what is a marketing analysis in a business plan

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How to Write a Market Analysis for a Business Plan

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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How to Do a Market Analysis for Your Business in 6 Steps

Written by Kate Starr

Market analysis is the process of collecting and analyzing information about your specific market.

It involves speaking to your customers, analyzing competitors, and identifying industry trends.

The result?

You’re able to:

• Make better business decisions
• Save time (and money)
• Create a better experience for your customers

In this article, we’ll go through the exact steps to perform your market analysis. You’ll also learn how to overcome the challenges that come with it.

Step 1: Define Your Purpose

Giving your research a purpose helps you focus on gathering crucial information for your business with fewer distractions.

Think of it like setting off on a road trip.

Without a destination in mind, you’re likely to end up driving aimlessly.

When you’re unclear about why you’re doing a market analysis or what you want to find out, you risk collecting irrelevant information.

And you might miss what really matters for your business.

So, how do you define the purpose of your market analysis?

First, identify the information you want to learn. Then, use this information to set a SMART goal.

Identify Key Focus Areas

Here are some common key focus areas of market analysis:

Market Size

You’ll need to consider the overall size and potential of the market.

Especially when launching new products or developing strategies.

Target Audience

Aim to get as much information about your audience as possible.

Go beyond age, gender, and location. Understand lifestyle, interests, behaviors, and needs.

This will help you craft messages that appeal to your audience and ensure that you offer products or services they need.

For example, subreddits like r/technology or r/smarthome feature interesting discussions about technology.

If you’re running a tech blog, you could use these to understand what people are saying about specific products, brands, or trends.

Pay attention to common complaints or frustrations people express about certain gadgets. Consider how you can use these insights to improve your own products and/or messaging.

Competitors

Identify your main competitors and their strengths and weaknesses.

Analyzing competitors will help you craft your own offerings and strategy. Or find gaps in your competitors’ offerings where you can add value to your audience.

Also consider how they acquire new customers. Is it through social media, SEO , email, or ads?

(Jump to Step 4 to find this data.)

This information gives you an insight into which channels you should focus on.

Further reading: Competitor Analysis: Core Principles and How to Conduct One

Pricing Strategy

How you price your products or services will obviously affect your revenue potential.

But it will also affect how your audience perceives your products.

Is there room for another budget-friendly option in your industry? Or would it be better to introduce a high-end version to meet the needs of an underserved portion of the market?

Look at the pricing strategies of your competitors to understand which options could be best for your business.

Set a SMART Goal

Once you know what information you need to find out and analyze, you need to set more specific goals.

The SMART framework helps you set goals that are:

• Specific: Be as precise as possible about what you want to do
• Measurable: Make sure you can track your progress and know when you’ve hit your target
• Achievable: Set goals that are challenging but realistic, given your resources and timeframe
• Relevant: Ensure your goal connects to your broader business objectives
• Time-bound: Set a deadline for your goal to create a sense of urgency and help you stay on track

But what does a SMART goal look like in real life?

Imagine you run a small bakery specializing in gluten-free treats.

You’ve seen a rise in interest in healthy eating. You want to analyze the market potential for expanding your product line.

Vague goal: “I want to understand the gluten-free market better.”

SMART goal: “I want to identify the top three most popular gluten-free baked goods among people aged 25-40 in my city within the next two weeks, so I can adjust my products and attract more people to my shop.”

Do you see the difference?

The SMART goal provides a clear focus for your research and makes it easier to gather the right data.

Helping you draw actionable conclusions that can lead to results for your business.

Now it’s time to actually gather that data.

Step 2: Gather Relevant Data About the Industry

There are various ways to collect relevant market analysis data.

Industry publications and statistics are good sources of information about your industry.

A quick search for terms like “[your industry] publications” and “[your industry] statistics” can serve as a good starting point for finding these sources.

Market research reports provide in-depth analysis of specific markets or industries.

Research firms often publish reports. They offer details about market size, customer behavior, and what competitors are doing.

In other words: valuable information for your market analysis.

You can find these reports on research firm websites, government sites, Google Scholar, or in libraries.

Surveys, interviews, and focus groups let you talk to your potential customers and industry experts.

It’s a great way to get firsthand information and understand people’s motivations.

For example, survey your customers when you launch a new product asking for their feedback:

Regardless of your information source, ensure that the data you collect is valid.

Do this by checking how the data was collected and studied. Any reliable report should have a section describing the research methodology.

Similar to this:

If possible, also compare information from different sources to make sure it’s consistent.

The specific data you’ll need to collect will vary based on your goals.

But you can use the following two areas as a start:

Knowing the size of your market gives you an idea of the opportunity you have.

Simply put:

How many potential customers are out there for your product or service?

But how do you find the market size?

Based on your competitors’ data, Semrush’s Market Explorer shows you how many people are interested in your product.

You can enter several competitors into the tool, find competitors to analyze, or analyze an entire category.

The tool breaks down the market size into two categories:

Total Addressable Market (TAM) and Serviceable Available Market (SAM).

TAM reflects your business’s potential to scale.

It includes all customers. Even those who don’t need or can’t afford the product at the moment. But might need it in the future.

For example, a pregnant woman who will buy diapers in the future.

And SAM tells you how much demand there is for your product at the moment.

This is the number of people who are ready to purchase your product or service.

Industry Trends

Keeping an eye on industry trends can help you identify potential threats and opportunities.

For example, you’ll need to know whether your audience’s interest in your product or service is increasing or decreasing. Or if there are new entrants to your industry that could disrupt your current approach.

You can monitor shifts in your industry or compare demand for specific search terms with Google Trends .

Let’s say you want to decide which product to prioritize as part of your smart home tech website: smart doorbells or smart LED lights.

You can use the tool’s compare function to see how interest in these two search terms has changed over time:

In this case, interest for smart doorbell slightly exceeds the interest for smart LED lights.

But interest for smart LED lights seems to peak around the holiday season each year. This makes sense as that’s when people are decorating their houses for Christmas.

So, it would make sense to prioritize smart doorbells year-round but consider a seasonal push for smart LED lights.

Step 3: Identify Your Target Audience

The better you are at solving people’s problems, the more successful your business will be.

But first, you need to pinpoint WHO these people are.

And we’re not just talking about their age and location.

Dig deeper for an intimate understanding of:

• What specific problems they face in their daily life or within your industry
• What goals or ambitions your product or service could help them achieve
• Which social media platforms they prefer and why
• What types of content they most frequently engage with and share
• How they typically spend their time and what activities they enjoy
• What core values guide their purchasing decisions

With this information, you can craft marketing messages, design product features, and provide customer service interactions that speak directly to them.

This helps build trust and loyalty. Which can lead to sustainable growth for your business.

For example, let’s say you own a local yoga studio. Your ideal student might look something like this:

Understanding your audience deeply like this lets you tailor your marketing and yoga class offerings precisely to their needs.

In this case, you’d be appealing directly to Sarah and other busy moms like her.

This is exactly what Erica, a yoga teacher, does in the Instagram caption below:

She acknowledges the challenges and emotional rollercoaster that motherhood brings.

She also highlights how yoga has supported her through various life stages.

This resonates with moms like Sarah—seeking stress relief, self-care, and community.

You may also have multiple target personas. Especially if you offer various products or services. Or if your offering can benefit more than one group of people.

In our yoga studio example, you might also target:

• Felix, a young professional (25-35) seeking a challenging physical practice to improve their flexibility and mindfulness
• Maria, a retiree (60+) looking for gentle yoga and meditation classes to support her physical and mental well-being

Identifying and understanding these diverse personas can help you prepare a tailored yoga class schedule.

And craft different messages to attract each group of people more effectively to those classes.

But how do you identify your target audience?

And all their needs, characteristics, and preferences?

You can manually observe your existing customers or those of your competitors. Then, note their common traits.

Or, you could gather feedback from your existing audience (like blog readers or social media followers) using a tool like SurveyMonkey .

You could ask your readers about their lifestyles and struggles. Or simply what kind of yoga classes they’d like to see in your studio.

Use SurveyMonkey’s templates to build your survey questionnaire. Even build one with AI.

You can also create your own questionnaire from scratch.

Once you build your questionnaire, send it to your email subscribers, share it on social media, or promote it to your blog audience.

