Great ideas strike the mind of entrepreneurs all the time. Such ideas are only valuable if they can yield a positive result and succeed in the market. There are many instances when an idea sounds good but lacks market potential due to various reasons such as affordability of customer, the significance of customer base, or feasibility of the product. To assess the potential of an idea, the thorough market analysis should be carried out. An excellent market analysis will help the entrepreneurs to lure investors, sidestep pitfalls, and attract customers. Here are few pointers to help entrepreneurs create a detailed market analysis for a business plan:
Assess Total Market Size
The first step in performing a market analysis is to estimate the total size of the market. The key is to estimate the total market size based on the servable market, which can be limited by geography, customer segments, or product type. An entrepreneur needs to figure out the market value in terms of both volume and value, which can then be accessed through publicly available data, consultancy firms, or research reports. Such evaluation gives the investor a fair idea of the potential of the business to succeed.
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Identifying Target Market
The next step is to determine the type of customer that would be seeking out the product or service offerings. For instance, if the product is a type of online self-learning program, the target market could either be students looking for a course or working professionals seeking to enhance their skill set. It helps the business to figure out different drivers of demand and understand how to create a product wanted by the customers.
Competitive Landscape
Entrepreneurs must realize that their idea is not something new in the market. There will always be a direct competitor to the product or a remote substitute. For instance, carpooling can be a substitute for cab services or any other form of transport. A thorough study of the competitive landscape is essential to estimate the level of competition in the market, the size of the competitors, and their capabilities. An extensive study of the competitive landscape also helps in identifying areas where competitors lack to serve.
Identifying Barriers to Entry
The final step of a market analysis study deals with the evaluation of the idea’s feasibility. The key question to ask here is what prevents someone from copying the same idea and taking over the market. The business should be able to exhibit a competitive advantage that is not imitable. Numerous barriers to market entry can exist in the form of technological, financial, regulatory, market access, and marketing barriers.
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