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For any business, knowledge is power. Even the best idea is condemned to failure if a prior market analysis doesn’t confirm its prospects of success. A corporate decision must be well-founded and market-oriented, and it must reach the company’s target market.

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Market Research: Market Analysis and Market Monitoring

Market research comprises marketing analysis and market monitoring. It results in a market forecast that estimates future market development. The difference between the two components is as follows

Market analysis assesses the current market situation at a particular point in time, with the aim of identifying the structure of the market share and the market potential.

Market monitoring is a continuous process that goes into far more depth. Market changes and fluctuations are noted, as are new trends. Market monitoring can be viewed as a series of continuous marketing analysis.

In order to minimize corporate risk, market research should be as comprehensive as possible. An inaccurate market assessment for big or small business can result in heavy investment and consequently heavy losses if the actual sales potential is too low.

When performing your market analysis, it is therefore important to identify the market potential statistics as accurately as possible.

Market Potential

What is the theoretically possible market size? Is there a strong market dynamic for sufficient growth?
The market potential of a product or service is the quantity that can be purchased by a particular target group in a particular period. Determining market potential should involve three steps.

Identifying Trends

Identifying the phase in the product life cycle

Calculating the market potential

1. Identify trends

By robust research process to determine trends that have great impact on the market potential. Product Reviews For example, they can provide new ideas; changes in the market share can bring market opportunities and risks. In the implementation of your idea, should also be paid to the search volume on the Internet. The more popular a product is on the Internet, the higher you can set the planned sales volume. A high search volume on the internet thus gives you hints on current trends. For example, if the search volume for underwater cameras increases, a mobile phone or a watch with underwater photo function could be a promising new trend. In addition, it is not only crucial to know which trends move your target group, but also at what time these movements take place. Seasonal fluctuations should be included in your market analysis section.

2. Determine the phase in the product life cycle

In which phase of the software/product life cycle is your offer? In the introduction, the growth, the maturity, the saturation or the degeneration? According to the phase, the market potential for your product or service increases or decreases. The closer you get to the degeneration phase, the more important it will be to spot new trends so your competitors do not overtake you.

3. Calculate the market potential

To calculate the market potential, you need to know two key outputs: the number of potential customers and their average needs. The demand can be predicted by the trend research mentioned above. Because a high search volume is evidence of high popularity and thus of a potentially high sales volume. The number of potential customers, multiplied by their needs per year, gives the market potential.

Competition Analysis

Competition analysis is an important component of market analysis, because success or failure may depend on things such as alternative products or market entry barriers. Competition is not just a case of direct competition. The entire environment in which a company operates affects market entry barriers. For example, if there are already many competitors in the market, customers have considerable power because they have the option of switching providers. If there are also substitute products (comparable alternatives), the barriers to market entry are very high.
If there has been substantial investment in the company or product, the barriers to market exit are also high, because a lot depends on this market exit or on the failure of an idea. When a significant amount of either time or money has been invested, the loss arising from leaving the market is considerably bigger than in cases of lower investment.
This means that the competition analysis should not be restricted to direct competitors. The following points should be considered in a competitive analysis:

  • Industrial relations and state regulation:
    The state constantly exerts influence on the market share – for example via legal barriers, price maintenance and constraints on imports or exports. If you plan to expand your business dealings internationally, thorough research on the basis of  country information  is therefore important.
  • Rivalry between providers:
    The degree of rivalry can vary widely – from predatory competition to market-sharing agreements. Strong rivalry between providers makes it more difficult to enter the market and to remain competitive.
  • Potential new providers:
    Are the entry barriers high or low in your market? A thorough market analysis also assesses how many competitors are likely to enter the market in future.
  • Substitute products:
    How high is the risk of substitute products? Substitute products are alternative products from other markets that fulfill the same purpose for customers. For example, margarine is a substitute product for butter.
  • Customers:
    How much negotiating power do your customers have and what is their buying behaviour?
  • Suppliers:
    How much negotiating power do your suppliers have or how easy would it be to switch suppliers?
The final step in the competitive analysis is a detailed assessment of the direct competition and analysis of its strengths and weaknesses.

1. Identify direct competition

Collect industry and company information about your competition. Identify competitors and the areas of the market in which they are active. Ongoing monitoring ensures that you always remain informed about what your competitors are doing. Only by keeping a step ahead of the competition can you retain your key competitive edge.

2. Comparison of offerings

Compare your product or service directly with that of the competition. Does the competition offer identical or similar products that could cause your customers to defect? How do the quality and price of the competition’s products compare with yours? Identify USPs and strengths and weaknesses.

3. Strengths and Weaknesses

The swot analysis of strengths and weaknesses does not just cover the products. In the final stage of the competition analysis you should perform an overall examination of the competing company and consider its strategy, image, employees, customer friendliness, flexibility and other criteria. The information gained may also be relevant to your company.

Competitor Analysis

Your competition analysis is ultimately about your direct competition. You can analyse this in three stages:

Identify direct competition

Compare offerings

Analyse strengths and weaknesses

Market Intelligence

The insights gained from your market and competition analysis are part of your market intelligence.

Comprehensive market intelligence involves having all the relevant information about the market that a company needs to ensure sound decision-making. When you have achieved this, you have understood your market, the competition and your customers and can forecast future needs and developments.

Market intelligence is part of business intelligence and it forms the basis for a successful marketing and corporate strategy.

Frequently Asked Questions

Answers to some popular questions

What do you mean by market analysis?

Market analysis assesses the current market situation at a particular point in time, with the aim of identifying the structure of the market and the market potential. 

What is the purpose of a market analysis?

Market Analysis helps companies understand the economic, strategic, demographic and customer spending trends. With this information they can make more informed decisions for the benefit of the business.

What are the components of market analysis?

Following are the components of Market Analysis:

  • Market Research
  • Economic Trends
  • Partners and Vendors
  • Customer Demographics
  • Buying Behavior
  • Products in the Market
  • Pricing Strategies
  • Marketing Strategies
  • Competition

What is the difference between market and industry analysis?

Industry analysis comprises of studying the industry trends, major players or competitors, pricing, partners and vendors and the part industry is playing in fulfilling the needs of the customers. On the other hand, Market Analysis includes Market Research, Demographics, Potential Customers, Buying Behavior etc. 

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