You can also use a marketing tool like Semrush’s One2Target to instantly access data about your target audience.

Here’s how to do it:

In the tool, enter up to five competitors’ websites in the search bar.

(Because if they’re a close competitor, you probably share the same target audience.)

Then click “ Analyze .”

You’ll see details about your audience’s demographics. Including age, sex, and distribution by location.

This helps you understand how to speak your audience’s language.

Move to the “ Socioeconomics ” tab to view your target audience’s household size, income level, employment status, and education level.

Understanding your audience’s socioeconomic situation gives you a sense of their lifestyle and budget.

If they have lower incomes, like in the example below, you may need to emphasize the value and affordability of your product.

Education level can also influence how your audience makes decisions.

A highly educated group might appreciate in-depth technical details. While others might prefer a simpler approach.

Move to the “ Behavior ” tab to understand what social media platforms they’re using.

This shows you where your audience hangs out online.

Focus your efforts on the platforms they use most. Instead of overwhelming yourself with publishing content on multiple platforms at once.

This will help you make more efficient use of your marketing budget.

Step 4: Analyze Your Competitors

Analyzing your competitors can reveal their strengths and weaknesses. This can help you find ways to stand out in the market.

But how do you do competitor analysis?

A great starting point is to review their websites and social media profiles and observe what they do.

Then, you can use tools like Semrush’s Traffic Analytics for deeper insights. You can enter up to five competitors in the tool to analyze them in bulk.

The Traffic Journey tab will reveal which marketing channels send the most visitors to your competitor’s website.

In IGK Hair’s case, we see that their primary traffic source is email. Followed by direct and then organic search.

What does this mean?

Almost 58% of traffic comes from email, which suggests that IGK is likely successful in using email marketing to get more repeat website visitors.

And 19% of website visitors directly access IGK Hair’s website. Likely through typing their URL in the browser’s search bar:

And clicking on bookmarks:

Both of these numbers mean that customers know and like IGK Hair. As they keep choosing to come back.

Around 18.6% of traffic comes from organic search—meaning their SEO strategy is working well, too.

The percentage might not sound high. But that’s 42,500 users landing on IGK Hair’s website through Google search every month .

They’re also ranking high for relevant keywords:

And attracting visitors who are actively searching for tips or services related to hair style or care.

Finally, while not a major source of traffic, IGK Hair is also investing in targeted ads to reach potential customers.

As we can see from the Google Ads Transparency Center , they have a few active ads:

When you know what channels work for your competitors, you can prioritize your marketing efforts accordingly.

Note: A free Semrush account gives you 10 searches in this tool per day. Or you can use this link to access a 14-day trial on a Semrush Pro subscription .

Step 5: Do a SWOT Analysis

A SWOT analysis helps you pinpoint what sets you apart from others. And where you might need to level up.

To do a SWOT analysis, ask yourself the following questions:

• Strengths: What are you good at? What do you do well that sets you apart from competitors?
• Weaknesses: Where could you do better? What are some things you struggle with?
• Opportunities: What trends or changes in the market could benefit you?
• Threats: What external challenges or risks could hurt your business?

Imagine you run a small, local coffee shop.

Here’s what your SWOT analysis might look like:

Step 6: Develop a Marketing Strategy

You’ve gathered lots of useful information from your market analysis.

Now you need to transform those insights into a defined marketing strategy .

This is where you map out your plan of action to reach your target audience, differentiate yourself from competitors, and achieve your business goals.

As Wesley van der Hoop , International SEO Expert and Author of To the Moon , a goal setting book, aptly puts it:

“If you can’t market it, don’t build it”

A comprehensive marketing strategy involves:

• Crafting brand messaging and tone of voice
• Selecting the right marketing channels and tactics to reach your target audience
• Establishing a budget and distributing it across your chosen channels and tactics based on priority
• Tracking your progress and optimizing your strategy

There are clearly a lot of steps here. And each step requires a lot of work on its own.

But you can learn how to do it all with this free Semrush course: How to Create an Effective Marketing Strategy .

How to Deal with Market Analysis Challenges

Doing market analysis often comes with a number of challenges.

Let’s discuss how you can overcome some of the most common ones:

Data Overload

The amount of data available across the internet can be intimidating.

Social media, market research reports, and industry publications are all great sources of information.

But it can also be challenging to deal with so much data.

Collecting reliable information is a time-consuming task, and it can be draining to try to consume all of the information in your industry.

It might even distract you from finding the data you really need.

What to Do About It

Look back at your market analysis goals, and prioritize the information you need to collect to meet them.

What are the specific questions you need to answer?

Use this question as a filter to weed out irrelevant data. Zero in on the most critical information.

Inaccurate or Biased Data

Unfortunately, not all data is reliable.

Some might be outdated. Some sources might be biased.

Some might even be incomplete or intentionally misleading.

Here’s how to differentiate good data from bad:

Various factors can influence the accuracy of your data.

For example, sampling bias. Which means the data isn’t collected from a representative sample of your target market.

Confusing questions in surveys can also skew responses. This can lead to inaccurate conclusions.

And researchers can have their own preconceptions or expectations that subconsciously influence how they collect and interpret data.

There are a few ways you can avoid relying on inaccurate or biased data.

First, look for information from well-established market research firms, industry publications, or government agencies.

• Forrester Research
• IDC (International Data Corporation)
• U.S. Bureau of Labor Statistics (BLS)
• U.S. Census Bureau

Avoid data that lacks clear sourcing or comes from biased organizations.

Pro tip: Reliable and reputable sources are transparent about their data collection and analysis methods. So, be careful if a source is vague about how they gathered their data.

Next, check the publishing date of any information you find. Since markets evolve quickly, aim for data no older than three years.

Most reports and statistics will clearly show their publication dates. Like this:

Finally, if possible, gather data from at least two sources and compare the findings.

If you find conflicting information across different sources, dig deeper to find the most reliable data. Or look elsewhere if you can’t confirm its accuracy.

Limited Resources

As a small business or a startup owner, you might have a limited budget. Or not enough people to do the analysis.

Which can make your market research seem daunting. As it can be tough to allocate enough resources to gather the right data.

While some reports may be costly, there are still free or low-cost resources to use.

So, when you start your research, check the free research reports first.

To filter your initial searches, use a Google search operator.

Let’s say you’re running a local bakery.

Since many free reports are uploaded as PDF files, you’d search something like: bakery industry statistics “PDF”

Other reports may mention they’re free. So, search: bakery industry statistics “free”

Little Information About Competitors

Small or private companies tend to have a limited online presence. Or less publicly available information.

Which makes it challenging to do competitor analysis.

Do a Google search with your competitor’s business name and see if they have some media coverage. Or any public information available on a reputable website.

Imagine IGK Hair is one of your competitors again.

Doing a simple Google search leads us to their website and social media profiles.

Go through their website, social media channels, and any online reviews.

While you’re at it, read their “About Us” pages, homepage copy, and product offerings.

Notice how they engage with customers through social media.

And what kind of posts they are publishing.

You can also use competitor intelligence tools like Semrush to understand their online strategies.

Like the Traffic Analytics tool’s traffic channels report we discussed earlier:

These data sources can help you piece together a picture of their overall online marketing strategy.

Lack of Objectivity

We all have biased opinions. Even if we don’t notice them.

These opinions can influence how we see and understand information.

This is true in market analysis too.

In market analysis, bias can lead to distorted conclusions and wrong decisions.

Try to separate your personal feelings and assumptions from the data you find.

Acknowledge your biases and ask yourself frequently: is this a fact or my perception? Then, seek additional data to ensure its objectivity. You can do this by comparing data from multiple tools.

Let’s say you want to create content about vegan brownies to attract more vegans to your bakery.

And because you’ve tried some in the past and heard your friends talk about them a lot, you think that “vegan brownies” is clearly going to be a popular search term.

However, a simple Google Trends report shows that it’s not as popular as you thought it would be. And “vegan cookies” is actually more popular:

And data from Semrush’s Keyword Overview tool confirms this. As “vegan cookies” has almost doubled the monthly search volume:

By confirming this data, and ignoring your initial biases, you can save time and resources by focusing on the tasks likely to yield the highest returns.

What to Do with Your Market Analysis

It’s true that market analysis can boost your business growth.

But data alone won’t achieve that.

