How To Do Effective Market Analysis:
The Best Tools & Methods
Market analysis is needed for everyone who wants to open a business, thinks about the company’s development, or aims to beat the competition. This analysis is not easy but the money, effort, and time spent on it are worth it. After all, it allows you to understand which product or service is in demand the most.
The marketing team of our 3D rendering company will help you navigate the topic, plan step by step, and conduct effective market analysis using the best tools and methods.
Market Analysis: A Guide to Action
First, let’s think over the concept of “market analysis.” Many people confuse it with marketing analysis or a simple market survey.
Analytics or analysis is a conclusion, a forecast, an assessment. A market analysis is a quantitative and qualitative assessment of a market. To understand how it is conducted, one must know the basics of statistics. There are two general sections of statistics:
- descriptive statistics;
- inferential statistics.
Descriptive statistics aims to describe the nature of the data. Graphs, charts, histograms — all of them are used to show data. Inference statistics seeks to conclude an unknown aspect of the data. Its task is to not just describe the essence of what is happening but discover something new, show a hidden meaning, and confirm or refute a hypothesis about the data.
Market Analysis Stages
Here are the four stages of how to conduct an effective market analysis.
Market analysis, as a rule, is carried out from the general to the specific. First of all, it is necessary to assess the market environment formed in the company’s background as a whole. Each economic sector has its factors of influence on business, and without taking them into account, it is impossible to build either a strategy or tactics for its development.
An overview of the industry, including an assessment of the current conditions for doing business and trends in their change, is included in the market analysis under the number one point.
It is vital to have a clear idea of your target market from the very beginning. So many aspiring entrepreneurs make the mistake of thinking that the entire market is all their potential customers.
By analyzing and understanding your customers, you will be able to personalize and enhance the shopping experience, improve your marketing, and develop new products that will meet customer expectations and significantly increase profits.
To develop a strategy for your company, you need to clearly understand who else is developing similar areas and the advantages and disadvantages. If you do not know your competitors, it is difficult to estimate the threats and who can surpass you in one niche or another.
The competitive analysis identifies the dominant economic characteristics in the industry and identifies the driving forces behind the market change. Having studied external factors well, you will be able to consider the specifics of a product or service and offer a business promotion option that will help you beat your rivals.
The efficiency of the enterprise depends on how debugged business operations are. Since the situation on the market is changing at lightning speed, the mechanisms that worked yesterday may already fail today.
Therefore, experts regularly analyze business operations and conclude about the appropriateness of adjustments. Based on the analysis results, management decides to change existing schemes, which helps reduce costs or increase productivity.
Having dealt with the theory, let’s move on to practice.
This article presents the best market analysis tools and methods to make your job easier and more effective.
Strategic analysis of the industry is the study of the immediate external environment of the organization (microenvironment) to choose the right option for strategic planning.
The task of industry analysis is to assess the level of attractiveness of the industry and its product markets to determine the company’s position in the industry. Research allows you to evaluate current trends, the level of competition, potential opportunities, and threats, identify critical success factors, and as a result, develop the right strategy for market behavior.
PESTEL analysis is your starting point for making any strategic decision, including an analysis of the internal and external situation in which the company is.
Effective strategic planning is critical to the smooth functioning of an organization. It provides an understanding of how to respond to certain developments in the future.
- business plan;
- a plan for the strategic development of the company;
- marketing plan;
- development plan, expansion to new markets;
- consolidation plan;
- action plan in case of unforeseen circumstances;
- restructuring plan.
In other words, always.
Previously, the analysis was known as PEST (Political, Economic, Sociocultural and Technological Factors). As the market and environment became more complex, additional important forces came into play, eventually leading to the current name:
- Legislative, legal factors.
Let’s consider them in detail.
In addition, it is the starting point for the formation of a SWOT analysis, where you can directly borrow data and conclusions from PESTEL.
You will need integrated access to international statistics, detailed reports, and up-to-date commentary from world-class experts. Resources such as Euromonitor, Statista, and Gartner will help you collect a wide range of point analysis data for any industry or country.
The target market described in the business plan should contain the following:
- Description of the consumer and their characteristics. You should pay attention to the demographics of your potential customers, such as age, income, and where they live. You also need to describe the psychological profile of your buyers, such as their interests and habits.
