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How to Write a Market Analysis for a Business Plan

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

Market Opportunity Analysis: A Complete Guide (With Examples)

Content Writer

Created on:

May 20, 2024

Updated on:

17 mins read

Transform Insights into Impact

Build Products That Drive Revenue and Delight Customers!

Dove’s award-winning #SpeakBeautiful campaign caused a 36.8% YoY decrease in negative tweets about beauty or body image. It was also a huge win for the brand, with over 168,000 hashtagged tweets, 800 million social media impressions and a 17% increase in brand sentiment.

They used social media to find that in a single year, women posted 5 million negative beauty or body image tweets. This was an opportunity to change the hurtful narrative and improve the brand image.

Market opportunity analysis can do both: help your business grow and bring a meaningful, positive change into the world. In this guide, you’ll learn how to conduct one and find some inspiring examples.

What is market opportunity analysis?

Market opportunity analysis is a type of market research. The point is to see how and where you can grow your customer base or revenue. Conducting a market opportunity analysis involves identifying competitors, understanding your target audience and uncovering weaknesses, opportunities and threats.

During this process, you’ll come up with new business ideas and be able to prioritize them based on their potential to bring profit or risk.

Why should you conduct a market analysis?

Market opportunity analysis gives your company a competitive advantage by allowing you to find new business areas with growth potential or where to expand in your current market. It allows you to:

• Make better-informed decisions
• Improve your long-term marketing strategies
• Evaluate product or service demand
• Identify potential for business growth
• Uncover your strengths, weaknesses, and areas for further research
• Find and mitigate potential risks

Now, let's find out how to perform your own market opportunity analysis.

How to conduct a market opportunity assessment

Identify opportunities you want to analyze.

The first step is identifying what kind of opportunity or product you want to analyze . Some ideas include:

• A new product or service
• A new market to expand into
• A business partnership
• An unmet customer need
• An improvement of something already in your offer or on the market
• Horizontal improvement for multiple operations
• A new niche uncovered by a shift in external factors

Get to know your (target) customers

Assessing your target customers is essential when exploring any product opportunity . If there are no buyers, what's the point of selling? Some questions you need to answer are:

• Is your product or service attractive or solves a particular pain point?
• What factors go into your target audience's purchasing decisions?
• Are they willing and able to spend enough on this idea for you to make a profit?

You can take two routes to make informed business decisions based on market research.

If you already have customers…

If you already have a customer base of any size, you can collect feedback directly to learn about their specific needs and preferences. The best way to do this is with a product discovery tool like Zeda.io.

It’s a robust platform for collecting feedback and finding new ways to grow.

You can do this by setting up a customer portal on your website. It's customizable, so you can make the theme match your brand. You can also make it a widget for your customers to ask for your guidance easier. Alternatively, send forms to collect various type of feedback directly from the user feedback tool to customers or internal teams.

You get a dedicated feedback panel to sort queries, feature requests and complaints. The AI-powered dashboard identifies and groups similar feedback, generating tags based on your workflow. It helps you analyze customer feedback to find highly demanded features to build next.

Zeda.io's AI product intelligence uses machine learning to analyze sentiments, customer segments, revenue and other data points. The dashboard displays the collected information as comprehensive, actionable insights.

With this feedback platform, you can also define goals and plan your roadmap to reach them. You can visualize your journey with our strategy maps created to give you clearly illustrated context. Connect OKRs to your business model plan to easily measure the outcomes as you go.

