Table of Contents
Table of Contents
Market Analysis
Take the guesswork out of growth with the data and analysis needed for smart business decisions
Is growth a top priority for your company? If so, you likely won’t be surprised to find that a majority of organizations share this goal. In fact, research conducted by McKinsey revealed that nearly 2/3 of businesses surveyed identify growth as a top item on their executives’ agendas. Additionally, 93% of participants have pursued at least one growth strategy in the last three years.
It’s clear that a long-term growth strategy is essential for the continued success of your company. What’s less clear in many cases is how to develop that strategy. Your leadership team needs to make smart decisions about market entry and expansion to sustain and build on your success.
For too many companies, the answers lie in looking to the past or guessing about the future. In fact, when asked how they make critical business decisions, 58% of business decision-makers make decisions based on gut feelings or past experiences rather than data.
Here are two additional key statistics:
The decisions that drive growth are some of the most important your organization will make, and nothing is more important to these decisions than a strong understanding of relevant markets. Knowing which products and services to sell, where to sell them, and how to expand your offerings in the future are the bedrock upon which a solid growth strategy is built. Without this information, companies are left to guess about potential paths to expansion and worse, likely to come up short in terms of revenue.
When market analysis guides decision making, your business is better positioned to understand:
Which markets are the best strategic fit for your goals
Which industries have a need for your product?
Which customers will demonstrate the highest demand for your offerings?
Which existing products are right for introduction to new markets
Which potential markets have been overlooked?
Have new areas of demand risen for your products?
How new products can succeed in current markets
What opportunities are presented by new technologies and difficulties?
Can you build upon existing solutions?
What is your place in the competitive landscape
What can you learn from competitors’ successes?
How attractive is a potential market based on competitor activity?
It’s important to keep in mind, however, that the goal of market analysis isn’t to simply gather data. It’s to gather the insights that are most relevant to your company’s needs, so you can shift from speculation to informed decisions.
Smart decisions demand the smart use of data. Learn more about the pitfalls of basing key strategic decisions on unconfirmed information.
What is Market Analysis?
Market analysis is research that helps you size and evaluate markets of interest to your business.
Through a careful review and interpretation of relevant data, market analysis can identify opportunities for organic growth.
To understand how market analysis addresses both organic and inorganic growth, let’s break down this concept.
Organic Growth
When a business successfully produces more offerings and increases sales by capturing a larger share of the market, it has experienced organic growth. Strong organic growth is a key indicator of a business’s health, but consistently achieving it can be difficult. Even with sound strategy and fully optimized operational practices, buyer demand, competitor offerings, and other market factors all play a role in limiting or increasing the potential for organic growth.
Without a strong understanding of the market for your offerings, it’s extremely difficult to identify and capitalize on opportunities for organic growth. Instead, firms are likely to expand in the wrong markets, invest in new offerings with limited viability, and make other costly mistakes that ultimately diminish revenues.
The Solution: Market Analysis
Market analysis identifies the most promising markets for your offerings, the best ways to grow your catalog of products and services, and more. This comprehensive assessment of market environments brings together data and analysis to give your firm the insight that strategic growth demands.
The result? Better decisions that lead to more stable growth, more opportunities for success, and increased revenues.
Who Needs Market Analysis?
To some organizations, it seems obvious that every business can benefit from the insights provided by market analysis.
For those still relying on a mix of intuition and past successes and failures, however, there’s often an assumption that the way things have always been done is the way things should always be done. Your organization may have even achieved substantial growth this way, making leadership reluctant to change.
Ask yourself: How much more could we have done with intuition backed by research and analytics? What else could we have learned from our wins and missteps with the application of a comprehensive view of the market?
In the simplest terms, market analysis is necessary when your organization seeks new opportunities for success, as well as when it's essential to skirt opportunities for failure.