- Market volume. You need to find out who your competitors are and where they locate. It’s also crucial to determine how much customers spend annually on your product or service.
Market analysis methods divide into quantitative and qualitative, and effective market analysis is possible when both are applied. Quantitative methods answer the question, “how much?”. Qualitative methods answer the questions “how?” and “why?”.
Classical methods of market analysis: surveys, in-depth interviews, focus groups, and observations.
Customer experience is the most crucial metric to show your company’s weaknesses and assess the brand’s status in customers’ eyes. Specific marketing methodologies are used to analyze this experience. Our top three: NPS, CES, CSAT. These are the primary tools for assessing customer sentiment: contentment, loyalty, ease of interaction with the product/website.
Net Promoter Score is a digital expression of customer loyalty. In the book Loyalty Rules!, Fred Reichheld makes several arguments in favor of using the NPS as the primary business development metric:
- companies leading the industry in terms of NPS grow two times faster than their competitors;
- from 20% to 60% of the company’s organic growth depends on the customer loyalty index;
- 1% increase in NPS results in the same results as a 5% reduction in costs.
The Customer Effort Score is a metric that evaluates how comfortable a customer is in particular interaction with a company. For example, was it convenient to place an order, was it convenient to subscribe to the newsletter, and was it convenient to use the software?
All this helps to find out the weak points in the service, analyze them and eliminate them. In this way, CES works to simplify the interaction between the client and the company.
Customer Satisfaction Score no longer measures customer convenience but customer satisfaction, i.e., consequences of the interaction. Like CES, this method evaluates the customer experience on a specific exchange, not on the entire experience with the company. For example, CSAT can determine if the consumer liked the service, website, product/service, content, e.
CSAT is one of the most popular methods in online business; in particular, Google Play uses it to evaluate products. It is also usually built into ticket systems (systems for processing customer applications).
An in-depth interview is a market analysis method implemented in an informal conversation with a representative of the target audience.
The interview gives you the opportunity to:
- identify rational, emotional, and subconscious motives of consumer behavior;
- determine the factors influencing the choice of product/service;
- get data for designing a new product;
- acquire a consumer assessment of the product before launching it on the market;
- determine the key messages of the future advertising campaign.
The focus group is a qualitative market analysis method that has been proven effective over many years of use.
You can organize a focus group for the following tasks:
- identification and analysis of the needs of the target audience of consumers;
- determining the degree of customer loyalty to a product or brand;
- ranking of product properties in order of importance for users;
- drawing up the concept of an upcoming advertising campaign;
- finding ways to improve the product offer;
- development of a marketing strategy to counter competitors.
However, one must remember that focus groups can’t have the leaders of opinion. Otherwise, the results will be inaccurate. On top of that, the choosing process for participants has to be very careful since the volunteers are usually the same people that take parts in such marketing events all the time.
Observation is a straightforward and convenient method of conducting customer research. The necessary information is collected by observing the target audience. You can watch almost everything: how a person makes a purchase, what he does, how his day goes, how he watches TV, advertising, etc.
The disadvantage of the method is the interpretation of the collected information. The consumer does not give you direct answers to your questions but shows you their behavior at a particular moment. Since it’s only a tiny piece of information, you can build the wrong conclusions based on this. Therefore, when you conduct qualitative observations, study the audience’s behavior in the long term.
A competitive analysis allows you to track, understand, and take into account the strengths and weaknesses of competitors and your own. Let’s look at the value of a qualitative and comprehensive study of competitors’ work.
There are three main advantages of competitive analysis:
- Learn how much the product or service is in demand. With the help of research, you will learn about trends and understand what to consider when developing a new product or introducing it into everyday life.
- Evaluate and improve the effectiveness of your marketing campaign. If your marketers are at the stage of developing systems, then competitors can “suggest” to you what they should implement.
- Find potential customers that your competitors missed. There is always a part of consumers who have been given less attention or completely neglected. Using customer journey maps, you will identify these gaps. As a result, expand your spheres of influence and reach a different audience.
We offer specific methods and universal software that you can use to collect all the necessary data. With their help, you can get into the secret kitchen of competitors, explore their digital media strategy, develop a more powerful brand, a unique selling proposition, and find and convert new audiences.