You need to turn those insights into action through your wider marketing strategy.

If you’re ready to turn your market knowledge into tangible results, our small business marketing guide will show you exactly how to do it.

It’s packed with actionable tips and proven strategies to help you reach your target audience and grow your business.

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How to Conduct a Marketing Analysis

A marketing analysis helps you improve your strategy to engage more of your audience, generate more leads and drive sales. This guide explains how to conduct a marketing analysis for your business.

Table of Contents

Marketing shouldn’t mean throwing the kitchen sink against the wall to see what sticks. An effective marketing strategy is based on intensive research into your audience and existing marketing efforts. To better understand your customers, your strategies and how to spend your marketing budget, consider conducting a comprehensive marketing analysis of your business.

What is a marketing analysis?

A marketing analysis is a process that helps you understand the various demographics and segments of your target audience, effective engagement strategies, the customer journey, and ways to improve conversions . Conducting a marketing analysis can help you improve your marketing campaigns, drive a better return on investment for your marketing budget, build brand awareness and customer loyalty, and boost your lead generation .

“Marketing analysis determines the success and failure of marketing campaigns,” said Esther Poulsen, CEO of Raare Solutions. “It is necessary to build customer engagement programs with the expectation of what the results should be, and then conduct a detailed analysis to determine if results were achieved, exceeded or failed.”

How do you conduct a marketing analysis?

To perform an in-depth marketing analysis for your business, you can employ methods like polls, surveys and focus groups. Refer to comments from users on your social media pages and online reviews. Use a SWOT analysis to determine strengths, weaknesses, opportunities and threats to your business from both a marketing standpoint and a general operations perspective. Tap into your social platforms’ analytics tools to better understand your audience’s behavior on social media.

Additionally, there are lots of tools out there to improve your marketing analysis and the insights it reveals. Here’s a look at some free or low-cost tools available to businesses.

• Ahrefs: Ahrefs is an SEO tool that allows you to analyze your existing content and optimize new content before deploying it. An SEO tool is key to improving your rankings for search engines like Google and Bing, ensuring that more users find you when querying relevant keywords and phrases.
• Crazy Egg: Useful for website analytics, Crazy Egg can help you identify which users are coming to your website and from where. This tells  you which members of your audience are encountering your external marketing efforts and have enough interest to search for or click through to your website.
• Google Analytics: Few tools for understanding the source and behavior of web traffic are as ubiquitous as Google Analytics. It can show you how users find your website and what they do once they visit it. This high-level view can help you identify the reasons users leave your website so you can increase the time they spend on pages and optimize the elements you want them to interact with. Best of all, Google Analytics is free.
• Semrush: Semrush is an SEO tool that enables you to optimize your online content and examine how you stack up against the competition. It offers a variety of pricing packages for businesses of all sizes and can scale with your company as you grow and continually reevaluate your marketing needs.
• SpyFu: SpyFu excels at tracking your competitors’ performance in online advertisements and search engine rankings, helping you establish targets to surpass them. Your marketing efforts don’t happen in a vacuum; information on what your competitors are doing can help you outrank them or do something unique to cut through the clutter.

What should be included in a marketing analysis?

For a marketing analysis to be truly comprehensive, it has to examine every relevant aspect of your marketing efforts. At minimum, you should include these elements in your business’s marketing analysis:

Leads and prospects

Especially important to marketing campaigns designed to drive new business, examining leads and prospects helps you understand where you source potential new business and how you keep them engaged with your brand. A marketing analysis can identify better ways to nurture these leads, pushing them along your conversion pipeline toward a buying decision.

Conversions

Conversions refer to any decision you want to influence an audience member to make, whether that is opening an email, clicking on an advertisement, or engaging with your social media accounts. Though converting a lead or prospect into a paying customer is the most common reference, sales are not the only type of conversion a marketing campaign is after. Keep your goals and key performance indicators (KPIs) in mind to identify what conversions are most important to you in a given campaign.

A marketing analysis should also shed light on the needs of your audience, including how your products or services meet those needs and how they do not. The more demographic information you can gather on your audience, the better you can segment your audience and target each segment with the type of content most likely to drive conversions.

“The more a brand knows about the people that are interested and not interested in a product or service, the greater opportunity for conversion,” Poulsen said. “It also ensures that an organization is investing in the right type of customers. Finally, it allows the marketer to talk to the consumer on their terms and how they want.”

Once you understand your audience, you can tailor your brand messaging and various marketing campaigns to drive engagement. A marketing analysis examines your audience’s current engagement with your brand through metrics like your email campaign’s open rate , click-through rate and bounce rate.

Your analysis should also consider how users behave after engaging with your content. For example, when a user clicks on a paid advertisement that brings them to your landing page, what do they do next? When you understand the reasons behind these metrics, you can improve them by optimizing your marketing campaigns to intrigue wider swaths of your audience and encourage further engagement.

Industry overview and competitive landscape

Getting the lay of the land through a competitive marketing analysis of your industry is critical so you can tailor your strategy to the market. You should understand not only market growth and other industry trends, but also how you stack up against your competitors. A competitive marketing analysis allows you to understand your company’s position compared to a direct or indirect competitor. “A basic overall industry overview [includes] the size, trends and projected growth,” said Anthony Money, a digital marketing specialist at Qualified Online Traffic. “This is focused more on the industry as a whole and not your business or your customers. Is the industry growing, higher/lower demand, more/fewer competitors, new tech/products/services, etc.?”

When you conduct a marketing analysis, give yourself time to gather sufficient data on each of these points. An abridged marketing analysis often delivers skewed results, or worse, not enough data to draw meaningful conclusions.

“The most common mistake is not allowing enough time to thoroughly collect and analyze your data and findings,” said Kelly J. Waffle, managing director of the Hinge Research Institute. “Many overlook providing adequate time and thereby limit their findings. This limitation so early in the overall process affects every future strategy and decision that is made.”

How to write a marketing analysis

Writing a marketing analysis is an important part of synthesizing the data you gathered into a reviewable format. The way you write your marketing analysis will determine how useful the results are to refining your marketing strategies. Ideally, a marketing analysis should include a clear description of the data points you researched, the results of your analysis, and ways you can positively influence your KPIs in the future.

“A marketing plan should include a pro forma,” Poulsen said. “In the pro forma, the organization identifies the audience being targeted, timing, amount of marketing campaigns (email, direct mail, digital) and the investment that will be made in the program.”

Additionally, a marketing analysis should include specific KPIs to measure the success or failure of certain strategies. For example, if you run an email marketing campaign with the goal to increase engagement, your KPIs could be the open rate, click-through rate and bounce rate. Similarly, if you are reviewing a content marketing campaign, your KPIs might include rankings on page one of Google, user time on page and click-through rates on embedded calls to action.

Set benchmark goals for each KPI and then track them during your various marketing campaigns. A marketing analysis will reveal how effective these campaigns were in achieving your goals. Remember, not every goal needs to tie directly to sales — sometimes brand awareness and engagement are victories that drive a prospect closer to becoming a customer.

“This will help to determine if the campaign was successful or did not deliver on the projected expectations,” Poulsen said. “Marketing analysis needs to not only report on the results, but [on] why it worked or did not work.”

What is the importance of a marketing analysis in a business plan?

The biggest benefit of a marketing analysis is that it shows you how to spend your marketing budget in a more targeted, effective manner. You’ll gain a better understanding of where your audience is active and what type of messaging resonates with them. By establishing this information through a comprehensive analysis of your audience — as well as any shortcomings of your current marketing efforts — you’ll understand how to improve your marketing ROI .

“It has been said that a big portion of marketing is wasted due to not understanding how well it performs and why,” Poulsen said. “The more analysis and insights obtained, the better the opportunity for future funding of marketing vision, and higher return on investment.”

What insights can a marketing analysis provide?

A marketing analysis should help you optimize your future marketing efforts by understanding what works and what doesn’t in your current marketing campaigns. It can provide the following insights for your business.

Understanding ROI

Every facet of a marketing analysis ties back into return on investment. For every dollar you spend on marketing, how many sales are you driving? Though not every marketing activity is directly tied to sales, it should all relate to bringing new leads into your conversion funnel and pushing existing leads closer to a purchasing decision.