Market analysis guides companies that are …
- Ready to introduce existing offerings to new or adjacent markets
- In need of greater understanding of current markets
- Seeking expansion in new geographic locations
- Focused on bringing new offerings to current markets
On the other hand, when challenges arise, market analysis helps ensure you’re able to navigate them in the most efficient, profitable way possible.
Market analysis charts a course for companies that …
- Experience stagnating growth
- Face new or increasing competitor challenges
- Expect new regulatory hurdles
- Operate within industries primed for market disruption
For simple context, imagine business decision making as driving a car down the highway. As a conscientious driver, you pay attention to road conditions, check your mirrors, and do everything you can to safely navigate from point A to point B. Still, any car has blind spots, and it can be difficult, or even impossible, to monitor them while you drive.
Market analysis eliminates the blind spots that arise when doing business by delivering the right information when it’s needed to ensure you’re never operating on assumptions, outdated ideas, and other faulty information.
Market analysis doesn’t just provide the right answers in these scenarios – it helps you ask the right questions.
When is the Right Time for Market Analysis?
Running a market analysis early can inflect the direction of every subsequent decision you make – this is where the power of market analysis can truly be seen.
At pivotal moments, like those described below, market analysis can ensure the answers to these questions are as accurate and well-informed as possible.
Here’s a look at just a few of the situations that demand comprehensive market analysis:
Expansion to new markets
Analysis of the market helps determine whether sufficient opportunity exists today and in the future to make expansion a smart investment.
New product development
Understanding demand, competitors, and other market forces helps ensure a consistent and lasting need for your new offering, as well as how it may fare among existing products and services that offer a similar solution.
Adjacent market exploration
Market analysis identifies new prospects for current offerings through adjacencies, streamlining the lead generation process by providing relevant avenues for sales.
Periods of flattened growth
Many companies experience revenue plateaus after taking maximum advantage of all current market opportunities. Through market analysis, your organization can spot levers to revitalize your growth engine organically with potential new products to launch or new markets to enter or inorganically with potential alliance or acquisition targets that capture new product offerings or a new customer base.
Annual strategic planning
What’s the best way to manage revenue stagnation? Strategic planning that anticipates possible stalled growth scenarios. Reviewing and updating a market analysis yearly helps signal new or emerging competitive threats, product demand decline, or changing customer needs.
In all of these situations, market analysis helps present a more comprehensive picture of the market environment in which your offerings are sold and your company operates. Now that you know what market analysis is, who can benefit from it, and when you should turn to this solution, it’s time to get a better understanding of how a market analysis is completed.
How is Market Analysis Completed?
At face value, market analysis seems like it should be simple. First, you’ll collect data. Next, you’ll interpret is and apply it to your most important organizational questions.
You’re confident that your company’s team is made up of industry experts. Sales must understand the relevant markets. Everything should come together with a little research and critical thinking.
When attempted internally, however, many businesses see that the task is substantially more difficult than originally imagined.
There are a number of reasons why internal market analysis efforts fail, and they are all easy to understand.
- Your team is too busy with other critical tasks to seriously tackle the work
- No one in-house has the research and analytics skills needed
- Market data are scarce or difficult to find
- It’s not easy to make sense of the data in front of you and create an unbiased analysis
Quality market analysis is significantly more complicated than the simple collection and interpretation of facts. Instead, it involves a number of interconnected activities that come together to create the in-depth assessment needed to fuel your strategy and decision-making. To acquire the information needed to form this assessment, analysts begin with market research.
What is Market Research?
Market analysis is fueled by expert research.
However, the amount of research needed can depend on a number of factors, from the scope of the analysis to the data available in a given market. For example, if your company is interested in entering a new market with a long history and ample publicly accessible information, researchers can easily find a wealth of data to work with. In other situations, information is far more scarce or closely guarded. Analysis is still possible, but may necessarily take a different approach to achieve the same end result: a clear picture of the market that is grounded in facts.
The necessary research can be broken down into two types, primary and secondary.