Specially trained secret or mystery shoppers will check the work of offline and online competitors’ stores, following a given algorithm. It is necessary to develop a questionnaire and several evaluation indicators. But remember that there is no single test scenario. You create it yourself, deciding what you want to know about the competitors.
The mystery shopper can analyze the following:
- Sales funnel;
- Product audit;
- Support work;
- Website \ application;
- Creatives and much more.
A secret shopper is a robust market and competitor analysis tool that can provide an entrepreneur with undeniable competitive advantages – maintaining high service standards and increasing conversions, sales, and business profitability.
Digital marketing presence
SemRush will find competitors and show which ones are the most dangerous. It is a multifunctional service for analyzing competitors in a niche by basic parameters: analysis of incoming traffic, domain overview, and audit of search results. You can conduct a comprehensive SEO audit of the site and identify keywords from the semantics of competitors. If you need free analysis, look at the statistics of relevant search queries in Google Analytics.
Analyzing the advertising activity associated with the brand’s image-building tasks, we select the following indicators:
- the volume of communication (the number of advertising impressions for a certain period);
- seasonality of communication (more or less active periods);
- frequency of communication (how many times the brand has contacted the consumer);
- formats of communication (what does a competitor use more often — banners, videos, etc.);
- targeting approaches;
- media consumption of the target audience (what formats are best perceived by the audience);
- placement sites (sites where a competitor locates also indicate the tools used by them — YouTube advertising, programmatic tools, direct placement);
If your goal is improving productivity, in this case, check out the competitor brand’s website and analyze the following metrics:
- sources of traffic;
- volumes of traffic;
- advertising tools;
- website visitors;
- priorities in the promotion of products;
- digital assets (files, documents, illustrations);
- examples of creatives.
It is the minimum optimal set of indicators for analyzing competitors.
The Ahrefs platform has the fastest backlink crawler and owns the world’s most extensive backlink catalog (over 14 trillion links).
It has the following products:
- Site explorer — research of organic traffic sources (keywords and pages that bring the most traffic) and paid queries (ads, PPC keys, landing pages), as well as analysis of the link profile (sites that link to your competitors and the authority of these links);
- Keywords explorer — search for keywords and ideas for their use, analysis of the competition of the request, research the frequency of search queries and the number of clicks on keywords, calculation of potential traffic;
- Site audit — analysis of the on-page SEO performance of your site, checking for 100+ predefined errors (performance, HTML tags, social tags, content quality, incoming and outgoing links, resources, external pages);
- Rank tracker — tracking changes in positions and comparing indicators with competitors;
- Content explorer — analysis of the most popular articles in its segment and sorting them according to the following criteria: organic traffic, domain rating, social signals, donor domains, traffic cost;
- SEO Toolbar is a particular extension for Chrome and Mozilla Firefox to get SEO metrics of any page on the fly.
CMeter and Gemius AdReal — are two main tools to evaluate media advertising activity. With their help, users can analyze the reach, frequency, and frequency of communication, advertising sites, remarketing, the number of advertising impressions and clicks, social data, and other metrics.
Сustomer journey mapping
When you promote a product or brand, you build the perfect path for a user to turn into a loyal customer. But in practice, everything is not so smooth — a person does not act according to the generally accepted scheme for buying a product: they see an advertisement, show interest, and purchase the product.
Your goal is to understand what path the client is going through and how you can improve it. To do this, specialists create a customer journey map (CJM).
The map reflects several vital points:
- Points of contact of the audience with the product and brand;
- Target audience segments;
- The path of user interaction: from getting to know the brand to make a deal;
- Problems or barriers in the transaction;
- Interaction with the brand after the first purchase of the product.
There are a lot of options for building maps. CJM has different formats of information such as tables, graphs, infographics, and so on. The main thing is to display the entire path of the client, barriers, solutions, and the result — the transaction. Everything will depend on how it is more convenient for you and your team to perceive the information and work with it.
It is essential to analyze the brand equity of key competitors. Brand equity’s basic structure (framework) includes brand awareness, association, perceived quality, loyalty, and other assets.
