Market Opportunity Analysis: Find What Customers Really Want
As you work on your business plan, a major section needs to be devoted to identifying future opportunities for your company. This is key to developing a long term strategy, because without any planning you’re likely to only have short term success. Not something a typical business owner wants to hear. If you’re still waiting to make a start on your business plan, check out this recent post and read through a great example of how it should look.
In essence, a marketing opportunity analysis takes into consideration the financial capabilities, available technology and your competitive readiness to take action. Its conclusions allow you to identify new target markets, discover unmet customer needs, and realize your competitive advantages. This course is great for beginners who want to be able to better understand what their customers want. Instead of guessing what it is your customers are after, it’s essential you do your analysis properly. All good businesses meet their customers needs, which is especially in today’s environment where the level of competition is through the roof.Another great resource that will help you hit the ground running is this course, as it teaches you every single section you need to consider in your analysis, as well as examples in how to do each.
Market Opportunity Analysis Steps
In its simplest form, to properly perform a market opportunity analysis there are five steps to follow:
1. Identify what’s currently happening in the business environment.
In this section you need to look at the economic conditions (growth, stable or decline) as well as any trends or social changes that could have an impact on the business. Delve into both the legal and regulatory situations, as these can often change and you need to be prepared for any future expected changes as well. Research the latest technology and state of the art developments, and take into account the natural environment. Are there any vulnerabilities or limitations on resources that could hinder your growth?
2. Define the industry and determine the outlook.
Here you need to state exactly the industry that you are operating within, and make forecasts on the size of the market. Look back over the last 5 years, and project how you believe it will grow over the next 12 months, 3 years and 5 years. Look to your competition and discover the marketing practices that are being utilized, and see if you can see any major trends or shifts within your industry. Here there are major implications for potential opportunities, as you need to ensure you’re moving in the same direction as the market.
3. Dive into the details of your competitors.
You need to know what businesses you are competing with, and know their products inside and out. Go through their product mix, and compare this with the products you are offering. Make sure you’re objective in your approach, and also identify the relative strengths and weaknesses of the products from your customers point of view. Look at how your competition is reaching the market, the channels they’re using to both distribute and market their products, and the level of service that’s being offered. If you have details on the market share of other businesses include it here, and sum it all up in a couple of short sentences that outline the implications of this section regarding the opportunities in the market.
4. Describe your target market.
You need to build a profile of your ideal customer, so that you can adequately focus your sales and marketing efforts and reach your customers. If you haven’t built a marketing plan before, this course is a great place to start as it covers both understanding and a strategy to reach your market, and has a number of templates to guide your progress. In essence you simply need to look at the needs of your customers, but if you get stuck try asking yourself one of these questions:
- Who are my potential customers?
- What are my potential customers like as a consumer?
- What are my potential customers looking for?
- When is the product needed?
- Is there a particular channel that the product sells best in?
- How do my potential customers make a decision to buy a product?
- How important is each of my products attributes to my potential customers?
- Are there any outside influences that have an effect on their buying decision?
- Is there any limitations that can influence the level of opportunity?
- What is the competition starting to do?
- How is the market developing and changing?
Thinking and answering these should get the ball rolling, remember the entire goal is to focus on the end-user, and determine what it is they actually need. If the need is there, the market is there, and you’ve got the basic fundamentals for creating success selling your products.
5. Create your projections.
Use a variety of techniques that build on all of the information in your business plan to set a forecast of your sales. This includes best and worst case scenario analysis, any intuition or “gut-feelings” you have about new markets, and compare any results you have seen to date. The final recommendation in a market opportunity analysis is a simple answer to this question. Is the project a go? Or a no go?
Sources of Information
As you’re working on the project, what can be most difficult is the information you need to adequately support your projections, or to help you make decisions. Especially in emerging markets, much of the time the information you need either doesn’t exist, or isn’t available. Here’s the types of information that will help you build your market opportunity analysis
- Trade reports from industry associations
- Newspapers and periodicals
- Information service reports that are standardized for an industry
- Government reports
- Annual Company Reports
- Interviews and discussions with customers or suppliers
- Interviews and discussions with competitors (or with customers about competitors)
- Interviews and discussions with experts
- A personal opinion of the macro environmental influences
Reach out to the managers in companies that deal with suppliers, the people running trade associations, consultants in your industry, as well as sales people. They’ll all have an idea of the information you need, as well as their firsthand experience. In doing your research, surveys are another great way to get more information on a market, especially if you have a means of reaching the target consumer. Here’s the questions you need to be asking, whether it’s in a survey, or in an interview
- Their estimate of the size of the market
- Their estimates of the market potential, and how fast it is growing
- Their understanding of your position in the market and your value proposition
- Their preferred product and why
- What aspect of the product adds the most value to them as an end-user
- How they see the differences between the top three competitors in your field
- Are the differentiators sustainable over time?
- What are the short and long term needs of the market?
- List out all the emerging markets that can use the product
As you’re making your conclusions in the market opportunity analysis, remember that there are four key areas where you can create value for your clients.
- Trapped value. This is empowering your customers, creating greater efficiency and accessibility of your products.
- New value. This is extending your product lines, personalizing products and using collaboration to build a loyal following of customers.
- Horizontal value. This is improving the functionality of your existing products.
- Vertical value. This is improving the industry specific products and activities your business engages in.
Taking all of the information gathered so far, the final step is to craft it into a story. You want to build a compelling picture of the target segment, and the high level value proposition that you are offering. You’ll need to spell out exactly what the benefits are to the customer, and what’s absolutely critical to deliver. Run through the resources that are required to take advantage of this opportunity, and clearly describe how the business will be able to establish an advantage over the competition. You’ll need to include how you believe value can be made from this opportunity, and spell out in plain figures what this opportunity represents in both investment, and expected returns. By the end of all this, you’ll have a perfect overview of what needs to be done, so that you can help the decision making process. The next step is to implement this into your marketing strategy, and build a fantastic value proposition which is covered in detail in this course for business owners.
Finding opportunities in a market isn’t rocket science, but there is a process to follow. Do it right and you’ll be surprised at what customer needs are currently unmet, and how profitable it can be after you build a solution for them.
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