Research is an important part of business and analyzing your market and competition is the most important and useful research you can do. You will find large organizations which have been making large profits by taking time to analyze their market and competition. Market and competition will both affect every aspect of a business. It is important to understand all the aspects of the market your business will serve. This analysis will be a part of your business plan so it must be done thoroughly. You need to have the basic information like who will buy the product or service you are going to offer and whether this number of target customers will keep on growing or it will shrink in the near future.
Analyzing your market and competition is important because:
- It provides valuable insight on every aspect of your business. It can help you to determine the best pricing and find a preferred business model.
- It helps you to gauge your business idea in order to achieve maximum results.
- It assists you in determining what customers really want and how much they can pay to get it.
- It provides information on why customers will use your product or service.
- It helps you to identify what makes your business idea very different from competitors.
- Market and competitor research helps you to identify new business opportunities and consider them when developing your idea.
- It helps you to focus on the right tasks and avoid wasting resources like time, skills and money.
- Through research, you can anticipate changes in the market such as technology and legislation. This helps you to plan ahead and avoid losses in future.
- Most importantly, market and competitor research reduces the level of risk involved when developing a business idea. The more knowledge you acquire the more prepared you are going to be when there are changes in the market.
Define your customers
It is important to understand the specific type of customer you are targeting. You need to obtain your customer description based on the following:
- Geographic details (where do they live)
- Age
- Gender
- Race
- Education level
- Marital status
- Level of income
- Household size
- Lifestyle characteristics, beliefs and behaviors that may affect their buying patterns
The more information you obtain regarding your target customers the easier it is for you to create a service or product that suits their needs.
Divide your customers into market segments.
Market segments consist of target customers who show unique behaviors. For instance, your product may attract both men and women but the two clients may have very dissimilar characteristics and that’s why you need to create two market segments for each one of them. Another market segment may depend on the geographical area.
You will find that buyers in a specific geographical area may be interested in a different set of products than clients from another area. You can also get a market segment depending on the buying times. For instance, weekend customers are different from mid-week customers. Once you understand the difference among these groups of consumers, you will be able to structure your product to meet various needs.
Analyze growth trends in different market segments.
Growth information is very important. You need to obtain growth trends in the overall market as well as in the particular market segments. For example, if women present a large segment of your clientele, you need to include factual information about the size as well as the growth trends of the women in your target market. You can obtain accurate census data to help you generate this information. You can also use findings from media organizations to prove how the market has been performing in the previous years. Whatever information you give regarding the market growth should be proven. Remember that your marketing plan will rely on this information so make sure it is not misleading.
After analyzing your market and competition you should be able to answer the following questions:
- What are the local market trends?
- What are your target customers’ buying trends?
- What is the estimated size of your target market?
- Are you focusing on a local or global market?
- What is your target position in the market?
- How much market share would you wish to capture?
- What is the lifespan of your target customer?
- Will your target customer purchase your product or service only once?
- Are the customers likely to be repeat clients? Why?
- Are there any factors that may prevent you from penetrating the market?
- How will you be able to capture market share?
- What is the cost of acquiring customers?