In a specific market, nobody wears shoes. Why? Is this market an eldorado for shoe makers? Or maybe… there is no place for shoes in this market? Avoid pitfalls with a market analysis.
Singapore is a very hot and humid place. Nevertheless, companies like Uniqlo, H&M, Zara sell a lot of winter clothes. Why? Because Singaporean travel a lot, and a lot of regional tourists come to Singapore to buy clothes.
There is no rule, for your company or your product. Everything is possible but marketing analysis will help you to assess your market and give you indicators to make your own decision.
As a business owner, sales or marketing professional you know that competition is tough. If you want to succeed in the aggressive world of business, it’s important to define your USP: your Unique Selling Proposition. Rosseler Reeves was an American advertising executive and believed that any advertisement or commercial should show off the value of the product or service, what he called the « Unique Selling Proposition ».
But in order to define your USP, you must first realise some marketing analyses. The analyses should be done very carefully as they constitute the basis of your marketing analysis.
Don’t miss the interview with Michael E.Porter (an interview by Harvard Business Review) at the end of this post.
- Market analysis – Is there a market for your products?
- Distribution channels analysis – do you need partners to sell and distribute your products?
- Competition analysis – Assessing your competitors
- Porter five forces analysis: an important marketing tool
- Environmental analysis
Market analysis – Is there a market for your products?
In the case of existing products, the size of the market can be estimated based on present sales and on potential sales. You will easily find free information from the following sources:
- government data
- trade associations (Chambers of commerce for example)
- financial data from major players
- customer surveys
Market growth rate
Are you on a growing, declining or stable market? Demography, sales growth in complementary products can be drivers in your research. Be careful to technology disruption or regulations that can change a market and thus make your product or service obsolete (music online, self-driving cars, ban of electric cigarettes…)
Are you on rising market with huge margins, or an industrial and very competitive market? How long will it take to be profitable versus your investments? Referring to Michael E.Porter, five factors influence the market profitability: the buyer power, the supplier power, barriers to entry, threat of substitute products, the intensity of competitive rivalry (watch the video at the end of the article).
Industry cost structure
Will you be competitive with your actual cost structure? Will your new product/service benefit from your actual fix costs, and give you a “Competitive advantage”?
Are you working in new technologies, in fashion, food and beverage industries? These are examples of industries led by trends. Healthy and organic food, seasonal collections in the fashion industry, short product life cycle in IT, Cloud, IoT… all these trends make some industries exciting but also challenging. These trends are a source of new opportunities and threats.
Distribution channels analysis – do you need partners to sell and distribute your products?
A channel analysis is an assessment of how and where a product should be sold.
The distribution channels analysis starts with an assessment of the options for getting a specific product or service into the hands of the end user. This typically happens in one of these ways:
- Selling directly to consumers.
- Selling to a retailer or wholesaler.
- Some combination of both.
A good analysis can give you a competitive advantage if your innovation a disruption in the way to distribute products (example: selling directly to end user may give you a price advantage but will need more investments to deliver products and services and offer a good quality of service). The analysis will give you information on the market price structure, margin of the different actors, necessary logistic. You can also benefit from the image of resellers (or a distribution network) on the market and speed up you market penetration.
IT products, pharmaceutical products are two example of industries with strong distribution networks. But today new technologies allow new distribution network for products or services (we talk a lot of Uber and Uberization of the economy).
Competition analysis – Assessing your competitors
Whether your are the first mover in a market, or you have competitors, you will have to struggle to sell your products. In the second case, you will compete with another company to sell to potential customers. You will need to convince your customers to buy your products against competitors.
You have different type of competitors:
- direct competitors, these competitors a companies your potential customers think about when they think about buying
- indirect competitors offer products that can satisfy your customers, even if not exactly the same as your product (if you want to see a movie you can choose to stream it, download it, go to the cinema, buy a DVD…) (see Netflix)
- potential competitors are companies that may enter your market. Example: battery manufacturers may be interested in manufacturing cars in order to sell their batteries (see Bolloré Bluecar)
Be sure to analyse a maximum of criteria: market share, penetration rate by segment, products, price, distribution, communication, financial strength (allowing them to react)…
You can have found information from many sources: competitor website, hiring posts, annual shareholder reports, press releases, your partners (vendors, resellers), customers…
Porter five forces analysis: an important marketing tool
Watch the Interview with Michael E. Porter, Professor, Harvard University explaining the five competitive forces.
Named after Michael E. Porter, this model identifies and analyses 5 competitive forces that shape every industry, and helps determine an industry’s weaknesses and strengths.
- Competition in the industry
- Potential of new entrants into industry
- Power of suppliers
- Power of customers
- Threat of substitute products
Finally, you will analyse the environment of the company and try to find the factors that can influence your business: Political factors, Economic factors (economic growth, interest rates, exchange rates, inflation), Social factors, and Technological factors.
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