These market analysis tools are the most common methods to understand your target market. Read how you can use them to achieve business success.
A business that doesn’t know its tools is a business that is destined to fail. In this article, we are briefly going to talk about market analysis tools (i.e. the most common methods to understand your target market), and how you can use them to achieve business success.
But first, let us answer an important question.
Why Analyze the Market?
This can also include all the reasons for doing market research, as analysis can only be made once data is collected and collated through research. The simple answer to this question is this: you cannot make sound business decisions without first doing marketing analysis.
When you conduct market research, you stay updated on the latest trends in the market, general buying habits, changing technologies, and competitor activity. Specifically, you will be able to see:
- What products and services your target market is already using
- Which businesses are using the best marketing mix to provide these products and services
- If there are any shortcomings in these products and services that you can fix to gain the attention of customers
- What external factors apart from competition and demand can affect the success or failure of your business (e.g. government economic policies)
If you do not take these factors into account and perform market analysis at crucial junctions in your business cycle (before launching a product or implementing an expansion strategy etc.), you will miss out on vital opportunities that can take your company to the next level, or ignore threats than can significantly harm your operations.
To sum up, it is futile to run your business on assumptions. Gut instinct doesn’t work all the time. You need solid data on your hands which you can analyze to execute your product development and marketing strategies.
With this knowledge serving as our foundation, let us now evaluate the most commonly used market analysis tools.
Secondary Sources of Information
To start off, you need to have access to market data. This can be obtained from newspapers, magazines, trade journals, and nowadays even from blogs on specific niches. These will let you in on the latest trends (e.g. how many people are using mobile internet in a particular locality that you are planning to target). You can obtain authentic information from government institutions like the chamber of commerce, census bureau, labor department etc.
However, there is always a limit to the kind of data that you receive from these secondary sources. And while you can make good estimates from these sources, you will need solid data on of your own, which brings us to the next point.
How to Collect your Own Market Data
Here are some major ways in which you can collect data for your business:
1. Observation
This includes observing people in marketplace conditions to ascertain consumer behavior. However, in the digital realm, observation takes a whole new meaning as you are now able to judge visitors’ website behaviors using analytics.
2. Surveys
This can further be broken down into:
- Interviews and individual surveys
- Telephone surveys
- Social media surveys
3. Focus Groups and Product Testing
The company can call in a select bunch of people to ask questions pertaining to a particular product or service. In addition, you can launch product in a limited scale to gauge customer response, and then extrapolate those results for a nationwide or global launch.
You should note that all forms of data collection have their own limitations. That is why for near-accurate analysis, you should use a combination of primary and secondary sources of information.
Situation Analysis
This is the analysis of all the factors that affect your business. Several methods are involved in situation analysis, the most common one being SWOT.
This is the evaluation of a company’s strengths, opportunities, weaknesses, and threats. Briefly, here is what SWOT analysis is all about:
- Strengths: The competitive advantage you have in the marketplace (e.g. customer service, better access to raw materials)
- Weakness: All things with which your competitors are able to grab your market share
- Opportunities: Unexplored market trends and untapped market niches that waiting to be taken advantage of
- Threats: Political, climatic, technological, and other external factors that can cause a problem for your business and get in the way of its long term goals
The reason why businesses conduct a SWOT analysis is that it offers you an all-round view of the environment in which they are operating in so they can better tackle projects and anticipate problems. As you can see, the last two components of SWOT are specifically geared towards external market conditions. But SWOT is not the only tool at the disposal of organizations when they are conducting situation analysis. There is also what is known as the PEST analysis, which can be summarized as:
[quote_box_center]PEST analysis is a market analysis tool that takes external factors that can affect a business into account.[/quote_box_center]
Here is a summation of these major factors:
Politics
As governments intervene in the economy, businesses are bound to be affected. Indeed, employment policies, tax laws, trade restrictions can impact your business directly and indirectly, along with political stability and how foreign markets operate.
Economic
This is easy to understand. Macro and micro-economical economic factors such as interest rates, exchanges rates, inflation, and disposable incomes influence how you will manage your business at present and in the long run.
Social
This has to do with the beliefs and culture of the society you are operating in. Population trends, dietary considerations, ethics and media, and spend habits are some of the factors that come under social considerations that you need to observe in your business activity.
Technological
Finally, businesses also have to deal with production, distribution, and communication changes imposed by new technology in order to stay afloat in a competitive economic landscape.
Note that a variation of PEST analysis called PESTLE also takes legal and environmental factors in account.
Final Thoughts
These were the common sources of market research and the major tools to analyze them. But remember that unless you are tightly focused your analysis on your niche, you will find it hard to make sense of trends and statistics. Also make sure that your research collection and subsequent scrutiny of the data is aligned with your marketing plan.
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