What Is a Market Analysis? (With How-to Guide and Benefits)

By Indeed Editorial Team

Published June 2, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A market analysis is an assessment that provides companies with additional information about their operations and markets. Organizations can use the metrics in these analyses to collect information about potential trends and challenges in the market. By knowing more about market analyses, you can optimize the company's processes. In this article, we explain what a market analysis is, review the benefits of analyses, and provide a step-by-step guide to conducting an effective analysis.

What is a market analysis?

A market analysis refers to a complex assessment of markets to optimize company sustainability regarding their products. These assessments use both quantitative and qualitative measurements to review the tangible and intangible market components. These analyses also determine the risks and benefits of expanding into new markets. Companies, especially chief marketing officers, can apply these analyses to markets in which they already operate, along with markets into which they want to expand. Market analyses typically target specific industries within large markets to determine potential projections.

Due to the depth of the necessary research, some companies choose to collaborate with external organizations to complete market analyses. Alternatively, companies with essential resources can also conduct their own market analyses.

Related: What Is an Internal Analysis? And How to Conduct One

What do companies learn from market analyses?

Market analyses provide companies with in-depth perspectives of company viability in either the overall market or specific industries. These analyses help organizations develop an understanding of themselves and how they function in comparison to similar companies within the same field. Market analyses help companies determine the feasibility of different actions, along with the risks of expanding to other markets. Analyses develop forecasts for companies, along with estimations regarding a company's potential performance.

Market analyses provide industry forecasts, or predictions of the company's future performance, to guide long-term business decisions. These analyses also delineate the market share, or the percentage of revenue the business earns in comparison to competitors in the market. Other factors in an analysis can include forecasted industry disruptions, regulatory shifts, and consumer trends.

Related: How to Write an Analysis (With Importance and Tips)

Benefits of market analyses

Here are some benefits of market analyses:

  • Risk reduction: This provides knowledge of how markets can reduce risks and develop strategies to succeed within the industry. You can also use risk reduction to identify competitors and whether they increase your risk.

  • Targeted products and services: You can serve consumers better by learning about the products and services they want or need.

  • Emerging trends: You can identify emerging trends through an analysis of the market, which allows you to incorporate innovative trends in sales or business strategies.

  • Revenue projections: You gain information about revenue projections by reviewing trends in the market and identifying market conditions that can affect sales.

  • Evaluation benchmarks: You can use analysis to set benchmarks and find comparisons from which you can assess the company's success.

  • Context for errors: You can use the results of an analysis to find information and explanations about potential past errors and develop strategies for avoiding or solving them in the future.

What to include in a market analysis

Market research includes information about the industry, including the target market, and can help determine a company's goals. Market research typically discusses:

Industry

Here's a list of components to include about the company's industry:

  • Detail the market share. You can consider developing graphs, illustrations, and charts to express the company's market share when preparing presentations for business leaders.

  • Identify the competitors. The analysis can include information about the company's direct competitors and how its market share compares with theirs.

  • Project the company growth. You can use analysis to project the company's growth and how quickly you expect this growth to occur. It's also beneficial to identify the data required to create these forecasts.

  • Identify life cycle. The market analysis typically includes the identification of the industry's life cycle and whether it can support changes to the company's market location and potential expansions.

  • Provide industry updates. It's beneficial to provide updates about changes to the market or industry and how they can affect the company.

Target market

Here's a list of components to include about the company's target market:

  • Market size: When determining the market size, you may want to consider the size and growth of the market in recent years.

  • Market customer: Discuss the target audience and include information about their demographics, like where they live, their age range, and their average income.

  • Market health: When discussing the target market, it's beneficial to review the overall health of the market and whether it can support expansions and changes to the company, and maintain profitability.

Business goals

Here's a list of components to include about the company's goals:

  • Growth: Consider the anticipated percentage of growth and the data to support this estimation.

  • Profits: You can discuss business goals by estimating the company's profits and determining whether you expect them to change after entering a new market. If you anticipate an initial decline in profits, you can also discuss when you expect revenues to exceed expenses.

External factors

Here's a list of components you might include about the company's external factors:

  • Taxes: You may want to consider whether a shift in the market can affect the company's taxes.

  • Interest rates: It's beneficial to identify the stability of the company and how it can navigate changes in interest rates.

  • Economic conditions: It's beneficial to identify how potential changes in economic conditions can affect the company. For example, a weak market may have a negative impact as customers have less financial freedom to buy products and services.

Related: What Does a Market Research Analyst Do? (With Skills)

Data resources for market analysis

Here's a list of the data resources you can use to complete an effective market analysis:

Demographic data

It's important to research your target customers so you can learn about their habits, preferences, needs, and wants. You can use government websites to gather this information and use it to tailor your products, services, or marketing strategies to appeal to your target demographic. Demographic data provides you with information about consumers according to unique characteristics, including their age, gender, race, ethnicity, employment status, marital status, level of education, and location.

Competitor information

You can benefit from collecting as much data as possible about competitors' business practices, products, and services. You can typically find information about a company's corporate structure and senior team members on its websites. Gathering information about competitors is beneficial because you can learn about their internal and external processes. You can then use this knowledge to gain an advantage and adjust the company's marketing strategies and appeal to your target audience.

Related: 7 Analysis Questions to Ask (With Example Answers)

Market research

You can conduct market research in several ways, such as sharing a survey with existing or potential customers in the company's target market. Hosting a focus group can also be an effective way to learn more about your target audience. Market research is beneficial because it provides companies with more information about how they can expand, and how changes can affect sales and company objectives. You can also develop projections that detail potential company outcomes, like increased sales and lead generation.

How to conduct a market analysis

Here's a step-by-step guide to help you conduct an effective market analysis:

1. Determine the purpose

It's beneficial to determine the purpose of the analysis, such as developing an understanding of competitors and new markets. By determining the purpose, you can optimize company operations and scale the organization when necessary. To do this, you may want to consider whether you're conducting an analysis for external purposes, such as acquiring business loans, or internal purposes, such as improving the company's profits.

2. Research the industry

During the market research, it's beneficial to create a detailed outline of the industry's current health and state. This provides you with information about the direction of the industry and how it can affect company operations or projections. It's also helpful to create a comparative analysis that demonstrates the company's trends compared to its biggest competitors.

3. Identify the target audience

When conducting market research, you may want to consider your target customer and gather information about the target audience through research. You can collect information about the size of the target audience, their locations, and what influences their buying decisions. It's beneficial to create a customer profile or persona after your research because it can help you develop effective targeted marketing strategies. This might lead to a rise in sales and customer retention.

4. Research competitors

You may want to research competitors to develop an understanding of their position and saturation within the market. This provides you with information about how competitors differ from the company and their overall strengths and weaknesses. To do this, you can start by listing the competitors and conducting a strengths, weaknesses, opportunities, and threats (SWOT) analysis on each one. Conducting these analyses provides you with an understanding of the company's objectives and how such businesses operate.

You can then consider why consumers choose their products and services. Gathering this information allows you to identify potential opportunities for expansion and helps you determine strategies that improve how the company serves its clientele. You may want to identify which functions work for the team and how the competition's processes exceed yours.

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