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Thinking about entering a new market? Introduce new products or services? Starting a new business? Your best first step is to conduct a market analysis to ensure that a viable market exists. Without customers, even the best ideas have no chance of success.
The process involves asking – and answering – a number of questions. The more thorough your queries, the better your chances of picking the right market for your products and services.
We'll start by evaluating the market at a relatively high level.
High-Level Market Analysis
Answer these questions about the market or industry you’re targeting:
Focused Market Analysis
At this point, dig a little deeper. The goal is to understand the characteristics and purchasing capabilities of potential customers within your market. Quick Internet searches can yield a tremendous amount of data. For the market you hope to serve, determine:
If you plan to sell products online, the landscape is incredibly competitive. Any business can establish an online store and ship products around the world. Never assume that you can capture a meaningful market share. For example, the bicycle industry is a mega-billion dollar sector. If you live in an area with 50,000 people and only one bike shop, you may be able to tap into that market more successfully than you would an online clientele. It is much easier to serve a market you can define and quantify.
Surveys can help you evaluate whether a new product or service will gain acceptance in a particular market. Surveys can yield valuable data, but only if properly constructed. Many companies provide professional survey services – well worth considering if you want hard data.
Arguably the most valuable survey models involve face-to-face or telephone interviews. Taking surveys in person allows you to ask follow-up questions, show examples or samples and check out the respondents' body language and nonverbal cues. The key is to survey companies or individuals who are within your target market; after all, your goal is to know whether the "right" customers are interested in your product or service.
Give careful thought to your queries. Don't ask leading questions. Be clear and to the point. Allow respondents to answer honestly. And most importantly, avoid personal questions.
Use a well-constructed, carefully administered survey as a final piece of your market analysis puzzle. If you've done your homework you'll know exactly what questions to ask and what potential customers to target.
Market Potential Analysis
A Market Potential Analysis, allows you to forecast sales for your organization. When you acquire this information, you then can develop projections. Ask these questions:
What percent are likely to become new buyers in the next year? Two years? Three years?