- Primary research offers original information gathered directly from the source, such as interviews, surveys, and focus groups. When publicly available data is scare, this approach can combine qualitative and quantitative methodologies to harness niche and difficult to attain information.
- Secondary research relies on existing sources of public information. This may include industry publications, required filings, reputable research, and more. Secondary research offers the context and broader information needed to create a full picture of a market, but may prove impossible when direct market data isn’t readily available.
The most appropriate methodology will depend on your organization’s objectives and the market(s) in question. These different types of information combine to present a more holistic picture of the market in question.
Once acquired, market research forms the foundation of the analysis. The collected data can help analysts identify:
- Promising areas for growth
- Potential for innovation
- Opportunities for increased profits
- Competitor insights
- Quantitative analysis of how attractive a market may prove
- Barriers to market entry
- Your organization’s advantages and disadvantages within a market
- The positioning of competitors within a market and in relation to your own market positioning
With this data in hand, it’s possible to complete an analysis that examines assumptions and theories to determine which are supported by fact and which must be left behind.
1. Quantify Your Opportunity
What can all of this newly acquired information tell us about markets of interest? To begin with, it can identify the market’s size. Doing so helps determine whether a potential market offers enough opportunity to make the costs and effort associated with entry or expansion worthwhile.
For example, your sales team might report growing interest from buyers in a particular cluster of companies all operating within a related set of industries. Should you seek expansion into this market based on that interest? A market size assessment can help you understand how much potential actually exists to confirm whether your speculation is supported by the available research.
This assessment can be completed in one of two ways. The first, a top-down analysis, studies the overall available market. With this information, analysts can estimate how much of that market can reasonably be secured by your organization. The second option, a bottom-up analysis, starts by considering the channels, locations, and other related factors that will affect sales potential in a given market. With this data, it’s possible to estimate how much growth can be achieved within these specific parameters.
As B2B eCommerce continues to grow, more and more B2C companies are looking for ways to enter this market. Market size assessment can make the difference between profits and a wasted investment.
2. Understand Your Market Dynamics
While a market size analysis identifies how much total opportunity exists within a specified market, an assessment of market dynamics reveals how various forces within that market affect current and ongoing demand for your offerings.
A market dynamics assessment should answer:
- What is the outlook for end-user and customer demand for our offerings?
- What drives this demand?
- Will the same factors drive demand in the future?
- What additional factors may affect demand in this market?
We can begin to answer these questions with a review of drivers of the existing demand. In many cases, solutions that are quite similar to your own offerings may exist concurrently within a market or multiple markets. But what separates the most successful from those that lag behind? Questioning why customers select specific solutions can help identify not only why they choose your offerings, but also why they look to competitors.
At the same time, a thorough market dynamics assessment should also take macroeconomic factors into account. These can include any of the outside forces that shape the overall direction of a market, such as changing fiscal policies and regulatory activity, inflation, employment rates, significant political events, and more.
Taken as a whole, this assessment helps determine whether demand within the market will rise, fall, or stagnate, so you can determine whether an investment in expansion is ultimately worthwhile.
Identifying the right markets for expansion is your first step toward successful organic growth. To do so, you’ll need a full understanding of market dynamics.
3. Understand Your Market Limiters
In addition to factoring market size and dynamics into your analysis, most companies must also consider the existing legal and regulatory landscape in which they do business. While adhering to these legal requirements is important for a number of reasons, regulations can have a significant impact on a business’ bottom line. In fact, in 2017 the National Small Business Association (NSBA) found that the average small business owner spends <at least $12,000 each year on expenses, directly and indirectly, related to federal, state, and local regulations.
