Components of Market Analysis
A large portion of any market analysis hinges on market research done before the actual analysis. Prior research could include exploratory, secondary and primary research. Exploratory research defines the basics of the market, secondary research uses existing studies and sources such as the U.S. census for the analysis, and primary research uses tools such as surveys to gather data for the current, specific market analysis. Once all the information is gathered, it’s evaluated and split into various components for a formal market analysis.
Customer description depicts the people in the company’s market, known as the demographic or target market. Demographics could be categorized any number of ways including income, buying habits, geographic location or age. Knowing the size of the market is important because that figure is the basis for projected income and overall business goals. Market researchers may also analyze factors such as the values that drive individuals in the demographic, how they make their decisions and their purchase power.
How the target demographic perceives the business and the product is also an important aspect to market analysis. The research for this analysis is often primary and in the form of surveys and focus groups. The analysis of the gathered information lets the business know about consumer attitudes, how likely they are to buy and their brand awareness and recognition.
Market trends bring contextual relevance to the business and the market by describing current tendencies and optional progression of those tendencies. Researchers can perform something called a PEST (Political, Economic, Social and Technological) analysis to fulfill this component of a market analysis. This helps researchers describe the current environment that business functions in while bringing awareness to the cultural trends that effect the demographic.
Market projections combine the information from the customer description, perception and market trends and forecasts the future of the target market, as well as the business’ place in the future of the market. This analysis helps businesses strategize by identifying critical areas needing focus. Market projections help researchers and analysts make important recommendations to help the business succeed in the future.
Most market analyses also include a portion that describes the business’ competition with the same examination that was applied to the researching company. For example, a competitor analysis might include research into how the target demographic perceives the competitor's brand, how the current trends effect competitors or how the competition could effect the business in the future.