If you don't have customers yet…

The approach we described isn't possible if you're just starting or venturing into a new business area. In such cases, focus on:

• Keyword research : Great tools to discover what products your potential customers are looking for include Google Keyword Planner, SEMrush or Ahrefs. Start with a seed keyword related to your industry. Generate relevant keywords and phrases, then analyze their search volume and competition. Prioritize them based on relevance and popularity. Long-tail keywords are more valuable as they indicate more focused customer intent.
• Smoke test landing page : This is a minimalistic web page for validating your product idea without fully developing it. You can build it with Wix, WordPress or Unbounce. Share it on social media, online communities, through email marketing campaigns and targeted ads. Track user behavior, number of visitors, conversion rates and sign-ups to measure the level of interest in your idea.
• Social media : Social media monitoring tools allow you to track conversations about your industry and related keywords. Identify your main competitors and influencers who cater to a similar audience – their followers are your potential buyers. Observe them and participate in the online conversation to get a feel of the current industry trends and get noticed by others.
• Online reviews : Dive into reviewing platforms like Yelp, Amazon, Google Reviews or relevant industry-specific sites. Look for recurring themes in what people like, dislike and what problems they encounter. You can even respond to these comments asking about further details or presenting your product or service as an alternative they can check out.

Analyze your competitors

We already briefly touched on basic competitor research when talking about doing a social media market assessment. Now, let's dive deeper into it.

Start with a simple Google search of your direct competitors who offer similar products or solve the same customer pain points with different solutions. Look for those companies on software reviewing sites like G2 or Capterra. There, you can see client reviews and compare features.

The next step is deeper research, which will help you navigate the competitive landscape. To get this information, follow your main competitors on social media, subscribe to their newsletters and keep yourself updated. Factors you should look into include:

• The product, its features and use cases
• The target audience and user persona
• Their go-to-market strategy – marketing channels, collaborations, ads, publishing frequency, taglines, language, category names
• The pricing structure – free trials, freemium options, setup costs
• Their technology infrastructure and data ecosystem
• Their market share and size

We suggest performing a SWOT analysis for each competitor, which includes Strengths, Weaknesses, Opportunities and Threats.

A great point of reference to sum up your competitive analysis is battle cards. List each competitor's main strengths, weaknesses, overlaps and differences. Here's an example of what that can look like:

Another way to illustrate your competitor research is with a simple spreadsheet. Include columns about all the most valuable data we've mentioned. Add a row with your own company. This view can help you identify your uniqueness and find gaps in your niche that the existing market isn’t addressing.

Consider external and internal factors

External factors.

Six external factors can impact your new market opportunity (think PESTLE ):

• Political : Tax, government policy, trade laws, political stability, industry regulations, global trade situation
• Economic : Exchange rates, globalization, economic growth or decline, inflation, interest rates, cost of living, labor costs, working hours
• Sociological : Cultural norms, fashion, population growth rate, age distribution, health consciousness, career attitudes, work-life balance, consumer spending habits
• Technological : Automation, innovation, social media and networking, robotics, AI, online security, disruptive technologies
• Legal : Employment law, common law, labor law, health and safety regulations, importing and exporting laws and taxes
• Environmental : Global warming and the rising need for sustainable resources, ethical sourcing, pandemics and other emergencies, supply chain intelligence, government environmental restrictions, CSR

To perform a PESTLE analysis of the current economic climate in your area, rate the impact level of each of these factors (e.g., on a scale of 1-5). Next, list the steps you will take to overcome each of the potential roadblocks you uncovered with this method.

Internal factors

Consider your capabilities, strengths and weaknesses. Ask yourself these questions:

• Do you have the technology and workforce necessary?
• Do you have enough financial resources for the endeavor?
• Are your teams skilled enough to take on the new challenge?
• Are you able to hire new people with the necessary skills?
• What new departments will you need to create?

Identify and prioritize opportunities

Sift through the opportunities you've found to get your ideas in order and find the best ways to grow into new markets. Some of the most popular prioritization frameworks you can use for this include:

• RICE : Intercom 's scoring system measures each idea against four factors – reach, impact, confidence and effort. Assign each of the components a number between one and 10. To calculate the RICE score , follow the mathematical equation of (R × I × C)/E. It’s an unbiased way to judge which projects are worth your attention first.

• Value vs. Effort Framework : This is a simplified version of RICE. It helps to judge ideas based on their value to customers and the effort it costs the organization.

• KANO model : This framework weighs the customer satisfaction level against the implementation cost on a horizontal and vertical axis.