With this in mind, a full review of the regulatory landscape should assess:
- All current regulations that apply to your offerings and industry
- The full burden of regulatory reporting and what must be done to remain compliant
- Any certifications, approvals, or other distinctions which are needed to achieve compliance
- The risks associated with failure to comply with regulations at all levels
Equally important is a full assessment of how regulations may change in the coming years. For example, you may identify a promising opportunity for expansion in a market comprising industries with little federal regulation. A review of existing rules, industry standards, and the introduction of stricter regulations in similar markets can help determine whether the new market will be attractive in the long term, or instead deliver quickly diminishing returns.
4. Analyze the Competitive Landscape
The competitor analysis is one of the most important aspects of any assessment. We might like to think that performance in any given market is driven primarily by factors we can control – the quality of our offerings and customer experience, the savvy with which we bring those offerings to market, and the like.
However, competitors are as important as any other factors within the market, and a successful market analysis can’t afford to ignore them. Gathering useful data to form the basis of this analysis can be difficult, but two specific approaches deliver results:
- Competitor Saturation: Markets are not limitless, and within each there is a point at which no further opportunity can be created. In these situations, growth can only be achieved through strategies that allow you to seize a share of the market from competitors. There are a number of opportunities to do so, however, from the development of product improvements and innovations to identifying and taking advantage of competitor’s weaknesses.
- Market Positioning: Market analysis can also determine how to best position your brand and offerings within the competitive landscape. Doing so evaluates the buyer’s assessment of your products and services and identifies opportunities to change this perception, allow you to win a larger share of the available market.
Bringing a new product to market? If so, your strategy needs competitive intelligence to succeed.
At the same time, this analysis supports the creation of profiles that can yield valuable information on key competitors within specific industries and markets. Along with these details, your assessment can address competing, new, and up-and-coming offerings to help you understand where your own products and services fit into the landscape. It can also address how they can rise above those currently offered and in development by your closest competitors. Rounding out this portion of the market analysis, a review of relevant technology trends and patent analysis can determine what to be on the lookout for as the market evolves.
5. Monitor Your Market
One of the most important things to understand about market analysis is that its assessments are often ongoing. This is because markets are seldom static. Instead, they constantly evolve with the entry of new competitors, the introduction of new products and technologies, and the ever-changing effects of economic factors and buyer behavior. Accordingly, your analysis should include a comprehensive strategy for monitoring a market to ensure that the information you’ve gained today is accurate and relevant in the future as well.
To create the foundation for an effective monitoring strategy:
- Determine which market indicators will be tracked. These indicators provide important data points that enable guided projections of future trends within a given market. Each indicator, from unemployment levels to buyer spending behavior, helps form the basis of a data set for future analysis and strategic decision-making.
- Evaluate how they interact with market dynamics and limiters. Doing so reveals how these factors contribute to the growth or shrinking of a market – or to keeping it static. Your analysis should include a clear strategy for how often indicators will be assessed to keep insights fresh.
- Understand how the insights generated can be used to revise and build upon your existing market positioning. Doing so ensures that your organization is able to respond to forecasted and unexpected market trends with decisions based on up-to-date information drawn from your most essential inquiries.
The results of these assessments offer a number of critical market insights, including a stronger understanding of the market’s overall competitive structure. Determining whether a market is mature and consolidated or nascent and fractured allows you to better evaluate the potential within it for your offerings, as well as position them more successfully.
Ready to learn more about how these elements of market analysis create a detailed, comprehensive picture of your best opportunities?
What Does Market Analysis Enable You to Achieve?
Earlier, we discussed the alarming number of organizations who use gut feelings or past experiences to guide their most important decisions.
And in the broadest terms, market analysis allows you to avoid all the pitfalls associated with this type of thinking. With guidance from careful analysis of relevant data, your company can move away from so-called blue-sky thinking, which can seriously hinder growth and stall success.
Ready to learn more about how these elements of market analysis create a detailed, comprehensive picture of your best market opportunities?
But what does that mean in terms of practical application? To see how market analysis could help your company achieve its goals, consider how Mueller Company partnered with Hanover Research to turn insights into action.