“It is essential to determine the ROI of a campaign,” Poulsen said. “The most important ROI to a company is conversion. This is determined by people that participated in a campaign by a pull list, receiving or responding to a message over a channel (direct mail, email, social, digital, media), and determining if the strategy is resulting in an expected conversion or outcome, whether they be leads, sales or other criteria.”

Understanding your audience

Your knowledge of your audience — the channels they are most active on, their likes and dislikes, and their pain points — should drive your marketing efforts. A marketing analysis can help you better understand your audience and the demographics of its various segments, allowing you to target customers with more effective brand messaging on the right channels.

“In simple words, you want to describe who your ideal client is,” said Money. “What is his/her demographic? What are their interests, their wants, hopes, needs [and] dreams? Where are they (geographically and online through groups, websites, etc.)? This is how we are able to strategically target them.”

Identifying new markets

Your marketing analysis should also identify potential members of your audience you haven’t previously considered. These could be people who need products or services tangentially related to the ones you already offer, or who need your existing products and services for a use case you hadn’t thought to market. This could provide an opportunity for upselling and cross-selling your products or services. In addition to identifying new markets, a marketing analysis should determine the potential growth rate of the market.

Identifying SEO opportunities

As part of your marketing analysis, audit your website and content to identify areas you could optimize for search engines . Search engine optimization, or SEO, is the process of ensuring the content of your website and social media platforms encourages search engines to crawl your pages and rank them highly in search results. Ideally, your website will appear on page one of the Google results when your audience searches for keywords and phrases associated with your brand, products and services.

Identifying paid ad opportunities

A marketing analysis should include a review of your paid advertisement campaigns, such as pay-per-click ads. You should not only look for new ways to expand your reach with paid ads, but also focus on what you are currently doing and how effective it has been. This can reveal opportunities to optimize your paid advertisement spend by tailoring ads to your target audience’s interests, boosting engagement and conversions.

“The marketing analysis should be tied to the overall strategic behavior of your organization,” said Waffle. “Also, if you are in an emerging market, you may have to conduct a marketing analysis once a year. If you are in a mature market, you may conduct your marketing analysis every two to three years.”

Depending on your business’s circumstances, you might want to run a marketing analysis on an impromptu basis, especially if you are considering expanding your offerings.

“If you are rolling out new products or services, you will want to refresh your marketing analysis,” Waffle said. “If you are trying to reach a new market or audience, you will want to conduct a new marketing analysis.”

If you’ve never conducted a marketing analysis before, now is the time. A comprehensive and thorough marketing analysis can help you spend your marketing budget in a way that will engage more of your audience and boost conversions. Whether you are launching a new marketing campaign, releasing a new product, testing new features or trying to optimize your marketing efforts, a marketing analysis is a must if you want to increase your ROI.

Mike Berner contributed to this article. ​​Source interviews were conducted for a previous version of this article.

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How to Write and Conduct a Market Analysis

3 min. read

Updated January 3, 2024

A market is the total sum of prospective buyers, individuals, or organizations that are willing and able to purchase a business’s potential offering. A market analysis is a detailed assessment of the market you intend to enter. It provides insight into the size and value of the market, potential customer segments, and their buying patterns.

In this section, we’ll be covering what information to include in your business plan after completing your research. If you’re struggling with the research itself, you should check out our market research resources for step-by-step guidance.

• How to write your market analysis

The information featured in your market analysis should focus on firmly defining who your customers are. Here are the two steps you need to take:

Define your target market

Finding your target market requires segmentation based on demographic and psychographic information until you reach the ideal customer. You need to address who they are and how you identified them.

Target market examples

A target market analysis is a key part of any business plan. Let’s walk you through some examples.

Determine your market size

Identifying your potential customers isn’t enough. You also need to prove that the size of the market can support your business. To do this, it’s helpful to define what’s available, serviceable, and can be obtained.

Optional information to include

The main purpose of the market analysis is to show who your customers are. While defining your target market may be enough, it can be helpful to include some of the following supporting details.

Show that you know your industry

Before starting a business, you should know the state of your industry and where it’s headed. This includes industry metrics you’ve collected, any barriers to entry, emerging trends, or common success factors.

Write a customer analysis

Conducting a customer analysis provides additional depth to your target audience. You’ll know them better and go beyond just segmentation.

Use a customer persona to describe your customers

It can be difficult for you, your employees, and potential investors to visualize who your customers are based solely on data. Creating a customer persona can bring them to life and support your target market choice.

• Why conduct a market analysis?

Conducting any sort of in-depth research can be a time-intensive process. However, the benefits far outweigh the investment—so much so that it’s recommended that you revisit your market analysis at least once a year in order to stay on top of emerging trends or changes in the market.

As part of your business plan, it demonstrates that you have a firm understanding of your customers. Here are the other benefits gained by completing a market analysis:

Reduce risk

If you really understand your potential customers and market conditions, you’ll have a better chance of developing a viable product or service. It also helps you explore if your idea will work or not. If you determine that the market size can’t sustain your business, there are too many barriers, high starting costs, intense competition, or some other factor that would lead to a higher chance of failure—you can pivot and avoid wasting your hard-earned time and money.

Better position your business

Researching the market landscape will help you strategically position your business. This may be done through pricing, specific features, production/distribution, or any other method to differentiate your business and make it more attractive to your target audience.

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Verify product/market fit

Part of positioning your business is determining if there is a sustainable market for your business. This starts with segmenting and identifying your ideal customers. It then involves a process of gathering feedback, gauging interest, and finding any sort of demonstrable traction. To learn more about finding product market fit, check out the market research section of our Starting a Business Guide.

Inform investors

Research is not only valuable for informing you as a business owner but in convincing investors and lenders that your idea is worth funding. In many ways, the fact that you spent time pulling together viable information is just as important as the information itself. It shows that you care about finding success as a business owner and are willing to put in the work, even at this early stage.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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The Ultimate Guide to Market Analysis for Your Business Plan

When creating a business plan , conducting a thorough market analysis is essential to understand your target market, industry trends, and the competitive landscape. A well-executed market analysis for a business plan provides the foundation for informed decision-making, helping you develop strategies that capitalize on opportunities and mitigate potential risks.

In this article, we'll explore the importance of market analysis in a business plan, outline the steps for conducting one effectively, and discuss best practices for ensuring that your analysis is comprehensive and insightful.

What Is Market Analysis for a Business Plan?

Market analysis is a critical component of a business plan that involves gathering and interpreting data about your target market, industry trends, and competitors. It provides a clear picture of the landscape in which your business will operate, enabling you to make data-driven decisions and develop strategies that align with your business plan objectives.

A comprehensive market analysis for a business plan should include:

• Target market identification and segmentation
• Industry trends and growth forecasts
• Competitor analysis
• Market size and potential market share
• Pricing and positioning strategies

Why Do You Need to Conduct Market Analysis for a Business Plan?

Conducting market analysis is critical to the development of a business plan for several reasons:

• Feasibility assessment: Market analysis helps determine whether your business idea is viable and likely to succeed in the current market environment,, which is essential to creating a realistic business plan.
• Informed decision-making: By providing insights into your target market, industry trends, and competition, market analysis enables you to make data-driven decisions that support your business plan's objectives.
• Investor confidence: Including a thorough market analysis in your business plan demonstrates to potential investors that you have a deep understanding of your industry and target market, increasing their confidence in your ability to execute your plan successfully.
• Competitive advantage: Market analysis helps identify your competitors' strengths, weaknesses, and market positioning, allowing you to develop strategies that differentiate your business and strengthen your business plan.

Steps to Conduct Market Analysis for a Business Plan

• Define your target market: Identify your ideal customer and segment your target market based on shared characteristics to ensure your business plan is tailored to their needs and preferences.
• Analyze industry trends: Research your industry's current state, growth projections, and emerging trends to identify factors that may impact your business plan, such as technological advancements or regulatory changes.
• Conduct competitor analysis: Evaluate your competitors' market share, strengths, weaknesses, and unique selling propositions to identify opportunities for differentiation in your business plan.
• Determine market size and potential: Estimate the total size of your target market and your potential market share to set realistic goals and projections in your business plan.
• Develop pricing and positioning strategies: Based on the results of your market analysis, determine the optimal pricing and positioning for your products or services to align with the goals of your business plan.