• MoSCoW : This is an acronym for “Must-Have, Should-Have, Could-Have and Won't Have” – a pretty self-explanatory division of features.

With Zeda.io, you can choose between the RICE or Value Effort Framework to easily score and prioritize business ideas based on their value. If neither works well, you can set up your customized framework, like the ones we illustrated above. Our dashboard allows you to sort any list of features based on the score you give them – how you calculate it is up to you.

Market opportunity analysis: Real-world examples

Don't take our word for how effective market opportunity analysis can be – just take a look at these examples.

For collaboration companies, a disruptive external factor (i.e., the pandemic) was a chance to grow exponentially. The market demand for remote collaboration and video conference tools was huge. Just look at the global interest peak right around the lockdown period.

Image source: Google Trends

Tech entrepreneurs leveraged this opportunity to launch or grow their remote tools. Although this unsteady time was disastrous for many businesses, Zoom's revenue skyrocketed throughout 2021.

You don't have to wait for another world-changing event to create a market niche. True – Starbucks has it easy because coffee is always in demand. However, they wouldn't have grown as they have without solid market research.

The way they achieve this is with their Idea Platform, launched back in 2008. It allowed their customers to make their voices heard and develop the company while building a stronger relationship with it.

Here are some of their implemented ideas :

• Splash sticks for keeping clothes cleaner
• 3 million mobile payment transactions weekly
• New flavors
• 5.8 million cake pop treats sold yearly

Not all ideas are worth executing, but each is worth examining. Many of the best business ideas aren't the most obvious ones. Take your time to brainstorm and sift through ideas with a robust market opportunity analysis to discover if your business idea is practical and profitable.

The easiest way to find new features and solutions your audience will love is with a product discovery tool like Zeda.io. Use it to collect and manage feedback , prioritize business ideas and build actionable roadmaps for your teams. The results we've noted with our customers include 20% smaller churn rates and 50% of sales growth.

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What is a target market opportunity analysis example?

Two examples are implementing a feature or product highly requested by your users (like Starbucks) or based on a change in external factors (like Zoom).

What are the 5 stages of opportunity analysis?

The market opportunity analysis process consists of these five stages: identifying areas for analysis, getting to know your target audience, analyzing competitors, considering internal and external factors and finally – prioritizing the uncovered opportunities.

How do you measure market opportunities for your product or service?

In addition to market research, you can perform a SWOT analysis to see how you fit within the current economic situation. You should establish KPIs and milestones to track progress and assess risks before starting.

Why do we need market opportunity analysis?

Market opportunity analysis can help find potential customers, identify current market trends and demand for certain products and services, mitigate risks and improve the efficiency of business and marketing strategies.

IN THIS ARTICLE:

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5 Steps to Conduct Market Opportunity Analysis [Example Included]

• by Alice Ananian
• June 3, 2024

In entrepreneurship, recognizing and capitalizing on market opportunities is like striking gold. Market opportunity analysis is the thorough dissection of market conditions and trends to unveil prospects that align with the growth and direction of your business. For entrepreneurs, startups, and small business owners, conducting a meticulous market opportunity analysis could be the difference between success and stagnation.

What is a Market Opportunity?

Before venturing into the steps of analysis, understanding the term “market opportunity” is imperative. A market opportunity is essentially a sweet spot in the business world where a need or want exists among consumers, and there’s an opening for a company to fill that gap. It’s a chance to capitalize on a situation where there’s potential for profit by providing a product or service that clicks with the target market.

This is what a market opportunity entails:

Unmet Needs or Wants: At the core, it boils down to identifying something that people desire but aren’t necessarily getting from current offerings in the market. This could be a completely new need arising from technological advancements or a gap in existing products or services that leaves consumers feeling unsatisfied.

Profitable Potential: There should be a sizable group of people willing to pay for the solution you’re proposing. The size of the market and the willingness to spend are crucial factors in determining the overall appeal of the opportunity.

