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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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What is market size analysis? Our policies for an article by Octopus Intelligence. We isolate Octopus Intelligence logo your problems, reduce risk and uncertainty and deliver intelligence-led answers and innovative solutions. Dedicated to help you win.

What is market size analysis?

By | Intelligence Analysis

In this article, we offer our thoughts on market size analysis.

What is market size analysis?

Market size analysis is the process of estimating the demand for your product or service within a particular market. So, market size estimation is an essential component of any strategic marketing planning.

Market size analysis allows you to understand the size of a target market and in turn, enables you to evaluate the opportunities waiting for you, and accurately plan your marketing approach and investments. Market size analysis allows you to assess the potential strengths and weaknesses of that marketplace and implement effective strategies to improve your following competitive advantage.

Analysis should include a list of organisations you could consider as competitors in the market, assess how much market share they hold and determine why they are in that market in the first place. Is it the primary market these competitors work in? Analyse how much are they going to fight to maintain their slice of the pie.

1. Define the market you are talking about

Defining the target market is the first thing that you have to do before doing market size analysis. Determining the market provides more certainty to your team and a baseline for your research. Define what the market is, and what is not the market.

2. Split the market into segments

If it is a huge market you are looking to move into, it is crucial to look at each target each segment separately, addressing their needs and demands. You may not have any customers to start with, and that’s why it is essential that you ensure to have an understanding of these sub segments before you expand your business.

3. Competitors in the market?

Determine who are your top three competitors and spend time assessing on what basis you can compete with them. What are the competitors offering? Are they similar to or better than yours? And, are going to offer something different?

Are your competitors in this market making a profit? Is that profit something you can better, and is it sufficient to bother? Are they expanding or scaling down? And what do their customers think of them? How can you distinguish my company from my competitors? What is their competitive advantage – and what can you do about it?

Are the Competitors in this market maintaining or increasing their market share? Once they know you have entered the market, what are they doing to about you? Will they reduce their prices, create new advertising, try and buy you out, improve their offering to take your competitive advantage away? Does the market size analysis include indirect competitors and indeed secondary markets your offering could take advantage of?

4. How much of the market can you win?

Top-down

A top-down analysis determines the total market potential and then estimates your own share in that market. This can help you develop strategies according to the market potential and can help you grow in the right direction.

Bottom-up

While bottom-up analysis estimates potential sales to determine a total figure of sales, this analysis evaluates where your products can be sold, competitive products sales, and the slice of current sales. Such analysis usually gives much more accurate results.

However, every poorly written market research report will state that the subject’s market is valued at around £2 or 3 billion per year. It’s a sign of lazy research unless backed up with reasoning. When looking at a market’s size, you should be realistic about the ability of your product/service breaking into this market. It is easy to say that the market size is £2 billion and we can get 5% over the next five years.

5. It’s not just about size, its what you do with it

However, you must remember that entering a market depends on more than just market size and potential growth. You have to look at the barriers and incentives for entry. Market size analysis could also include profiles of distributors, transport issues, people and political issues and a more thorough understanding of how to market in that particular market. Any market intelligence provider should be expected to offer the ‘what’, but more importantly, the ‘how’ and ‘why’.

In conclusion

It is very easy when entering a new market without analysing the competition and the actual size of the market open to you. Starting in a static market, you should be expected and be ready to face fierce competition.  Market size analysis will help you understand how the addressable market size could change and aid you to respond to trends positively.

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How to help ships safely navigate angry waters with powerful counter intelligence

By | Intelligence Analysis

Your information has real value to many people. And it’s not just your secret ingredients or patents either. So why do so many companies happily give their valuable information to competitors on a plate?

The fact is, competitive intelligence can be collected more easily than you may think – ethically and legally too. So where can they find information about you?

A good Competitive Intelligence (CI) consultant will link lots of information together from many sources to build a picture.

For example, they can read a situation from company newsletters and press releases. It‘s also relatively easy to get information on the phone. It just takes time. A telephone call taken when you’re on the hop can reveal a single piece of information. 20 phone calls to other people in your organisation will reveal even more.

There are also many elicitation techniques used when chatting at a conference, trade show or networking. Add beer to the equation and, bingo, more information is revealed.

Intelligence against you

It’s not just companies who want your information. Countries have corporate intelligence functions too.

The Japanese have an open intelligence operation. The Japan External Trade Organisation (JETRO) is often seen at conferences and trade shows. Usually, they’re the ones with the large cameras, claiming not to be able to read the ‘no photography’ signs! Russia and China don’t work to the same rules as Competitive Intelligence Agencies, but neither do the French, Israeli, German or US government agencies either.

Again, there’s no reason to make it easy for them.

Why would someone spy on you?

There are plenty of reasons. Do you have a new growth strategy? Has this affected a competitor or supplier? Have you taken a slice of work off a competitor or moved into someone else’s patch?

Getting noticed means you are doing something right. But your success is going to disrupt someone else. They may well be looking to retaliate.

Counter Intelligence

So how do you reduce your competitors’ chances of finding information about you?

Frontline: First, make sure your receptionist is Competitive Intelligence savvy. Often forgotten, they hold significant knowledge about your company. They are the front line and come in regular contact with outsiders.

Phone: Have a phone policy where everyone asks who is calling, where from and their contact number in case they get cut off.

Trade shows: At trade shows, brief the team about people asking too many questions. When talking to an interested person ask for their card and dig into their background. Don’t let them take photographs.

Conferences: Record all documents you have at a conference. Check them in and don’t leave them hanging around. When presenting material to an audience, are you giving more than the information you want to give them? Tell them what they need to know, nothing more. This is especially true in the Q&A session (where it’s easy to let your guard down).

People

Employees: Over-enthusiastic employees keen to impress must aware what they are saying to people. Boasts about how great your latest product is could be heard by the wrong person. Keep a close eye on disgruntled employees. They may be out for revenge or working for your competitor in the future. Keep them on-side and depart as friends.

Recruitment: When placing a job advert online look at what you’re saying about your organisation. Are you giving away your expansion or relocation plans?

Travel: Talking about your company on a mobile phone or to a colleague on flights and trains or is unwise. Even more so if you are travelling to a trade conference. Your competitors are likely to be on the same flight.

Documentation: Does your public documentation include information which could be useful to a competitor?

After hours: Make sure your salespeople are aware of what they’re talking about in hotel lounges and restaurants. Try and stop work talk on a Friday night in the pub.

It’s vital to test your defences.

If you have a CI team or a friendly CI Agency, get them to collect against you. See what they can find. Have your CI team brief trade show attendees to determine what to look out for. Review all documentation, marketing and press releases.

Ask what does it reveal about you? It‘s important to:

  • Assess your vulnerabilities
  • Determine the competitive threat
  • Decide what you need to protect yourself
  • Develop countermeasures
  • Review your counter intelligence processes

CI is part of business. Use it to gain an advantage, just as your competitors do against you. Competition is healthy.
It’s rare for a traditional competitor to destroy you, but is there any point leaving the door open for them?
Any questions? Feel free to get in touch with me on graeme@octopusintelligence.co.uk