Why You Should Conduct Market Analysis for Your Business

Whenever starting a new venture, project, or business, it's essential to conduct research on what others are doing within your desired market. This research is called a market analysis, and it will provide you with different insights on a couple of things:

1. Your market
2. Your demand and profit
3. Your target audience
4. Your competitors
5. Your distribution channels

Having - and most importantly understanding - these insights will allow you as a business owner to create new plans for your business to improve and excel in your chosen industry. There are many ways to conduct a market analysis, but the essential part is getting the insights you need to improve your venture, project, or business. In the article below, Moqod explains why it's necessary to conduct market analysis and how you can conduct it for your business. Moqod delivers digital products to startups and other businesses. These products vary from software to web and app solutions.

A market analysis is the result of a both quantitative and qualitative research into the market of a business. With their market, we mean the market they operate in or will operate in daily. It consists of a few essential points that can assess a business' current situation and then allows to make up new plans for the future. The result of market analysis will be one document explaining everything you, executives, or investors need to know about your business.

# The Main Components

The final document of your market analysis will contain 5 components:

1. The market
2. Demand and profit
3. Target audience
4. Competitors
5. Distribution Channels

# The Market

When defining your market, you look into different points of interest:

• Market size
• Market growth
• Trends and developments

Defining the market size can be done by researching the volume and potential of your target market. It's a combination of the number of customers and suppliers active in the market and sales being made.

The market growth can be calculated by extrapolating historical data into the (near) future. It wil provide insights in the future development and possible growth that can take place in your market. If the expected growth is small the decision can be made to pick a different market or to find strategies that will help grow the market. Growing the market yourself is possible by using marketing strategies for example, but it will take quite a lot of strategic planning to achieve.

Trends and developments that are going on in the market you would like to operate in. One of the most recent examples of trends and developments is sustainability. It has had a significant impact on many businesses worldwide, and it can also be used as a competitive advantage. Looking at these trends and developments allows you to understand what is going on and how you can use these trends and developments to your advantage.

# Demand and Profit

Calculating the demand of your market is an important step to find out if there is an actual demand in your chosen market. Demand can be visualized by creating a chart with price on the vertical axis and quantity on the horizontal axis. The line in the chart will represent the demand given by the customers in the market.

The information gathered by calculating the demand can be used to calculate the profit potential within your market. To calculate the potential profit you will have to subtract all your costs from your price and multiply that by your quantity sold (the demand). This will provide you with a number that will form your profit potential in your market analysis.

By calculating the demand and the potential profit, you'll get new insights into your business's viability.

# Target Audience

To assess your target audience, it's very important to look into the problem you are solving with your product or service. Who has the problem? For who are you trying to solve a problem? These are two questions you could ask yourself to obtain new insights into your target audience.

Once you better understand your target audience, you can work on defining them by a few metrics. A few examples of these metrics can be location, age, gender, education, job, annual income, interests.

# Competitors

It's safe to say that as a business owner, you always have to face competition. Competition can be seen as both a threat and an opportunity. The threat is that the competition can overtake your target audience and "steal" business. The opportunity is that you can learn from the mistakes of your competition.

When identifying your competitors, you can divide them into two categories direct and indirect competitors. Direct competitors offer the same services and products as your business. Indirect competitors don't provide the same services and products but do satisfy your target audience. The main goal of a competitor analysis is to find out:

• How you can differ from your competition.
• What your competitor is doing right.
• What your competitor is doing wrong.
• What their user experience is like.
• Where there is an opportunity in the market (market gaps).

Identifying these critical points of your chosen competitors will help you to improve your business on different fronts. To assess these points even further, you can complete a SWOT analysis of your business and your competitors. SWOT is short for strengths, weaknesses, opportunities, and threats. It provides insights into these topics and allows improving your business with the results of the analysis.

# Distribution Channels

Before going into business, it's important to look into the channels that can be used to distribute your product or service to your target audience. These distribution channels can be either existing or created depending on what is needed to distribute your product or service properly. An example of an existing channel can be an app or website. Performing a distribution channel market analysis clarifies what is already being used by other businesses and where there are opportunities to create new innovative distribution channels for your business.

# In-house or outsource

There are two ways to conduct market analysis: do it in-house or outsource it to an external company. Accuracy is one of the most important things to keep in mind whenever conducting a market analysis. This accuracy can be heavily affected by the company itself because they have a different view of the company than someone looking at the business as an outsider. That's why it can be wise to outsource market analysis to an external company to increase the accuracy of the final analysis. Moqod can help you to conduct a market analysis for your business.

# Importance

We get asked the question often: "Why shall we conduct a market analysis?". It's an essential step in understanding your business, customers, competitors, and the market you operate in. Market analysis is a very accurate way to formulate and set new goals for your business because it's entirely based on facts. This accuracy makes it very valuable to companies.