What Is Market Analysis
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 6, 2022
What Is Market Analysis
Market analysis in business is an assessment of a specific industry, niche, or vertical
market. Market analysis is a subset of market research that helps you understand your
target market and the competitive landscape, as well as where your brand and product fit
in.
Starting a business with a market analysis ensures you have an easier path to
success because it validates your idea and that there's demand in the market and people
willing to pay for what you have to offer.
Your market analysis also helps you better understand how to promote your
products most effectively because it gives you a comprehensive understanding of your
audience. If you need to secure funding from external investors or lenders, it shows that
you’ve done your research and can demonstrate the viability of your business idea and their
investment. Your market analysis is primarily focused on external factors rather than
internal analyses. It essentially serves as a gut check for whether or not your business idea
can make it.
At minimum, your market analysis should identify the following:
Who your target customer is
Where, why, and how they shop
The size of your target market
The price people are willing to pay for what you sell
Your competitors and their strengths and weaknesses
Keep in mind that the market changes, so conducting a market analysis isn’t just for
new businesses—established businesses can also use market analysis to validate new
product ideas or address challenges.
Here’s a quick market analysis example to demonstrate exactly
that: iHeartRaves analyzed the market when the COVID-19 pandemic first hit. The clothing
brand sells apparel people wear at music festivals and gatherings—events that slowed down
or even halted with the start of the pandemic. As such, the brand needed to pivot. So, it
changed promotional tactics and added face masks to its product lineup after conducting a
quick analysis to see what opportunities it could pursue.
How to do a market analysis
There are three main steps to completing a market analysis for your ecommerce
business:
1. Research the industry
2. Understand your audience
3. Know how you stack up against competitors
Research the industry
Now it’s time to understand the industry as a whole. Researching your chosen
industry helps you get a bird’s-eye view of the market landscape.
When researching your particular industry for your market analysis, consider the
following:
Market size. Estimate how many businesses and customers are in your
potential industry. A big market could be saturated and require you niche down more
specifically, whereas a smaller market could mean there’s lots of opportunity for new
businesses.
Market value. Get insight into how much money the industry generates each
year. Lots of consumer spending means there’s plenty of opportunity for you to claim your
slice of the pie.
Market demand. As many as 42% of new business startups fail because of
insufficient demand, so it’s essential to validate that people want what you offer before you
pursue your idea.
Market need. Identify gaps in the market and how the existing landscape falls
short in those areas.
Here are some reputable places to check for this data:
US Bureau of Labor Statistics
North American Industry Classification System
USAGov data and statistics about the US
US Census Bureau Census Business Builder
US Bureau of Labor Statistics consumer price index
US Department of Commerce Bureau of Economic Analysis
US Federal Reserve daily interest rates
Federal Reserve financial data
Bureau of Economic Analysis gross domestic product
US Census Bureau Statistics of US Businesses
You may also find industry-specific resources. For example, if you’re looking to start
a pet business, check out the American Pet Products Association and the American
Veterinary Medical Association.
Market analysis in business is an assessment of a specific industry, niche, or vertical
market. Market analysis is a subset of market research that helps you understand your
target market and the competitive landscape, as well as where your brand and product fit
in.
Starting a business with a market analysis ensures you have an easier path to
success because it validates your idea and that there's demand in the market and people
willing to pay for what you have to offer.
Your market analysis also helps you better understand how to promote your
products most effectively because it gives you a comprehensive understanding of your
audience. If you need to secure funding from external investors or lenders, it shows that
you’ve done your research and can demonstrate the viability of your business idea and their
investment. Your market analysis is primarily focused on external factors rather than
internal analyses. It essentially serves as a gut check for whether or not your business idea
can make it.
At minimum, your market analysis should identify the following:
Who your target customer is
Where, why, and how they shop
The size of your target market
The price people are willing to pay for what you sell
Your competitors and their strengths and weaknesses
Keep in mind that the market changes, so conducting a market analysis isn’t just for
new businesses—established businesses can also use market analysis to validate new
product ideas or address challenges.
Here’s a quick market analysis example to demonstrate exactly
that: iHeartRaves analyzed the market when the COVID-19 pandemic first hit. The clothing
brand sells apparel people wear at music festivals and gatherings—events that slowed down
or even halted with the start of the pandemic. As such, the brand needed to pivot. So, it
changed promotional tactics and added face masks to its product lineup after conducting a
quick analysis to see what opportunities it could pursue.
How to do a market analysis
There are three main steps to completing a market analysis for your ecommerce
business:
1. Research the industry
2. Understand your audience
3. Know how you stack up against competitors
Research the industry
Now it’s time to understand the industry as a whole. Researching your chosen
industry helps you get a bird’s-eye view of the market landscape.
When researching your particular industry for your market analysis, consider the
following:
Market size. Estimate how many businesses and customers are in your
potential industry. A big market could be saturated and require you niche down more
specifically, whereas a smaller market could mean there’s lots of opportunity for new
businesses.
Market value. Get insight into how much money the industry generates each
year. Lots of consumer spending means there’s plenty of opportunity for you to claim your
slice of the pie.
Market demand. As many as 42% of new business startups fail because of
insufficient demand, so it’s essential to validate that people want what you offer before you
pursue your idea.
Market need. Identify gaps in the market and how the existing landscape falls
short in those areas.
Here are some reputable places to check for this data:
US Bureau of Labor Statistics
North American Industry Classification System
USAGov data and statistics about the US
US Census Bureau Census Business Builder
US Bureau of Labor Statistics consumer price index
US Department of Commerce Bureau of Economic Analysis
US Federal Reserve daily interest rates
Federal Reserve financial data
Bureau of Economic Analysis gross domestic product
US Census Bureau Statistics of US Businesses
You may also find industry-specific resources. For example, if you’re looking to start
a pet business, check out the American Pet Products Association and the American
Veterinary Medical Association.
Much like you want to know about your audience when you’re conducting a market
analysis, you also want to understand the competitive landscape. Knowing who your
competitors are helps you pin how your brand is different and how you can differentiate
yourself from other players in the market.