Best Practices for Effective Market Analysis in a Business Plan

• Use multiple data sources: Gather data from a variety of sources to ensure a comprehensive and balanced analysis that supports your business plan.
• Conduct primary research: Engage directly with potential customers to gain valuable insights that can inform your business plan's strategies and tactics.
• Stay up-to-date: Regularly monitor industry trends, competitor activities, and market conditions to ensure your business plan remains relevant and accurate.
• Collaborate with experts: Consult with industry experts, mentors, or business advisors to gain valuable insights and validate your findings for your business plan.
• Present findings clearly: Use visuals, such as charts, graphs, and infographics, to present your market analysis findings in a clear and engaging manner within your business plan.

By conducting a comprehensive market analysis for your business plan, you'll gain a deep understanding of your target market, industry landscape, and competitive environment. This knowledge will inform your business plan's strategies, guide your decision-making, and ultimately increase your chances of success.

Remember to regularly review and update your market analysis as your business grows and market conditions evolve to ensure that your business plan remains adaptable and well-positioned for long-term success.

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Market Analysis

Connecting the Dots, Quantifying Technology Trends & Measuring Disruption

How to do a market analysis for a business plan

A market analysis is an important part of a business plan because it helps you understand the market in which your business will operate. It involves researching and analyzing the target market, competitors, and industry trends in order to identify opportunities and challenges. Here are the steps you can follow to do a market analysis for a business plan:

Define your target market: The first step in a market analysis is to identify the specific group of customers that you will be targeting with your products or services. This may include demographics (age, gender, income, education level, etc.), geographic location, and other characteristics that are relevant to your business.

Research the market size: Next, you’ll need to determine the size of the market you are targeting. This will help you understand the potential demand for your products or services and determine whether the market is large enough to support your business. You can use various sources of data, such as industry reports and government statistics, to estimate the size of the market.

Analyze competitors: It’s important to understand who your competitors are and what they are offering. This will help you identify unique selling points for your business and determine how you can differentiate yourself from your competitors. You can research your competitors online, ask customers about their preferences, and even visit their stores or websites to get a sense of their product offerings and pricing.

Assess industry trends: Understanding industry trends can help you anticipate changes in the market and position your business to take advantage of them. Look for trends in areas such as technology, consumer behavior, and regulatory changes that may affect your business.

Determine your target market’s needs and preferences: To effectively market your products or services, you need to understand what your target customers need and want. You can gather this information through customer surveys, focus groups, and other market research methods.

Determine your target market’s purchasing power: It’s important to understand how much your target customers are willing and able to pay for your products or services. This will help you determine your pricing strategy and determine whether there is enough demand at your target price point.

Analyze your target market’s attitudes and behaviors: Understanding your target customers’ attitudes and behaviors can help you tailor your marketing efforts to their preferences. For example, if your target market values sustainability, you may want to highlight the eco-friendliness of your products in your marketing materials.

By conducting a thorough market analysis, you can gain a better understanding of the market in which your business will operate and make informed decisions about your marketing, pricing, and product development strategies.

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A market analysis can help you identify how to better position your business to be competitive and serve your customers.

Table of Contents

A market analysis is a thorough assessment of a market within a specific industry. These analyses have many benefits, such as reducing risk for your business and better informing your business decisions. A market analysis can be a time-intensive process, but it is straightforward and easy to do on your own in seven steps.

To perform a market analysis for your business, follow the steps outlined in this guide.

What does a market analysis include?

In a market analysis, you will study the dynamics of your market, such as volume and value, potential customer segments , buying patterns, competition, and other important factors. A thorough marketing analysis should answer the following questions:

• Who are my potential customers?
• What are my customers’ buying habits?
• How large is my target market ?
• How much are customers willing to pay for my product?
• Who are my main competitors?
• What are my competitors’ strengths and weaknesses ?

What are the benefits of running a marketing analysis?

A marketing analysis can reduce risk, identify emerging trends, and help project revenue. You can use a marketing analysis at several stages of your business, and it can even be beneficial to conduct one every year to keep up to date with any major changes in the market.

A detailed market analysis will usually be part of your business plan , since it gives you a greater understanding of your audience and competition. This will help you build a more targeted marketing strategy.

These are some other major benefits of conducting a market analysis:

• Risk reduction: Knowing your market can reduce risks in your business, since you’ll have an understanding of major market trends, the main players in your industry, and what it takes to be successful, all of which will inform your business decisions. To help you further protect your business, you can also conduct a SWOT analysis , which identifies the strengths, weaknesses, opportunities and threats for your business.
• Targeted products or services: You are in a much better position to serve your customers when you have a firm grasp on what they are looking for from you. When you know who your customers are, you can use that information to tailor your business’s offerings to your customers’ needs.
• Emerging trends: Staying ahead in business is often about being the first to spot a new opportunity or trend, and using a marketing analysis to stay on top of industry trends is a great way to position yourself to take advantage of this information.
• Revenue projections: A market forecast is a key component of most marketing analyses, as it projects the future numbers, characteristics and trends in your target market. This gives you an idea of the profits you can expect, allowing you to adjust your business plan and budget accordingly.
• Evaluation benchmarks: It can be difficult to gauge your business’s success outside of pure numbers. A market analysis provides benchmarks or key performance indicators (KPIs) against which you can judge your company and how well you are doing compared to others in your industry.
• Context for past mistakes: Marketing analytics can explain your business’s past mistakes or industry anomalies. For example, in-depth analytics can explain what impacted the sale of a specific product, or why a certain metric performed the way it did. This can help you avoid making those mistakes again or experiencing similar anomalies, because you’ll be able to analyze and describe what went wrong and why.
• Marketing optimization: This is where an annual marketing analysis comes in handy – regular analysis can inform your ongoing marketing efforts and show you which aspects of your marketing need work, and which are performing well in comparison to the other companies in your industry.

What are the drawbacks of running a marketing analysis?

The below drawbacks of running a market analysis pertain less to the method itself than the resources it requires.

• Market analysis can be expensive. If you’re not as familiar with marketing concepts such as market volume and customer segmentation, you might want to outsource your market analysis. Doing so can be great for your analysis’s quality, but it can also leave a big dent in your budget. Narrow your market analysis to a certain group – perhaps current customers – to lower your costs.
• Market analysis can be time-consuming. Market analysis can take precious time away from more directly business-related tasks. You can analyze one area at a time – say, buying patterns or competition – to free up your day-to-day schedule.
• Market analysis can require extra staff. Some larger companies retain in-house market analysis staff, and you can follow their lead. Doing so, though, comes with all the usual costs of hiring a new employee . The question then becomes: Do you conduct your market analysis yourself, outsource it, or hire in-house? The more expensive options can often yield more meaningful insights.
• Market analysis can be narrow. The most successful market analyses use actual customer feedback, which analysts often get through customer surveys. These surveys may reach only a portion of your entire customer base, leading to an inaccurate sample size. The result is that market analysis may not fully detail your customers and what you should know about them.

Market analysis vs. conjoint analysis vs. sentiment analysis

Where market analysis is broad and comprehensive, conjoint analysis focuses on how customers value what you offer. Surveys are often the backbone of conjoint analysis – they’re a great way for customers to share what drives their purchases. Product testing is an especially common application of conjoint analysis. This method can yield insights into pricing and product features and configurations.

Sentiment analysis goes beyond number-driven market and conjoint analysis to identify how customers qualitatively feel about your offerings. It can show you what customers are happy and unhappy about with your offerings or buying process. You can also wade into deeper emotional territory such as anger, urgency and intention, or you can dig up descriptive feedback. It’s a great tool to use alongside market analysis, whereas conjoint analysis is all but included in market analysis.

How to conduct a market analysis

While conducting a marketing analysis is not a complicated process, it does take a lot of dedicated research, so be prepared to devote significant time to the process.

These are the seven steps of conducting a market analysis:

1. Determine your purpose.

There are many reasons you may be conducting a market analysis, such as to gauge your competition or to understand a new market. Whatever your reason, it’s important to define it right away to keep you on track throughout the process. Start by deciding whether your purpose is internal – like improving your cash flow or business operations – or external, like seeking a business loan. Your purpose will dictate the type and amount of research you will do.

