for your product or service
  • Describes your competitors
  • Finally, what are the barriers to entry

Some questions you could answer:

  • Who are my potential customers?
  • And how large is my potential market?
  • What are customers’ shopping habits?
  • Also, what are potential customers willing to pay?
  • Who is my competition?
  • and what are my competitors’ strengths and weaknesses?
  • What makes you different from your competitors?

Analysing your market will reduce the risks of failure because you have a better understanding of your customers and market conditions.

Market Need

Any market is continually shifting and to understand the size of your market, and whether customers are waiting for you, it’s sensible to identify current and future market conditions. You and your investors do not want the future stress of finding your product does not sell. 

However, this market analysis needs to be done on a constant and consistent basis at whatever stage your company is at. So, conducting  market analysis and research could (actually it will) provide you valuable insight and competitive advantage.

How to Conduct a Market Analysis

Your analysis and research should incorporate the following:

Industry Outlook

What is the direction your industry is heading? Has it got a bright future, or does your plan rely on the reintroduction of gas street lighting? Therein, commencing market analysis within your industry offers a preliminary view of what’s expected to be your potential market in the future.

Market Size

Are you getting yourself into a big market, or are you going niche? Nothing wrong with niche. But will you have enough customers to buy your product or use your service?

Product Life Cycle

If its a product you are creating, do you have any idea what it’s life cycle will look like? And investors and banks will want to know how your product will be developed and enter the market. So, a product life cycle will include these headings:

  • Research and development
  • Launch
  • Growth
  • Decline

Projected Growth

What’s your year on year growth. How will your company perform? Remember, best case and worst case. Therefore allowing you to see how your product/service will look like in the future.

Target Market

Define who is your ideal customer and how your offering will cater for them. However. it’s a mistake to think you can offer your product or service to anyone and everyone.

Demographics

Spend time on detailing the following on your customer. Especially important for a b2c offering:

  • Age and gender
  • Location
  • Occupation and income level
  • Lifestyle

Research and Supporting Material

Information without data is just claims. Also, to add credibility to your market analysis, you need to include data. Some methods for collecting data include:

  • Target group surveys
  • Actual potential and current customer quotes
  • Focus groups
  • Reading reviews
  • Feedback surveys

Market Value

It’s best to use top-down or bottom-up analysis to calculate your market value. Its easier to do a top-down analysis and it’s merely the case of calculating the entire market and then estimate how much of a share you expect to achieve. Therefore. bottom-up analysis is data-driven, is usually more accurate but requires more work. You bring in the specifics of your business and then tell the audience how you can scale them into a projected market share. Bottom-up analysis incorporates:

Where will you sell your products?

  • Your competition
  • The price per unit
  • How many users you expect to reach
  • The average amount a customer would buy over time

Competition

What’s the level of competition within your market. Are there competitors who have the most market share. How can you position yourself to differentiate yourself from the competition? As you will be no doubt aware, the competition consists of direct competitors and indirect competitors.

  • Direct competitors sell the same product/service as you.
  • Indirect competitor sells a different but similar product to yours. But you are in the same market.

These sort of questions need answering and highlights the need for a Market Analysis business plan.

  • What are your competitor’s strengths?
  • And of course, what are your competitor’s weaknesses?
  • How can you exploit your competitor’s vulnerabilities in your own business?
  • Can you solve the same problems better or different than your competitors?
  • How big of a threat are competitors if you start trading on their patch?

Barriers to Entry

To avoid costly legal and business mistakes, it is crucial to identify the barriers to starting your business. Consider these:

  • How rapid is technology advancing, and will you proposed offering to be obsolete in a few years?
  • And how will you stand out in a saturated market?
  • How much will it cost you set up the business? How much would it require a future competitor to enter the market? Will it put them off? Think about renting space, finding recruits, hiring employees; speciality equipment is usually expensive.
  • Is location important to how you will perform? Can you be in a back street of Oldham and trade well or do you need to be on Regent Street, London?
  • How aggressive and tooled up is the competition? Are they going to knock your head off as soon as your lift it over the parapet?
  • Are their specific government regulations you need to adhere to or potentially block a new competitor entering your market?

Is it worth the effort?

It may be a challenge to start a market analysis exercise, but one thing at a time and break the tasks down into bite-sized chunks, and you will feel less overwhelmed by the volume of information needed in a market analysis. When setting up a business or moving into a new market, you don’t want to cut corners. And if you do, it will come back to haunt you.

Bring the analysis together into a summary to ensure the reader is keen to read your plan and knows what to expect.