Addressing the Gap:   A market opportunity isn’t just about identifying a need; it’s about offering a solution that stands out.  This could involve creating a completely new product category, significantly improving upon existing options, or tailoring something to a specific niche audience that feels neglected.

These are the broad avenues by which market opportunities can be spotted:

Market Research: Conducting thorough research to understand consumer trends, competitor analysis, and overall market sentiment can reveal gaps that your business idea can address.

Analyzing Customer Behavior: How people interact with products and services can provide clues about what they find frustrating or lacking. Look for ways to streamline processes or add features that enhance the customer experience.

Innovation and Invention: Sometimes, the most lucrative opportunities lie in creating entirely new categories or disrupting existing markets with groundbreaking ideas.

Considering Broader Trends:   Major shifts in society, technology, or environmental concerns can open doors for innovative solutions.  Think about how your product or service can address these emerging needs.

By identifying and capitalizing on market opportunities, businesses can achieve growth, expand their market share, and establish themselves as leaders in their respective fields.

Factors Influencing Market Opportunity

The landscape of a market opportunity is shaped by a complex interplay of various factors. There are several key factors that contribute to an opportunity’s attractiveness.

Market Dynamics:

• Supply and Demand: This fundamental principle dictates the overall attractiveness of an opportunity. A strong market opportunity thrives on a healthy imbalance between unmet demand and readily available solutions. If there’s a limited market for your offering or if existing players effectively fulfill the need, the opportunity might be less promising.
• Competition: The competitive landscape significantly impacts an opportunity. A market dominated by a few strong players makes it challenging for new entrants. However, an opportunity might still exist if you can offer a differentiated product, target a niche market, or disrupt the current model altogether.
• Market Size and Growth: The size of the target market, along with its projected growth, determines the potential revenue and scalability of your venture. Targeting a large and growing market with your solution offers a wider audience and a more sustainable business model.

External Factors:

• Economic Conditions:   Overall economic health plays a big role. During economic booms, consumers have more disposable income, making them more receptive to new products and services. Conversely, economic downturns can lead to cautious spending, hindering the success of new market entries.
• Technological Advancements:   Technological disruptions can create entirely new market opportunities or reshape existing ones.  Staying on top of technological trends allows you to leverage advancements to create innovative solutions or improve existing ones.
• Sociocultural Trends: Shifts in demographics, societal values, and lifestyles can open doors for businesses that cater to these evolving preferences. Understanding these trends allows you to tailor your product or service to resonate with the changing consumer landscape.
• Political and Legal Environment: Government policies, regulations, and legal frameworks can influence the viability of a market opportunity.  Ensure there are no legal roadblocks or unexpected costs associated with entering the market due to regulations.
• Environmental Considerations: Sustainability concerns are becoming increasingly important. A market opportunity that offers eco-friendly solutions or caters to the growing demand for responsible business practices can be highly attractive.

Additional Considerations:

Industry Trends:   Understanding the specific trends within your target industry can reveal emerging opportunities or areas ripe for disruption.

Customer Pain Points:   Identifying the frustrations and challenges faced by potential customers allows you to craft solutions that directly address their needs.

Understanding and leveraging these factors to identify and act upon market opportunities can be the key catalyst for successful business innovation, setting the stage for the next critical steps in developing a strategic business plan.

Benefits of Market Opportunity Analysis

A market opportunity analysis is a crucial step for any business looking to thrive. It’s essentially a deep dive into the potential of a market opportunity, analyzing its viability and weighing the pros and cons before committing resources. Here’s why a market opportunity assessment is so important:

Informed Decision Making  

Without a thorough assessment, you’re essentially gambling on the success of your venture. The assessment provides valuable data and insights that illuminate the potential risks and rewards associated with the opportunity. This allows you to make strategic decisions based on facts and figures, not hunches.

Reduced Risk

By pinpointing potential challenges and roadblocks early on, you can take steps to mitigate risks or even pivot to a more promising opportunity. Early detection is key to avoiding costly mistakes and wasted resources.