2. Research the state of the industry.

Map a detailed outline of the current state of your industry. Include where the industry seems to be heading, using metrics such as size, trends and projected growth, with plenty of data to support your findings. You can also conduct a comparative market analysis to help you find your competitive advantage within your specific market.

3. Identify your target customer.

Not everyone in the world will be your customer , and it would be a waste of your time to try to get everyone interested in your product. Instead, use a target market analysis to decide who is most likely to want your product and focus your efforts there. You want to understand your market size, who your customers are, where they come from, and what might influence their buying decisions. To do so, look at demographic factors like these:

During your research, you might consider creating a customer profile or persona that reflects your ideal customer to serve as a model for your marketing efforts.

4. Understand your competition.

To be successful, you need a good understanding of your competitors, including their market saturation, what they do differently than you, and their strengths, weaknesses and advantages in the market. Start by listing all your main competitors, then go through that list and conduct a SWOT analysis of each competitor. What does that business have that you don’t? What would lead a customer to choose that business over yours? Put yourself in the customer’s shoes.

Then, rank your list of competitors from most to least threatening, and decide on a timeline to conduct regular SWOT analyses on your most threatening competitors.

5. Gather additional data.

When conducting marketing analyses, information is your friend – you can never have too much data. It is important that the data you use is credible and factual, so be cautious of where you get your numbers. These are some reputable business data resources:

• U.S. Bureau of Labor Statistics
• U.S. Census Bureau
• State and local commerce sites
• Trade journals
• Your own SWOT analyses
• Market surveys or questionnaires

6. Analyze your data.

After you collect all the information you can and verify that it is accurate, you need to analyze the data to make it useful to you. Organize your research into sections that make sense to you, but try to include ones for your purpose, target market and competition.

These are the main elements your research should include:

• An overview of your industry’s size and growth rate
• Your business’s projected market share percentage
• An industry outlook
• Customer buying trends
• Your forecasted growth
• How much customers are willing to pay for your product or service

7. Put your analysis to work.

Once you’ve created a market analysis, it’s time to actually make it work for you. Internally, look for where you can use your research and findings to improve your business. Have you seen other businesses doing things that you’d like to implement in your own organization? Are there ways to make your marketing strategies more effective?

If you conducted your analysis for external purposes, organize your research and data into an easily readable and digestible document to make it easier to share with lenders.

Retain all of your information and research for your next analysis, and consider making a calendar reminder each year so that you stay on top of your market.

Making market analysis easy

If you have the time to conduct a market analysis yourself, go for it – this guide will help. If you don’t have the time, hiring an in-house expert or outsourcing your analysis is often worth the cost. Your analysis will help you figure out who to target and how – and that’s a huge part of business success.

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A Guide to Market Analysis

As a marketing professional, understanding market analysis is essential for developing effective marketing plans. Market analysis provides valuable insights into consumer behavior, market trends, and competitive landscape, enabling businesses to make informed decisions and develop successful strategies.

In this guide, I will delve into the various aspects of market analysis, from its importance and types to practical examples and best practices, equipping you with the knowledge to master the art of market analysis and implement it effectively in your marketing plans.

Understanding Market Analysis

The importance of market analysis in marketing plans, demographic and psychographic analysis, market segmentation analysis, swot analysis (strengths, weaknesses, opportunities, threats), trend analysis, conducting a comparative market analysis, market analysis example: launching a new product, case study: nike’s market analysis strategy, identifying key competitors, assessing competitor strengths and weaknesses, benchmarking performance and market share, leveraging competitive insights for strategic differentiation, market research platforms, analytics software, competitive intelligence tools.

Market analysis involves a systematic examination of market dynamics, including consumer preferences, purchasing behavior, and industry trends.

By analyzing market data, businesses can gain a deeper understanding of their target audience, identify opportunities for growth , and anticipate potential challenges.

Market analysis encompasses a wide array of factors, ranging from demographic and psychographic segmentation to economic indicators and market size . It involves studying consumer demographics, such as age, gender, income levels, and lifestyle preferences, to create detailed buyer personas.

Additionally, market analysis delves into the economic factors that influence purchasing power and consumer spending patterns, providing invaluable insights for market segmentation and targeting. Understanding the nuances of market analysis empowers marketers to craft tailored marketing campaigns that effectively resonate with their target audience, driving engagement and sales.

In essence, market analysis serves as the foundation for informed decision-making in marketing. By dissecting market data and trends, businesses can identify emerging opportunities, assess market demand, and evaluate the competitive landscape.

The significance of market analysis in marketing plans cannot be overstated. It serves as the linchpin of strategic planning, guiding businesses in making data-driven decisions and formulating effective marketing strategies.

Market analysis provides a comprehensive view of the market landscape, shedding light on customer needs, competitor positioning, and industry trends. This invaluable information empowers businesses to position their products or services effectively, identify niche markets, and capitalize on emerging trends, thereby gaining a competitive edge in their respective industries.

Moreover, market analysis plays a pivotal role in mitigating risks and uncertainties associated with market dynamics. By conducting a thorough analysis of market trends, consumer behavior, and competitive forces, businesses can anticipate market shifts and proactively adapt their marketing strategies.

This proactive approach not only minimizes potential threats but also enables businesses to seize opportunities, stay ahead of industry trends, and maintain relevance in the market.

Types of Market Analysis

Demographic and psychographic analysis entails examining the characteristics and traits of the target audience to create detailed buyer personas.

Demographic factors such as age, gender, income levels, education, and occupation play a crucial role in shaping consumer behavior and purchasing decisions. Psychographic analysis delves into the lifestyle, values, interests, and attitudes of consumers, providing deeper insights into their motivations and preferences.

By leveraging demographic and psychographic analysis, businesses can tailor their marketing messages and product offerings to resonate with the specific needs and desires of their target audience, thereby enhancing customer engagement and loyalty.

Market segmentation analysis involves dividing the market into distinct segments based on shared characteristics, needs, or behaviors. By categorizing consumers into homogeneous groups, businesses can tailor their marketing strategies to address the unique needs of each segment, enhancing the relevance and effectiveness of their marketing efforts.

Whether it involves geographic, behavioral, or psychographic segmentation, market segmentation analysis enables businesses to allocate resources efficiently, target specific customer segments, and deliver personalized marketing experiences that drive customer acquisition and retention.

SWOT analysis is a strategic framework that evaluates the internal strengths and weaknesses of a business, along with the external opportunities and threats present in the market environment.

By conducting a comprehensive SWOT analysis, businesses can gain a holistic understanding of their competitive position, assess market opportunities, and identify potential challenges or risks. This strategic insight is instrumental in formulating marketing strategies that capitalize on strengths, address weaknesses, exploit opportunities, and mitigate threats, thereby positioning the business for sustainable growth and competitive advantage .

Trend analysis involves examining historical and emerging market trends to identify patterns, shifts, and opportunities within the market landscape. By analyzing consumer behavior, industry developments, and technological advancements, businesses can anticipate future market trends and align their marketing strategies to capitalize on emerging opportunities.

Trend analysis empowers businesses to stay ahead of the curve, innovate proactively, and position their products or services in alignment with evolving consumer preferences, ultimately driving market relevance and competitive differentiation .

A comparative market analysis is a crucial component of market analysis, providing valuable insights into competitive positioning, market trends, and consumer preferences.

This strategic analysis involves comparing the performance, strategies, and offerings of competitors within the same industry, enabling businesses to benchmark their own performance and identify areas for improvement.

Conducting a comparative market analysis entails a systematic evaluation of competitor strengths and weaknesses, market share , pricing strategies, distribution channels, and marketing tactics, offering a comprehensive view of the competitive landscape and informing strategic decision-making.

When conducting a comparative market analysis, it is imperative to identify direct and indirect competitors operating within the same market space. Direct competitors are businesses that offer similar products or services to the same target audience, posing a direct threat to market share and customer acquisition.

Indirect competitors, on the other hand, may offer substitute products or services that cater to overlapping customer needs and preferences. By analyzing both direct and indirect competitors, businesses can gain a holistic understanding of the competitive forces at play and formulate strategies to differentiate their offerings and capture market share.

A comparative market analysis involves assessing competitor positioning, brand perception, and unique selling propositions (USPs) to identify opportunities for differentiation and competitive advantage. By understanding how competitors position their products or services, businesses can carve out their own distinct value proposition and develop marketing strategies that resonate with their target audience.

