How To Do A Market Opportunity Analysis For A Small Business
A critical aspect of the success or failure of any marketing strategy is whether or not the elements of the marketing program are consistent with the reality of the market environment. This generates the need for a market opportunity analysis to be completed as a means to monitor and evaluate the favorable circumstances and challenges presented by factors outside of the organization’s control. Therefore, this responsibility falls on the individual or team responsible for managing an organization’s marketing initiatives. In this article, we identify the four primary actions that are required to conduct a market opportunity analysis.
GAIN AN UNDERSTANDING OF THE MARKET OPPORTUNITIES
Having an awareness of the nature and attractiveness of any opportunity requires a look at the market as a whole. For instance, asking questions like:
- What environmental trends are driving or constraining market demand, as well as the fundamental characteristics of the industry as a whole?
- What are the characteristics that are unique, only the organization in question?
- Does the company have the necessary resources (talent, knowledge, time, etc.) to get the job done?
COMPLETE A CUSTOMER ANALYSIS
At the end of the day, the main goal of marketing is to facilitate and support a final transaction with customers. This requires, amongst many other things, the evaluation of the motivations and behavior of current and potential customers. This means conducting market research to analyze the consumer behavior of current and potential customers to understand their wants and needs.
This leads to the importance of knowing how customers’ wants and needs impact the benefits gained from the product or service, and what is the criteria used to select a brand. Having an understanding of where the customer shops is critical, in addition to how they respond to specific prices, promotions, or service policies. This is the point in which an understanding of the mental path customers take when making a purchasing decision, including the psychological, social, and emotional factors that influence the process.
CONDUCT MARKET RESEARCH AND FORECASTING
It falls into marketing’s wheelhouse to collect objective information about potential customers, the satisfaction of existing customers, feedback from wholesale or retail partners, as well as the strengths and weaknesses of competitors.
When conducting market research, our team likes to utilize Porter’s 5 Forces Framework to analyze the different elements that impact markets. These include:
- The Threat Of New Competitors
- The Bargaining Power Of Buyers
- The Threat Of Substitute Products, Services, or Technology
- The Bargaining Power of Suppliers
- The Competitive Environment Among Existing Competitors
It’s important to remember that for marketers to make informed and educated decisions, research data must also be converted into estimates of sales volume or expected profit. Otherwise, it’s almost impossible to determine the expectations and return on investment that a specific marketing program can generate within particular segments and timeframes. This creates the need for marketing agencies to prove their techniques and methods for collecting and analyzing market data, as well as forecasting potential sales volumes.
EVALUATE MARKET SEGMENTATION, TARGETING, AND POSITIONING
Not all customers are created equal – meaning each prospective customer with a similar need requires the same products or services to satisfy such needs. Oftentimes, purchasing decisions are influenced by personal preferences, personal characteristics, social circumstances, etc. Although, it’s important to remember that customers who purchase the same product may be driven by different needs or benefits, and rely on different sources of information about a product, and may even purchase a product from a different distribution channel.
Thus, a critical step of developing a marketing program is to divide customers into market segments – which are distinct groups of people with similar needs, interests, circumstances, or characteristics that influence them to respond to marketing messaging in a similar way to a product or service. After the market segments have been defined, a company must decide how to position the brand, product, or service to the selected target segment. In some cases, this means designing a product or service, and its marketing program to emphasize the attributes and benefits that appeal to customers within the segment, while also distinguishing the company’s brand from competitors.