Analyze the brand of competitors in the following aspects:
- Brand mission — the meaning of the brand’s existence, as manufacturers understand it;
- Positioning is the determination of your brand’s position and its holistic image among the various brands of the category in the minds of the target audience;
- Brand idea is a promise of benefits that can understand by an audience at any level of perception;
- Brand’s essence is the foremost thing, giving it a unique value that is deeply meaningful to consumers;
- Brand personality is a set of human characteristics associated with a brand;
- Brand style is an interconnected set of individual characteristics;
- Brand values are a set of functional, personal, and social values that combines the mind of the consumer with the brand;
- Brand benefits are the unique features that a brand offers to meet a specific need;
- Brand attributes — a set of sensory characteristics related to a product or service.
When the data is collected, you have a complete picture of the competitive environment. Based on the analysis of competitors, you can build better digital and brand strategies.
#4. BUSINESS PROCESS
There are the following types of business process analysis, depending on the needs:
- visual qualitative analysis of graphic schemes of the process;
- analysis of inputs/outputs;
- analysis of functions;
- analysis of resources (personnel, equipment, software);
- analysis of the state of the process regarding standard requirements (ISO QMS standards, as well as PDCA requirements);
- analysis of the state of the process regarding regulations;
- measurement and analysis of indicators:
- analysis of process efficiency indicators;
- analysis of customer satisfaction process;
- comparative analysis of processes;
- simulation modeling of the process and functional cost analysis;
- ABC-analysis of the process.
Do not skip ABC (Activity Based Costing) – analysis. Conducting functional cost analysis allows you to estimate the expense of business processes in structural units and identify unprofitable products, services, customers, and procedures.
VRIO stands for V — Value, R — Rarity, I — Imitability, O — Organization.
Answer the following questions for yourself.
Value question: “Can the firm exploit an opportunity or neutralize an external threat with a resource/opportunity?”
Rarity question: “Do few businesses have control over a resource/opportunity?”
Imitation question: “Is it difficult to obtain, develop or imitate resources/opportunities? Do firms face a lack of resources/capabilities with costs to acquire or develop them compared to firms that already have them?”
Organization question: “How organized are the company’s operations to deliver value? Is it ready and able to use the resources/opportunities?”
VRIO involves an analysis of a company’s resources and capabilities to identify the potential that can turn into a sustainable competitive advantage.
As a rule, the following aspects analyzes:
- financial resources (funds, access to financing);
- human resources (skills, knowledge, contacts);
- material resources (tools, materials, equipment);
- intangible resources (brand, intellectual property).
Going Forward Strategy
It isn’t easy to make decisions in today’s competitive business environment. Therefore, SWOT and TOWS analysis help you make critical strategic decisions.
SWOT analysis can be called one of the essential strategic planning tools that can be used to assess a company’s micro and macro environment. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths include areas where the company excels. Identifying these areas would be very helpful in drawing up company development plans. It consists of things like the company’s reputation, competent staff, innovative product design and geographic location, cost advantage of the company, etc.
Weaknesses may include areas that need improvement, such as lack of advanced technological equipment, labor inefficiency, etc.
Opportunities are benefits derived from environmental factors such as opportunities for business expansion or favorable government regulation.
Organizational threats can include competitor threats, substitute threats, customer bargaining power, supplier bargaining power, and new entrant threats.
After analyzing these factors, you will be able to make plans to take advantage of the company’s strengths and opportunities while minimizing the risks posed by external threats and internal weaknesses.
A TOWS analysis is similar to a SWOT analysis but, first, you analyze threats and opportunities and then strengths and weaknesses. TOWS analysis can lead to productive management discussions about what is happening in the external environment rather than looking at the company’s internal strengths and weaknesses.
By analyzing all the factors associated with threats, opportunities, weaknesses, and strengths, managers can make plans to allow the company to take advantage of opportunities and strengths by minimizing the negative impact of faults and threats.
Once the market analysis is complete, it is time to conclude to improve the company’s performance. Organize your research and data into an easy-to-read document. Be sure to save all the information you gather for future analysis as regular market research is helpful for any business strategy.
Market analysis helps reduce risks, identify new trends for business development and increase revenue. You will understand the main market trends and know the major players in your industry and what it takes to succeed. It will be easier for you to decide on the development directions of the product line or services because you will know what your customers want.
The regular market analysis will show whether customers are responding to your efforts and which aspects of the business are not working or need refinement, which is highly efficient and sets you apart from the competition.
If you need to improve the visuals for your company’s marketing communications after the market analysis, use our top-notch 3D rendering services.