Components of a Market Analysis
by Andrew Michaels
Market analysis requires a thorough understanding of the organization's own capabilities; the capabilities of current and future competitors; the consumption process of potential customers; and the economic, physical, and technological environment in which these elements will interact. Some market analysis components are the following four C's:
The Consumers. It is not possible to anticipate and react to your customer's needs and desires without a complete understanding of consumer behavior. Discovering customer's current needs is a complex process; but it can generally be accomplished by direct marketing research. By doing a marketing research, you will know the life cycle of your product. For instance, you want to venture into bookmark printing business, your research should include how many establishments are there in your target area; what approaches do your competitors have that is different from yours. Your research also will determine if your product will click or not.
However, anticipating evolving consumer needs requires understanding the consumer, which in turn requires understanding the behavioral principles that guide consumption behaviors.
The Company. Your company must fully understand its own ability to meet customer needs. This involves evaluating all aspects of the firm, including its financial condition, general managerial skills, production capabilities, research and development capabilities, technological sophistication, reputation, and marketing skills. Marketing skills would include new product development capabilities, channel strength, advertising capabilities, service capabilities, marketing research capabilities, market and consumer knowledge, and so forth. Failure to adequately understand one's own strengths can cause serious problems.
The Competition. It is not possible to consistently do a better job of meeting customer needs than the competition without a thorough understanding of your competitors? capabilities and strategies. This requires the same level of knowledge of the firm's key competitors that is required of one's own company.
In addition, for any significant marketing action, the following questions must be answered: If we are successful, which firms will be hurt (lose sales or sales opportunities)? Of course those businesses that are similar to yours will greatly be affected because you will be competing for the same set of target customers.
Of those firms that are injured, which has the capability (financial resources, marketing strengths) to respond? You can assess this by doing a survey on the customer whether they would still be buying from your competitors. If the business is already an established business, they will surely create or invent something as a response. They will invest more money on advertising and other product promotions to stay in the market.
Is our strategy (planned action) robust enough to withstand the likely actions of our competitors, or do we need additional contingency plans? You will need extra capital when your product is declining, or customers are not that confident in using your product. If you will be fighting fist for fist with your competitors, a large amount of money is at stake. You need to boost further your campaigns, advertisements and promotions.
The Conditions. The state of the economy, the physical environment, and technological developments affect consumer needs and expectations, as well as company and competitor capabilities. The deterioration of the physical environment has produced not only consumer demand for environmentally sound products but also government regulations affecting product design and manufacturing.
Clearly, the company cannot develop sound marketing strategy without anticipating the conditions under which that strategy will be implemented. Those are the components of a market analysis that is essential in your business.