A complete market analysis is a cornerstone of a successful marketing and advertising campaign. All too often companies neglect to perform a thorough market analysis and are left to the bleak alternative of guesswork. Market analysis is a strategic management strategy that provides an analytical approach to answering some of your companies most difficult questions:
· Who are our customers?
· How competitive is the current market landscape?
· How risky is entering this market?
· How efficient are our branding efforts?
Most business plans start on a hunch that a product or service could sell or be beneficial to someone. That may have been enough to launch your idea off the ground, but in order to keep your business plans thriving, it’s important you get accurate and concise answers to these questions and to perform a SWOT analysis.
What is market analysis?
A market analysis is a qualitative and quantitative evaluation of the external market and your internal resources. Thorough market analysis adequately assesses opportunity, value, risk, customer purchasing behavior, competition, and economic entry barriers and regulations.
3 Reasons Market Analysis is Important
This strategic management strategy does not tell you exactly how you should run your marketing campaign or position your company’s brand. However, it provides analytical insight that allows you to steer your company and brand around barriers or obstacles that could have impeded or completely halted your company’s progression. So, while there are many, let’s focus on the top 3 reasons market analysis is important.
1. Market Analysis Puts Your Customer First
Not long ago, Harvard Business School professor, Clayton Christensen, shook up the marketing world when he asked, “What job are people hiring your product for?” This simple question opened a door for those selling commodities to differentiate themselves from their competition.
The principle at play in Professor Christensen’s idea can be summed up in just one sentence,
“People don’t want to buy a quarter-inch drill; they want a quarter-inch hole.” – Theodore Levitt
Once we discover that people are hiring our services or products we realize that our competitors are not always what we think. A morning bagel’s competition might be a fruit smoothie, or an ice cream sundae’s competition could be a pastry. These things are often competitors to the problem of morning hunger or late-night dessert, yet they are not always sold by the business you would generally consider your “competition.”
Market analysis allows you to optimize your service or product for the job your consumer is hiring it to do.
TAKE A LOOK AT HOW WE INITIATED A REBRAND THAT RESULTED IN 6.5X WEB CONVERSIONS.
2. Market Analysis Forces Companies to Look Inward
Starting your own company or managing one is often accompanied by a dose of egoism. It’s difficult to look at your product or service offering from a truly objective perspective because of how much you have invested. Market analysis forces companies to look inward and ask, “Why would consumers come to us?”
Critically acclaimed author Simon Sinek prompts business owners to think differently in regards to how they sell. He says, “People don’t buy what you do; people buy why you do it.”
He asks us to compare the following sales pitches:
“We make great computers. They’re beautifully designed, simple to use and user-friendly. Want to buy one?”
“Everything we do, we believe in challenging the status quo. We believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple to use and user-friendly. We just happen to make great computers. Want to buy one?”
This principle is especially important when your product or service is tied to the consumer’s self-actualizing vision of themselves. This benchmarking principle is more apparent in the apparel business than any other. Take the members of the surf culture around the North Shore of Hawaii, for example. Do you think they care how breathable the fabric of their t-shirt is? Or the thread-count of their hoodie? No. Their predominant want is to identify with a brand that helps them feel like their best self.
Market analysis forces companies to consider how their product makes their consumer feel and to what degree that feeling is driving the purchase decision.
TAKE A LOOK AT HOW WE TURNED AN INTERNATIONAL LAW FIRM’S BRAND FROM COMMONPLACE TO CONTEMPORARY
3. Market Analysis Helps Determine Your Unique Sales Proposition
Though they are not always semantically agreed upon, there are five ways a company can differentiate their product or service in order to make it appealing to customers. Market analysis enables you to determine which of these methods of differentiation would be the most effective way to enter the market through strategic control.
- 1. Brand- Companies differentiate themselves by brand by standing for something or associating their brand with a cause.
Ex: TOMS’ slogan is, “One for One.” Their initiative to give shoes to the impoverished and shoeless is built heavily into their branding strategy. This branding strategy seeks to resonate with empathetic people who can turn a common purchase into one that helps others.
- 2. Product- Companies differentiate themselves by product by positioning themselves as the highest quality product on the market.
Ex: BWM’s slogan is, “The Ultimate Driving Machine.” Their branding and marketing goals set out to position themselves as the best car someone can own in the minds of their consumers.
- 3. Service- Companies with organizational structure differentiate themselves by service by offering a one-of-a-kind experience for their customer; this is typically done by showing exceptional customer service.
Ex: Nordstrom’s mission statement begins with, “To provide outstanding service every day one customer at a time.” Nordstrom’s has been accredited for having an extremely lenient return policy, swift response time to customer inquiry via email and even social media. Their brand is built around treating their customers with care and they are therefore retained.
- 4. Price- Companies differentiate themselves by price by positioning themselves as the most affordable or even the most expensive.
Ex: Wal-Mart’s slogan is, “Save money. Live better.” After Wal-Mart introduced their price matching program, they successfully branded themselves as the most affordable grocer by doing just that, literally being the most affordable.
- 5. Audience- Companies differentiate themselves by audience by branding their product or services to specifically aid or benefit a certain group or type of person.
Ex: Whole Foods’ brand is reflected in their motto, “Whole Foods, Whole People, Whole Planet.” Because their branding stands for healthy living, it often resonates with healthy people. Because of this people are often willing to pay more for the shopping experience.
Take a look at these two e-commerce Cheerio’s offers. Can you guess which one is from Wal- Mart and which is from Whole Foods?
Using market analysis to determine your entry point and your unique selling proposition is crucial for creating a sustainable business model.
Marketing analysis is the first step to making data-driven decisions in your business plan. Get in touch with our marketing team to see how we can assist you with finding your brand voice and your audience.