What is Market Analysis?
The process of analyzing a market that involves studying the economic value of products and resources in order to form a plan that can lead to effective business or personal decisions. Market Analysis is used to evaluate a product’s attributes, and how they will relate to consumers.
Market Analysis according to Fintalent’s Market analysis consultants includes:
- Market Assessment
- Competitive Rivalry
- Marketing Research
- Pricing Strategy
Market Analysis allows companies with products or services to understand what type of consumer they are being marketed to, who that consumer is, and also where that consumer would be found when they are thinking about buying. In that way, the company can determine if they have the right product. Market Analysis is why companies spend so much money on advertising campaigns.
Why do companies spend so much money to advertise? Simply because it’s crucial to know how to reach the market. To understand how a company can reach their market, it is necessary for them to utilize Market Analysis tools.
Market Analysis is an important aspect of the business world. It is used to help companies make decisions on how they want their product to be marketed and sold. The tools that you need for Market Analysis are Price Sensitivity, Price Attitude and Price Perception. Pricing Needs and Price Attitudes are not as important but should be done in conjunction with Price Sensitivity and Price Perception.
Price Sensitivity is a crucial factor when you are trying to determine whether or not your product or service needs to be changed, how much it needs to be changed, and where it needs to be sold. To do this, price sensitivity is broken down into 3 levels: Segment 1 (Low), Segment 2 (Medium) and Segment 3 (High). With the levels of price sensitivity in mind, you need to learn more about your target market.
Once you have learned the level of price sensitivity that your target market is going to be, then you need to understand the attitude of people in the market. Price attitude is broken down into 3 levels as well: Segment 1 (Buy-Oriented), Segment 2 (Buy and Try-Oriented) and Segment 3 (Try-Oriented). Once you understand Price Attitude, you must go back to Price Sensitivity to determine the impact that it has on Price Perception.
Once you know the Price Intensity of your target market, which is from Price Sensitivity and Price Attitude, then you can begin to set a price for your product or service. You need to understand that the pricing of your product or service should be based around 3 things: Competition, Market Positioning and Consumer Behavior.
What does this all mean?
First off, it means that you need to understand where you are going to place your product or service. It also means that you need to understand what level of price sensitivity your target market is. So in a nutshell, it means that you need to look at the competition, how your product is going to be marketed and positioned, and also how consumers are going to perceive a price for your product or service. What I’m saying is that before deciding on what price will fit into the marketplace, you need to know how consumers think about pricing. This is why Market Analysis is used by companies when they want to sell their product or service.
How do you do it?
When you are conducting Market Analysis, it’s best to have the help of someone who understands what is going on in the market. It’s best to seek out some help from the people who know what you’re talking about. In order to make sure that your Market Analysis ends up being a success, it is necessary for you to get some help from someone who can calculate how consumers are going to perceive different price levels and how they will react to different pricing strategies put forth by various companies. There are many ways that this could be done, depending on what type of samples will be needed and if there will be more than 1 company involved.
You could ask people to fill out a survey or you could use psychographic and demographic surveys. Another way is to use focus groups. There are many different ways that Market Analysis can be conducted, but the most important thing is that you make sure that you want to know who your consumer is, how much pressure they are under, what matters to them and what their perception of pricing will be.
Market analysis tools:
Price Sensity Theory (PSI)
This tool has been around for quite a while, but it’s still useful today as a tool to determine consumer price elasticity. Marketers would apply this with pricing strategies like: discounts, coupons and rebates. It determines the demand for a good or service by first determining the price and then determining how sensitive the consumer is to changes in price.
This is the soft skills that go along with Market Analysis tools. Price positioning styles include: aggressive, incremental, holistic, responsive and risk taking. These are used to determine what pricing strategies will work for your target market based on current and projected customer behavior, such as buying patterns, demands and business objectives. There are also different ways that you can position prices, including: high-low, price-value positioning, high-end pricing and budget positioning. The high-low strategy is when cost leadership strategies are used to set a low price at the top of the market by introducing lower priced products as well. The price value positioning strategy is where you have a higher priced product that provides a lot of value for the customer. A high priced product could be considered a “luxury” for consumers to buy and the appearance of good quality is very important in this scenario. The high end pricing strategy uses a smaller segment of the market and aims to be highly profitable from a small group of customers who are willing to pay for quality, luxury or prestige. The budget positioning strategy is designed to make more money out of a smaller segment of your target market. Depending on the product or service, you should also consider factors such as: seasonality, target market and business objectives.
This is used for new customers who are entering the market for the first time. This can be used by marketers to communicate a pricing strategy or offer value to seal the deal with these new potential customers so that they end up becoming repeat customers. The most common type of price ladder example would be a lower priced version at first and then a higher priced version towards the end of the purchase cycle. This is also called a “two tier system”.
This is used by marketers to determine the difference between competitors in terms of price. This can be done by using marketing techniques like: pricing comparisons, differentials and standard market definitions. With these techniques, you should be able to get a clear picture of how your pricing will compare with other products or services in the market. Most competitors are likely to have similar priced products and services that they are trying to compete against but they may have different positioning strategies. Just like how you should know your competitors better than the competition knows them, so should you know yourself better than your competition knows you.
This is used to determine how sensitive a customer is to changes in price by using techniques like: split testing, A/B testing and conjoint analysis. This is used to see how different price points will affect the sale of a product or the overall result of the advertising campaign that you’ve put forth.
This is used to see how a customer will react to changes in the way that they get their value. This may be changes to packaging, advertising messages or even the product itself. Most of the time a customer is going to be more sensitive to changes in value versus price, especially when trying to determine whether you are giving them enough value for what they are paying for. It’s best if you have an idea of what you’re trying to achieve with your product and service as well as what kind of results you can get from different strategies that you implement in your business.
Some additional factors to consider with Market Analysis include: target market, business objectives and industry analysis. Your target market should be defined by geography, demographic and psychographic data or even buying patterns. You also want to make sure that you’re looking at the right industry as well as competitors within that industry, which will give you a better idea of what the needs and wants of your customer base are. Make sure that you are in tune with the business objectives for your product or service as well as how high volume sales can increase market share in order to create a strong position in the minds of customers.
Future of Market Analysis: What will be the future of Market Analysis?
There are already a few great marketing tools to use in order to analyze the market and gather data on your own company as well as competitors. In the absence of these, firms can look to platforms like Fintalent to hire professional consultants for their market analysis needs.