Optimized Resource Allocation

Resources, such as time, money, and personnel, are finite. The assessment helps you allocate resources effectively by highlighting areas that require the most focus and investment. You can prioritize efforts where they’ll have the biggest impact.

Identifying Unmet Needs

A well-conducted assessment goes beyond surface-level analysis. It helps you unearth deeper customer needs that aren’t being fully addressed by existing solutions. This allows you to tailor your product or service for a more targeted and impactful approach.

Competitive Advantage

The assessment process reveals your competitor landscape. You can identify their strengths and weaknesses, allowing you to develop a differentiated offering that stands out in the market.

Customer Focus

By understanding your target market intimately through the assessment, you can ensure your product or service resonates with their needs and preferences. This customer-centric approach is essential for building a loyal customer base.

Financial Projections

The assessment helps you develop realistic financial projections based on market size, pricing strategy, and potential sales volume. This allows you to make informed decisions about funding requirements, profitability, and potential return on investment (ROI).

Stronger Business Plan

The findings from the assessment feed directly into the creation of a robust business plan. This plan, grounded in solid market research and data, becomes a roadmap for your business growth and success.

Investor Confidence

If you’re seeking investment, a market opportunity assessment demonstrates your due diligence and understanding of the market landscape. This instills confidence in investors and increases the likelihood of securing funding.

Market Opportunity Analysis Process Step by Step

Use this market opportunity analysis template for your next endeavor to streamline and systematize the process:

Step 1: Define Your Focus

Imagine you’re a company that makes fitness trackers. You see a potential rise in demand for wearable health monitors. Here’s how to define your scope:

• Identify Market Opportunities: Brainstorm possibilities within the wearables market. Maybe it’s a fitness tracker for kids or one focused on sleep monitoring.
• Choose Your Focus: Pick a specific opportunity to delve deeper into, like a sleep-oriented tracker. This will guide your research.

Step 2: Dive into Market Research

• Gather Data: Look for a mix of primary and secondary sources. Conduct surveys or interview potential customers (primary). Gather market reports and industry publications (secondary).
• Market Landscape:   Find the size of the target market (people with sleep issues interested in trackers) and its growth projections. Look for trends like the growing interest in personalized health data.
• Customer Needs and Pain Points:   What are people’s sleep concerns? Do existing trackers address them effectively? Maybe they lack user-friendly interfaces or in-depth sleep analysis.

Step 3: Analyze the Competition

• Who are the Competitors? Identify companies offering sleep trackers or similar wearables targeting sleep issues.
• Competitive Landscape:   Research their strengths (reliable data, long battery life) and weaknesses (complex setup, generic insights). Analyze their marketing strategies and target audience.
• Your Competitive Edge:   Can you offer a tracker with a user-friendly app and detailed sleep stage monitoring, differentiating yourself from competitors?

Step 4: Market Evaluation

• Market Attractiveness:   Is the sleep tracker market big enough with room for growth?  Is there a strong customer base willing to pay for such a device?
• Business Alignment: Does this opportunity align with your company’s expertise in wearable technology and focus on health?
• Resource Requirements:   Consider the resources needed –  developing the tracker, designing the app, and potentially new manufacturing processes.

Step 5: Decision and Planning

• Go or No-Go: Based on your research,  decide if this sleep tracker opportunity is worth pursuing. Weigh the potential risks (high development costs, competition) and rewards (capturing a new market segment).
• Market Entry Strategy:   If you decide to move forward, create a plan. This includes your tracker’s features, pricing strategy, target audience for marketing, and how you’ll manufacture and distribute the device.

Remember, It’s Ongoing!

The market is constantly changing. Regularly revisit your analysis to ensure your strategies remain relevant as the sleep tracker market and customer preferences evolve.

Market Opportunity Analysis Example

Scenario: Imagine you’re a company specializing in plant-based milk alternatives (e.g., soy milk, almond milk). You’ve observed a rise in consumer interest in plant-based diets and wonder if there’s an opportunity in plant-based meat alternatives.