The Client
Mueller Company, a full-line manufacturer of water distribution products, is known for their innovative offerings and overall industry impact in quality standards. The company boasts more than 150 years of history and a catalog that includes thousands of water system components.
The Need
With an eye toward organic growth, Mueller Company identified a promising opportunity due to growing interest in a specific area of the water gate valves market. To ensure that this expansion was a wise decision and not merely blue-sky thinking, they needed a careful analysis of the potential market to determine demand and shape their long-term product development strategy.
The Market Analysis Project
Hanover Research’s team conducted the necessary research to guide a full analysis of Mueller Company’s market of interest. Upon completing the collection of relevant data, we:
Performed a market size assessment to help determine the total addressable market
Provided product growth projections for the water gate valves in question
Identified important market trends to determine the market’s potential for growth, shrinkage, and stagnation
Assessed key North American competitors to determine their role within the market and how it might affect Mueller Company’s entry and participation
The Findings
Upon conclusion of the market analysis, Hanover Research discovered growth projections that fell below those predicted for the full water gate valve industry. Despite this, the category still presented a stable, worthwhile opportunity for market expansion based on the full scope of the analysis. This confirmed Mueller Company’s original assumption and allowed them to develop an analysis-backed product development strategy that positioned them for ongoing success in this market. Additionally, Mueller Company was able to reduce lead time and improve customer service based on the results of the commissioned market analysis.
To learn more about how Hanover Research’s market analysis solution supported growth for Mueller Company, see the full case study online.
Must-Have Market Analysis Support
With the insights provided by market analysis, your company will be able positioned to make well-informed decisions about future opportunities for growth
At the same time, your specific growth strategy may benefit from additional solutions designed to support inorganic growth, the consumer, and more.
Mergers and Acquisitions Opportunity Analysis
A comprehensive growth strategy should include opportunities for both organic and inorganic growth. Where organic growth typically takes time to reach new customers or build new capabilities in-house (i.e., hiring new talent, investing in research and development, purchasing new technology, equipment or infrastructure), inorganic growth presents a comparatively faster way to add desired customers or capabilities. With inorganic growth, once a target company has been identified that possesses the new customer base or capability you need, it should take only the duration of the deal’s completion and integration to reach your growth goal.
However, inorganic growth can be deceptively simple. Many companies fail to realize any lasting growth from an inorganic strategy due to an incorrect assessment of the quality of the target company’s capabilities or health of their customer base, an inadequate integration plan, or a lack of market knowledge. These risks can frequently result in a wasted investment rather than the desired growth.
To reduce this risk and streamline the acquisition process, a mergers and acquisitions opportunity analysis:
- Builds a detailed and customized screening criteria based on your specific needs for target identification
- Includes a comprehensive market scan to identify optimal targets
- Ranks potential targets based on desirable attributes and capabilities
- Provides in-depth research to define strengths and weaknesses, as well as any potential problems with customer sentiment, competitors, and more
In addition to identifying high-value targets, a mergers and acquisitions opportunity analysis also reveals undesirable candidates for acquisition, helping to reduce wasted time and money invested in less-viable targets.
Start with our report, Your 5-Step Guide to Successful M&A Target Identification. The guide shows how organizations can succeed in M&A activity by establishing a systematic, data-driven approach.
Customer Research
The customer needs analysis adds one of the most important voices in the market to your assessment: that of the customer. Conducting interviews or holding focus groups with prospective and current customers allows you to understand their struggles, motivations, and decisions by asking:
- What do our customers need?
- What priority do they place on this need?
- How strongly do they feel about their need and the full field of available solutions?
- How do they feel about our solutions?
- What problems are customers attempting to solve?
It’s important, however, to ensure that research questions are formulated with a keen eye toward the desired information and how that information will contribute to the overall market analysis. Poorly formed questions often fail to capture essential information and can even produce misleading data.