Additionally, analyzing competitor marketing tactics, digital presence, and customer engagement strategies provides valuable insights for refining and optimizing your own marketing initiatives, ensuring relevance and competitiveness in the market.

Market Analysis Examples

Suppose a consumer goods company is planning to launch a new line of organic skincare products targeted at environmentally conscious consumers. Before introducing the new product line to the market, the company conducts a comprehensive market analysis to gain insights into consumer preferences, competitive landscape, and market trends.

The market analysis reveals a growing demand for sustainable and natural skincare products, with an increasing number of consumers seeking eco-friendly alternatives. By leveraging demographic and psychographic analysis, the company identifies the specific characteristics and preferences of its target audience, enabling them to tailor the product offerings and marketing messages to align with consumer values and lifestyle choices.

The market analysis includes a comparative analysis of existing organic skincare brands, assessing their product offerings, pricing strategies, and brand positioning. This competitive market analysis unveils opportunities for differentiation, enabling the company to position its new product line as a premium, sustainably sourced skincare solution that resonates with environmentally conscious consumers.

Armed with these insights, the company develops a targeted marketing plan that leverages digital channels, influencer partnerships, and eco-friendly branding to engage its target audience and drive product awareness.

As a result of the strategic market analysis, the company successfully launches its new product line, capturing a significant share of the growing market segment and establishing itself as a leading player in the organic skincare industry.

Nike , a global leader in athletic footwear and apparel, exemplifies the power of strategic market analysis in driving brand success and market leadership. Through meticulous market analysis, Nike continuously gathers insights into consumer trends, competitive landscape, and emerging market segments, enabling the company to innovate and adapt its marketing strategies to stay ahead of industry trends.

Nike’s market analysis encompasses demographic and psychographic profiling of its target audience, trend analysis to anticipate shifts in consumer preferences, and competitive market analysis to benchmark its performance against rival brands.

Nike’s market analysis extends to global market trends, enabling the company to tailor its product offerings and marketing messages to resonate with diverse consumer segments worldwide. By leveraging market analysis, Nike identifies emerging opportunities in the athleisure market, capitalizes on cultural trends, and cultivates a brand image that transcends geographical boundaries.

This strategic approach to market analysis has propelled Nike to the forefront of the athletic apparel industry, solidifying its market leadership and shaping consumer preferences through innovative marketing campaigns and product innovations.

By leveraging strategic market analysis, businesses can identify untapped opportunities, mitigate market risks, and position their brands for sustainable growth and market leadership.

Competitor Analysis in Market Analysis

Competitor analysis is an integral component of market analysis, providing businesses with insights into the strategies, strengths, and weaknesses of rival brands within the same industry.

By conducting a comprehensive competitor analysis, businesses can gain a deeper understanding of the competitive landscape, benchmark their performance, and devise strategies to differentiate their offerings effectively.

The first step in competitor analysis involves identifying the key players within the industry landscape. This entails researching and profiling direct and indirect competitors that cater to the same target audience or offer similar products or services.

Direct competitors pose a direct threat to market share and customer acquisition, while indirect competitors may offer substitute solutions that address overlapping customer needs.

By identifying and analyzing both types of competitors, businesses can gain a comprehensive view of the competitive forces at play and strategize accordingly to differentiate their offerings and capture market share.

Once the key competitors have been identified, businesses must conduct a thorough assessment of their strengths and weaknesses. This involves analyzing competitor product offerings, pricing strategies, distribution channels, brand positioning, and customer engagement tactics.

By understanding the strengths and weaknesses of rival brands, businesses can identify opportunities for differentiation and develop marketing strategies that capitalize on their own unique value propositions.

Additionally, assessing competitor weaknesses enables businesses to identify potential areas for improvement and formulate strategies to address customer pain points or unmet needs in the market.

Competitor analysis also involves benchmarking the performance and market share of rival brands to gauge their competitive positioning.

By comparing key performance indicators such as sales figures, market penetration, and customer satisfaction metrics, businesses can assess their relative standing within the market and identify opportunities to gain market share.

This competitive benchmarking provides valuable insights for refining marketing strategies, optimizing product offerings, and enhancing customer engagement to bolster competitive advantage.

Ultimately, competitor analysis equips businesses with actionable insights to strategically differentiate their offerings and outmaneuver rival brands. By leveraging competitive insights, businesses can refine their marketing messages, enhance product features, and optimize pricing strategies to resonate with their target audience and stand out in the competitive landscape.

Competitor analysis enables businesses to anticipate competitive moves, proactively address market challenges, and position themselves as industry leaders through innovative marketing initiatives and customer-centric strategies.

Tools for Effective Market Analysis

In the digital age, a plethora of tools and resources are available to facilitate effective market analysis, enabling businesses to gather, analyze, and interpret market data with precision and efficiency.

These tools range from market research platforms and analytics software to competitive intelligence tools and consumer behavior tracking solutions.

Leveraging the right tools for market analysis is instrumental in gaining actionable insights, identifying market trends, and formulating data-driven marketing strategies. Let’s explore some key tools for effective market analysis and their respective applications in shaping marketing plans.

Market research platforms such as Nielsen , Euromonitor , and Mintel provide comprehensive market data, consumer insights, and industry reports to inform strategic decision-making. These platforms offer in-depth market analyses, demographic profiling, and trend forecasts , enabling businesses to stay abreast of market dynamics and consumer preferences.

By leveraging market research platforms, businesses can access valuable data on market size, growth projections, and competitive landscape, empowering them to make informed marketing decisions and capitalize on emerging opportunities.

In the realm of digital marketing, analytics software plays a pivotal role in tracking consumer behavior, measuring campaign performance, and deriving actionable insights from marketing initiatives.

Tools such as Google Analytics , Adobe Analytics, and HubSpot provide businesses with valuable metrics on website traffic, user engagement, and conversion rates, enabling them to assess the effectiveness of their marketing efforts and optimize their digital presence.

By harnessing analytics software, businesses can gain real-time visibility into consumer interactions, identify marketing trends, and refine their marketing strategies to drive meaningful results.

Competitive intelligence tools such as SEMrush , Ahrefs , and SimilarWeb offer businesses unparalleled insights into competitor strategies, keyword rankings, and digital presence.

These tools enable businesses to conduct thorough competitor analysis, benchmark their performance against rival brands, and identify opportunities for strategic differentiation.

By leveraging competitive intelligence tools, businesses can uncover competitor keywords, assess backlink profiles, and track market share, empowering them to refine their SEO strategies, enhance content marketing efforts, and gain a competitive edge in the digital landscape.

About The Author

Geoff Fripp

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Discover the Best Tools for Business Plans

Learn from the business planning experts, resources to help you get ahead, market analysis, table of contents.

The Market Analysis section of a business plan is crucial, providing detailed insights into the business environment. It helps entrepreneurs understand their industry, target markets , competition, and the broader economic landscape. This analysis is essential for informed decision-making, strategic planning, risk mitigation, and building investor or banker confidence.

However, before diving into the details of market analysis, it’s imperative for entrepreneurs to have a profound understanding of their target customer.

This foundational step is crucial as it shapes the entire market analysis process, ensuring that the insights gained are relevant and actionable for your specific business idea.

Divergent Paths to Understanding Your Customer

• Model-Based Planning®:  Ideal for experienced entrepreneurs in well-defined industries, Model-Based Planning® offers a structured, model-specific framework. It includes pre-developed customer profiles that guide focused market analysis.
• Pre-Vision Interviews:  Suited for entrepreneurs at the idea phase or those entering new markets, Pre-Vision Interviews establish deep customer understanding. This approach is crucial for businesses that aim to be first-movers or fast-followers and is often vital for those seeking investor capital. For entrepreneurs at the idea stage or entering new markets, delve into the detailed customer insights with Pre-Vision Interviews by   clicking here .

With a clear understanding of your customers, through either Model-Based Planning® or Pre-Vision Interviews , you’re now ready to delve into the various components of Market Analysis, as detailed in the following sections of this webpage.

Components of Market Analysis

Market analysis summary.