Potential Opportunities:   Plant-based burgers, sausages, chicken alternatives – the market is expanding.

Chosen Focus: Let’s focus on plant-based burger patties as a specific entry point.

Step 2: Market Research

Data Gathering: Conduct surveys with vegetarians, vegans, and flexitarians (people who sometimes eat meat) to understand their interest in plant-based burgers. Look at market research reports on the plant-based meat market size and growth projections.

Market Landscape: The plant-based meat market is rapidly growing, driven by health concerns, environmental considerations, and animal welfare issues.

Customer Needs and Pain Points:   Surveys might reveal a desire for plant-based burgers that taste more like real meat, have a satisfying texture, and are affordable and readily available.

Step 3: Competitive Analysis

The Competitors: Identify leading plant-based meat companies like Beyond Meat and Impossible Foods, as well as traditional meat companies entering the plant-based space.

Competitive Landscape: Existing plant-based burgers may be perceived as expensive or lacking the sizzle and texture of real burgers. Traditional meat companies might have wider distribution networks but lack brand recognition in the plant-based space.

Competitive Advantage: You could potentially offer a more affordable plant-based burger patty made with familiar ingredients and a focus on taste and texture, leveraging your expertise in plant-based milk alternatives.

Step 4: Opportunity Evaluation

Market Attractiveness: The plant-based meat market is projected for significant growth, indicating a potentially large and lucrative customer base.

Business Alignment:   Expanding into plant-based burgers aligns with your company’s focus on plant-based alternatives and leverages your existing knowledge of plant-based ingredients.

Resource Requirements:   Developing a new product line requires investment in research and development, potentially new manufacturing processes, and marketing efforts to reach the target audience.

Go or No-Go: Based on the analysis, you might decide to pursue the plant-based burger opportunity due to the promising market and alignment with your business goals.

Market Entry Strategy: Develop a plan outlining your burger’s taste profile, texture, pricing strategy (competitive but profitable), target audience (health-conscious consumers, flexitarians), marketing channels (social media, partnerships with vegetarian restaurants), and distribution strategy (grocery stores, online retailers).

How to Expedite and Optimize Market Opportunity Analysis

Prelaunch.com can prove to be a helpful tool at various stages of your market opportunity analysis, particularly in the areas of understanding customer needs and testing your product concept. Here’s how:

Understanding Customer Needs:

• Competitor Analysis: Prelaunch offers an AI-powered market research tool that analyzes customer reviews of existing products. This can reveal what customers love and hate about current offerings in the market you’re considering entering (e.g., plant-based burgers in the previous example). By understanding these pain points and unmet needs, you can tailor your product concept to address them directly.
• The platform also offers the option of conducting a focus group, not of random individuals but from a selected group of people who have signaled their purchase intent already by reservation. 

Testing Your Product Concept:

• Concept Validation:   One of Prelaunch’s strengths is its ability to test multiple variations of your product concept with different target audiences. This allows you to see which features resonate most with potential customers and which price points they’re receptive to. In the plant-based burger example, you could test different flavor profiles or patty textures to see which ones get the most positive feedback.
• Early Feedback:   By testing your concept on Prelaunch before fully developing the product, you can gather valuable early feedback that can inform your product development process. This can save you time and resources by helping you avoid costly mistakes and ensure you’re on the right track to meet customer needs.

Starting a business or growing an existing one is full of risks and choices. A market opportunity analysis provides a structured way to gauge the viability of a new venture. It’s about being proactive instead of reactive, and strategic instead of hasty.

By dedicating time and resources to this process, you arm yourself with the foresight necessary to make educated decisions and steer your enterprise toward prosperous seas. Remember, the more thorough your analysis, the clearer the path becomes.

Alice Ananian

Alice has over 8 years experience as a strong communicator and creative thinker. She enjoys helping companies refine their branding, deepen their values, and reach their intended audiences through language.

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