A market study is a crucial step in creating a business. Once your entrepreneurial idea has ripened and you feel it’s ready to pursue, a market study will allow you to examine your target market to size it up and get a better grasp of it.
More specifically, a market study will allow you to:
- Analyze a sector to reduce risks and maximize your chances of success;
- Become familiar with the needs, preferences and characteristics of your customers;
- Validate the commercial feasibility of your project and tweak your concept;
- Orient your various actions.
A market study is supposed to look into certain key topics: the market, the customers, the competition and the environment.
Unfortunately, many future entrepreneurs skip this step either because they’re intimidated by it and don’t feel up to the task, or because they think they already know the concerned market. A market study should not be overlooked – especially for complex and ambiguous projects. To the most reluctant of you, keep in mind that doing a market study is first and foremost a question of method and common sense! Besides, for a market study to be effective and conclusive, it must be carried out in an orderly, structured manner (searching for information, conducting surveys, synthesis and analysis of collected information, etc.). Below, our suggested method.
How to conduct your market study?
- For purpose of cost and most importantly for you, personally, to become familiar with the market, we recommend completing the first steps yourself.
- Start by using all the credible and relevant existing studies you can find (assessments, statistics, articles, etc.) available through public organisms, etc.
- Get help preparing and structuring your questionnaires from a consultant (such as nyuko [link]) and then your personal circle to gather enough answers.
- Before addressing your prospective customers, get in touch with experts from your sector. They know your target well and can help enrich your reflections.
- The direction your study points to is not always the right one. Interpretation and intuition remain overriding factors in a business approach.
What data to collect?
To define your market:
- Is it a growing, stagnating or declining market?
- How big is it? How many prospective customers are there?
- Is it a local, national, regional or international market?
- How many companies share the market?
- What about nearby (adjacent) but different markets?
To analyze demand:
- Who needs your offering?
- How many customers can you expect? Where are they?
- What are their buying patterns? What do they expect from your product/service?
- What are the key factors to meet those expectations?
- What will influence their choice (price, convenience, atmosphere, quality, notoriety of distributor, time of sale, options, additional products, selection, image, etc.)?
To examine existing offerings, meaning your competition:
- Who are they (direct or indirect)? Where are they?
- What do they offer and for what price?
- How do they sell? What are their financial results? Who do they sell to?
- How do they communicate? What are their competitive advantages?
- Are they successful and what is their reputation? What is their market share?
- Are their customers/users satisfied? What is their feedback?
To assess potential suppliers:
- What are the possible distribution platforms and the motives of the suppliers?
- Who are the suppliers on your market? How is their financial health?
- Get in touch with a few of them and compare their offerings (price, delays, services).
To explore the environment of your market:
- Who are the potential influencers?
- What media sources would be most likely to get reach your targets?
- What factors (political, economical, social, technological, legal) could or could not affect your market?
Of course, this list of questions is non-exhaustive. It’s up to you to understand which parameters are essential to your project.
How to collect that information?
- Via direct contact: with prospective customers, influencers, suppliers, distributors;
- Via desk studies: by searching online, in catalogues, studies, statistics, publications from the sector;
- Via a qualitative study: conduct with a limited number of people to obtain precise information, suggestions, etc. through interviews or small group discussions;
- Via a quantitative study: that consists of questioning a wide range of people representing your targets in order to decipher trends, often using a survey.
It generally calls for a mix of the above tools. In practice, quantitative and qualitative studies are complementary. Conducting the two successively (first qualitative to explore, then quantitative to confirm) provides a comprehensive analysis of the targeted market and clientele. Consider using online tools (SurveyMonkey, Google Docs, etc.) to easily create and manage surveys.
Once you have all the sought information and have synthesized and analyzed it, you may uncover new opportunities or risks in your market. You will be able to define the keys to success as well as the constraints pertaining to your market. All of this will help you validate or recalibrate your offering and positioning.
Logically enough, the next step is to lay down assumptions regarding revenues and establish a projected turnover. Having this estimation will feed your financial projections so you can determine whether or not your project is financially viable. Do note that these are merely projections and do not guarantee your success!
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