One way to gather data on customer needs is to conduct a voice of the customer study (VOC), which can provide important context on the perception of current and prospective customers within a key market. A comprehensive review of customers’ needs, concerns, and objectives allows you to not only develop new offerings and successfully bring them to market, but also to determine which opportunities for organic and inorganic growth will best position you to provide the solutions customers seek.
Upon completion of a customer needs or VOC analysis, your organization will have a stronger idea of the benefits and risks associated with introducing existing offerings to new markets and new offerings to current markets with evidence-based projections for demand. This helps avoid substantial investment in products and services that will be met with minimal demand, as well as offerings that fail to effectively address the customers’ most pressing needs.
Understanding customers is a critical aspect of identifying and maximizing opportunities for growth. Fortunately, there are several ways to gain this information by measuring customer experience.
How Do You Evaluate the ROI of Market Analysis?
Market analysis is an investment in the growth and overall success of your business.
But how do you measure the return on that investment? In some cases, ROI may be immediately visible when you’re able to quickly put a strategic development plan into place or immediately add new leads to your sales efforts. In other situations, ROI will be most obvious after those plans are set in action or a series of key acquisitions are completed.
Overall, market analysis solutions enable your organization to identify the best possible avenues for success, which means that its ROI can present in many ways. These might include:
- Sound investments that yield greater returns: By confirming a market’s viability, an investment in market analysis reduces risk and delivers increased revenues over time.
- Informed product launches: Why do so many new product launches fail? Market analysis provides data-backed demand modeling that helps minimize lost profits and brand status due to failed launches of new offerings.
- Chances to grow in unexpected ways: Comprehensive market analysis can identify promising new markets and market segments, as well as geographic areas for expansion with a clear assessment of how they support your organization’s goals and needs.
- Strategic market entry: With a full picture of a new market, your company is optimally positioned for entry, avoiding costly missteps and maximizing opportunity.
- Awareness of barriers to market entry: Market analysis provides a clear assessment of regulatory and legal hurdles, relevant market dynamics and other issues that may slow or stall market entry, allowing you to navigate these challenges or pivot strategically to pursue a more desirable market.
- Competitor out-performance: With detailed profiles, competitive intelligence, and competitor monitoring, you’ll access the insight needed to outpace competitors in key markets.
- Improved sales processes: Thanks to the information and analysis gained through an assessment of a market, your sales team will be better equipped to generate leads and convert them to customers.
- Effective strategic planning: Strategy without analysis is simply an assumption. Market analysis ensures your growth and development strategies are grounded in sound insights to minimize risk and raise the potential for success.
- Improvements in operational efficiency: Market analysis reveals competitor best practices and other relevant information that helps streamline operations, bring your company into alignment with industry standards, and boost productivity while reducing costs.
- Reduced lead generation effort: Generating quality leads can be time-consuming and costly. With market analysis, however, your company can identify viable leads and target them effectively within specific markets, market segments, and industries.
How else can you evaluate ROI from market analysis? From better customer targeting to increased sales, there are a number of ways your investment pays off.
Are You Ready to Grow?
By now, you understand all the ways market analysis can help companies build the strategies needed for stable, long-term organic and inorganic growth.
At the same time, you’re also well aware of the level of skill and effort required to successfully complete a market analysis. It can be difficult for many organizations to manage this solution internally due to a lack of experience, human resources, and time.
With the right partner, however, every organization can gain the market insights needed to make informed business decisions backed by research and comprehensive analysis.
Get the Market Analysis Support You Need Today
For more than 15 years, Hanover Research has provided expert market analysis to over 1,000 organizations across a wide range of industries. With more than 200 analysts on staff and dedicated account and research teams, our subscription-based solutions offer a cost-effective way to make more informed decisions, identify and capitalize on opportunities, and increase operational efficacy.
To learn more about market analysis, or any of our corporate and education solutions, contact Hanover Research today. We can help you identify which services are best suited to your needs and help take the guesswork out of business decision making.
Make smart growth decisions with confidence, not guesswork.
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