• Role as a Synthesis of Findings:  The Market Analysis Summary encapsulates the key findings from your market research . It serves as an executive overview, providing a snapshot of the market’s health, potential, and challenges. This summary should highlight significant points such as market size, growth projections, key trends, and competitive landscape.
• Writing it Last:  It’s recommended to write the summary after completing all other sections of the market analysis. This approach ensures that the summary accurately reflects the comprehensive understanding gained from detailed research.

Detailed Market Analysis

• Understanding Market Size, Growth Rate, and Trends:  Assess the size of the market, its growth rate over time, and key trends affecting it. This includes demographic shifts, technological advancements, and changes in consumer behavior. Use reliable data sources and forecasting methods to provide a well-rounded view of the market.
• Identifying Target Market Segments:  Define the specific customer segments within the market that your business will target. Consider factors like demographics , psychographics, geographic location, and buying behaviors. Tailor your marketing strategies to these segments to maximize impact and efficiency.

Industry Analysis

• Current State of the Industry:  Provide an overview of the industry, including its history, current status, and major players. Discuss the industry’s regulatory environment and any recent changes that might affect the business.
• Industry Structure and Dynamics:  Analyze the industry’s structure, including its supply chain , distribution channels , and major competitors. Evaluate the industry’s competitive dynamics, market entry barriers, and typical profit margins.

Trends Analysis

• Identifying and Evaluating Trends:  Identify current and emerging trends within the industry and market. These could be technological advancements, changes in consumer preferences, or shifts in regulatory policies. Analyze how these trends will impact the industry and your business specifically.
• Impact of Trends on Industry and Target Market:  Discuss the potential opportunities and threats these trends present. Plan strategies to leverage opportunities and mitigate risks associated with these trends.

Competitor Analysis

• Identifying Key Competitors:  List the major competitors in your market, focusing on those directly competing with your business. Assess their market share, strengths, weaknesses, and strategic positioning.
• Assessing Competitors’ Strengths, Weaknesses, and Strategies:  Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) for each key competitor. Understand their strategies and how they have been successful or fallen short in the market.

Utilizing Research Tools in Market Analysis

Role of ibis world, esri, and statista in market research.

• IBIS World:  IBIS World is renowned for its comprehensive collection of industry reports and business environment profiles. It offers detailed insights into market conditions, industry trends, and competitive landscapes. These reports are pivotal for understanding industry dynamics and forecasting future market developments.
• ESRI:   ESRI , particularly through its ArcGIS platform, provides a wealth of location-based data and analytics. ESRI’s Market Potential data, for example, offers insights into consumer behavior and demand across various product and service categories. This data is instrumental in understanding geographical market trends and potential customer bases, making it invaluable for businesses seeking to target specific locations or demographics​​​​​​.
• Statista:   Statista is a leading statistics portal, offering access to data from market and opinion research institutions, as well as from business entities and government institutions. It’s a versatile tool for market analysis, providing up-to-date data on various industries, including market sizes, trends, and forecasts.

Leverage These Tools for Quality Research

• Deep Dive into Industry Reports:  Utilize IBIS World for in-depth industry reports to understand your market’s size, trends, and competitive landscape.
• Geographical and Demographic Analysis:  Use ESRI’s tools to analyze market potential based on location and demographics, helping to identify where your customers are and their spending behaviors.
• Statistical Data for Market Trends:  Leverage Statista for comprehensive statistical data to support your market size estimates, trend analysis, and forecasting.

Identifying Industry-Specific Resources

• Look for sources that provide up-to-date, comprehensive, and accurate data.
• Ensure the sources are recognized and respected within the industry.
• Consider the depth of information provided; more detailed reports often offer better insights.
• Trade associations often publish detailed reports on industry trends.
• Government databases can provide reliable statistics on various industries.
• Academic journals and publications can offer in-depth analysis and forecasts.

Incorporating these tools into your market analysis process will enhance the quality of your research, providing a solid foundation for your business plan.

Conducting Competitor Analysis

Importance of personal involvement in competitor research.

Engaging in competitor research personally offers invaluable insights. It allows you to observe and understand your competitors’ strengths and weaknesses from a customer’s perspective. This direct engagement is crucial for developing strategies to differentiate and compete effectively.

Techniques for Effective Competitive Analysis

• Talk to Competitors’ Customers:  Engaging with the customers of your competitors can provide candid insights into what they value and their experiences. This feedback is often more unfiltered and honest than promotional materials or sales pitches.
• Experience Competitors’ Offerings:  Purchase and use the products or services of your competitors. This firsthand experience can reveal strengths to emulate and weaknesses to exploit in your own offerings.
• Visit Competitor Locations:  If applicable, visit their physical establishments. Observe their customer service, store layout, product presentation, and overall customer experience.
• Analyze Competitor Websites:  Review their online presence, noting their branding, communication style, customer engagement, and online services. Look for areas where they excel or lack, providing opportunities for your business to stand out.
• Examine Online Reviews:  While being cautious of potentially manipulated reviews, pay special attention to less-than-perfect ratings. Trends in these reviews can highlight areas that customers feel need improvement.
• Market Positioning:  Understand how your competitors position themselves in the market. Analyze their marketing materials, advertising strategies, and any unique selling propositions they highlight.
• Pricing Strategies:  Observe their pricing models. Are they competing on price, quality, service, or innovation? Understanding their approach can guide your own pricing strategy.
• Supplier and Partner Relationships:  Investigate their supply chain and partnerships. This might give insights into their operational efficiencies or dependencies.
• Customer Service Analysis:  Evaluate their customer service approach. Are there gaps in their customer support that your business could fill?
• Social Media Engagement:  Analyze their social media presence. How do they interact with customers online? What kind of content generates the most engagement?
• Employee Feedback:  If possible, gain insights from current or former employees about the internal workings of the competitor’s business. This can provide a unique perspective on their operations, culture, and challenges.

Outsourcing Market Analysis

When to consider outsourcing.

Outsourcing market analysis can be a strategic decision for businesses, especially when internal resources are limited or when specialized expertise is required. Consider outsourcing when:

• Lack of In-House Expertise:  If your team lacks the skills or experience in conducting in-depth market research.
• Time Constraints:  When you’re under tight timelines to develop a business plan and need to expedite the research process.
• Need for Specialized Knowledge:  Certain industries or markets may require specialized knowledge that an external expert or agency can provide.
• Objective Perspective:  Sometimes, an external perspective can provide unbiased and fresh insights that internal teams might overlook.

Business Plan Writer Reviews

For guidance on choosing the right professional or agency for outsourcing your market analysis, check out our Business Plan Writer Reviews .

Essential Qualifications of Professional Business Plan Writers

When hiring a professional for market analysis, ensure they possess the following qualifications:

• Active Subscriptions to Key Research Organizations:  Verify that they have access to essential market research tools like IBIS World, ESRI, Statista, and others relevant to your industry. Active subscriptions indicate that they can provide current and comprehensive data.
• Experience and Expertise in Diverse Industry Research:  Look for professionals with a proven track record in conducting market analysis across various industries. This experience demonstrates their ability to adapt research methods to different business models and market conditions.
• Understanding of Different Business Models:  The consultant should understand various business models, especially if your business falls into a niche or emerging market. Their ability to adapt their research methodology to fit different models is crucial.
• Analytical Skills:  They should possess strong analytical skills to interpret data effectively and provide actionable insights.
• Communication Skills:  Good communication skills are essential for them to convey complex information in an understandable manner, aligning with your business needs.
• References and Past Work Samples:  Ask for references or samples of their past work to assess the quality and relevance of their research.

Market Analysis in Your Business Plan

Conducting a thorough market analysis is an indispensable part of developing a robust business plan. It provides critical insights into the market size, growth potential, industry trends, competitive landscape, and customer preferences. This analysis forms the foundation upon which strategic decisions are made, risks are assessed, and opportunities are identified.

The insights gained from the market analysis should be seamlessly integrated into your business plan.

A well-executed market analysis can significantly enhance the effectiveness and persuasiveness of your business plan, especially in the eyes of stakeholders, bankers, or potential investors.

Up Next: Developing the Organizational Structure

Having completed the market analysis, the next step in your business planning journey is to develop the organizational structure of your business. This involves outlining the management team, defining roles and responsibilities, and establishing the operational framework of your organization. A clear and efficient organizational structure is crucial for effective management and smooth operation.

Proceed to Organizational Structure

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