Get to the Point

Be concise, and avoid fluff and repetition. Think of the questions an investor would ask you about the plan. Have your answers ready. And, perhaps have noticeable bites in the plan but surrounded by excellent solutions when the reader picks up on it. It will help the investor think he is smart for pointing out the items, and you will show them that you know your stuff.

Revisit

Markets are always changing, and it’s vital that your business changes with your markets, so keep your market analysis fresh and ongoing. A good analysis will allow you to see into the future and quickly adapt to changes.

Summary

We explained the need for a Market Analysis business plan and why a plan is needed and what you need to provide the reader. There is a military term which sums up why Market Analysis in a business plan is essential. Prior preparation and planning, prevent a pretty* poor performance. Preparation significantly increases the chances that your business will be a success, even in a competitive market. Market analysis will separate you from those who haven’t done their homework and when you are handing it into to an investor who has money to give you, the excuse that the dog ate it will not wash.

*not the actual military word. 

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4 compelling reasons why Market Analysis is important

By | Intelligence Analysis

In this article, we hope to define and offer 4 compelling reasons why Market Analysis is essential to you and your future. A Market Analysis exercise should be at the centre of any successful marketing and advertising strategy.

However, it’s incredibly common for companies to fail to do any Market Analysis or just give the exercise lip service and complete a couple of paragraphs to keep everyone happy. But a functional Market Analysis is not just confirming a hunch with a considerable dollop of cognitive bias scooped on top. Market Analysis will offer the answers to businesses hardest questions. Questions like:

  • How competitive is the market landscape?
  • Who are our actual customers?
  • Is it risky to enter a particular market?
  • How successful has our branding strategy been?

What is market analysis?

Market analysis is a quantitative and qualitative examination of your external environment and the resources you have at your disposal. Thorough Market Analysis will give you a picture of the size and value of opportunities open to you, the risks involved, potential customer purchasing behaviour, the competition, and the known entry barriers. Here are 4 compelling reasons why Market Analysis is essential to you:    

1.It provides you with a map

Marketing Analysis doesn’t let you know how how to position your brand or how to run a marketing campaign. However, it provides you with a route through the choppy waters, obstacles and barriers that could get in the way of getting to your destination, Without it, you could hit the rocks, and you will ultimately fail. 

2. Puts the customers at the centre of your planning

Market analysis isolates your offering to make you design it for what your customers are buying it for. Not what you think why they are buying it. The following Theodore Levitt quote excellently sums the point up. “People don’t want to buy a quarter-inch drill; they want a quarter-inch hole.” Once you discover why a customer buys from you, then you will be onto a winner. In our business, we offer Competitive Intelligence, but we realise that our clients are appointing us to solve their problems. They don’t care how we do it; they just want answers and options. 

3. Market Analysis also looks inward

Market Analysis can keep an ego in check. We hear this sort of thing a lot. “Why would I need Intelligence when I know everyone in the industry. What I don’t know is not worth knowing” Or when you have built your product from scratch, and you live and breath it every day it is incredibly challenging to be genuinely objective. After all its cost you thousands, sleepless nights and it’s your baby. Market Analysis answers questions like “Why do consumers use us?” You will find customers will not buy because of what you do, but why you do it. And you need to understand this yourself before expecting customers to. 

4. What’s your USP?

A Market analysis exercise helps you to determine how to differentiate your self in your chosen market effectively.

    • Product – Some differentiate themselves by claiming to be as the highest quality product on the market. Others focus on ease of use, accessibility and availability. A BMW 5 series and a Renault Clio do the same thing, but they attract different customers.
    • Brand – How does your brand differentiate you from the competition? Does your brand resonate with the consumers you want to attract? What’s the story about your brand?
    • Audience – Some products and services can be focused on specific types of people. A particular group, type of person or age group. Like organic or vegan food you will find customers are often willing to pay more for your product for the experience.
    • Service – Some differentiate themselves by their service offering. It is usually associated with exception customer service. First Direct bank in the UK is an excellent example of this exceptional customer service. They are owned by HSBC who offer a more standard service but differentiate themselves differently. Any idea of how HSBC differentiate themselves? Let us know what you think.
    • Price – When it comes to price, there are two apparent differentiators here positioning themselves as the most affordable or the most expensive.In the UK supermarket sector, even though the lines are getting a little more blurred the supermarkets Aldi versus Waitrose immediately springs to mind.

In summary

In this article, we have defined 4 compelling reasons why Market Analysis is essential to you and your future business. Market analysis should be at the centre of any successful marketing and advertising strategy. To determine your entry point and your USP is very important if you want to create a sustainable business model.

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