How to Complete a Proper Market Analysis for BD Pros
Whenever you enter into a new market, it’s important to know every detail of the potential market beforehand in order to maximize the potential of your launch. Successful market analysis involves understanding demographic data and knowing the competitive landscape through verifiable data. Understanding your customers before targeting them will make your business plan much more effective.
In this article, we’ll talk about the five-step process that you need to conduct whenever looking at completing a market analysis. We’ll then cover the reasons a business development team benefit from completing a market analysis and how often you should complete one.
How to Conduct a Proper Market Analysis in 5 Steps
There is a set process you can take when conducting a market analysis to make sure that you’re making decisions off of strong data. Whether you’re wanting to look at your target market before you launch your business or you’re trying to better understand the market before a big partnership launch, this is a good guide to go by for an effective analysis.
The five steps to follow when conducting a proper market analysis are:
Step 1: Analyze Market Data
Finding the right data to help you weed through all of the happenings in your market can be tough. Luckily, there is an enormous amount of existing sources out there that’ll make your life easier. The U.S. Small Business Administration recommends you answer these six questions to get a good sense of a given market:
— Demand: Is there a desire for your product or service?
— Market size: How many people would be interested in your offering?
— Economic indicators: What are the income range and employment rate?
— Location: Where do your customers live and where can your business reach?
— Market saturation: How many similar options are already available to consumers?
— Pricing: What do potential customers pay for these alternatives?
Once you’ve answered these questions sufficiently, you’ll be able to find the right answers to whether you’ve made the right decisions to go into this market or not. This will also help you determine what segments of the market are ripe for your business to target.
Step 2: Prove Your Hypothesis Wrong About the Market
After you’ve extensively analyzed market data and come to the conclusion that there is a good product-market fit, or where it is, it’s time to put your hypotheses to the test. For Greg Plumb, Head of Go-to-Market Strategy at Starry, that meant going against preconceived notions about what he thought customers wanted and figuring out where he was wrong as fast as possible.
“It’s very valuable to start hypothesizing and be very rigid with your learnings. I wanted to determine the number of things, starting with the highest level then going to the most granular. The highest being the market itself, then working down to the product bucket, and then eventually ending up in the customer bucket,” says Plumb.
Plumb and the business at large had made assumptions about their customer base, such as believing they didn’t need to build an interface their customers could interact with, and their customers didn’t need regular reports to prove impact. Both of these assumptions were proven false through customer research.
You should be using the data you have at this point to try and prove your hypothesis wrong. If you’re able to look at the market from that perspective then it gives you a leg up on the competition as most people look at data to try and prove themselves right. If you can prove your hypothesis wrong then you’ll get to the right answer for your target market a lot faster.
Step 3: Understand Your Target Customer
When in doubt, your target customers will tell you which direction is the right way forward. Don’t be afraid to use them as a resource. In fact, proper customer research that involves speaking with target customers is a key component of successful market analysis. Without this data point, you’re just guessing based on what has happened previously.
Plumb is a big advocate for one-on-one interactions versus customer surveys, especially when you’re at an early-stage company. “If you’re talking to your customers as you are developing, it’s really valuable in terms of identifying gaps or initial preconceptions that can be totally wrong,” says Plumb.
Constantly talking to customers and aligning your business decisions with the learnings from those conversations is key to building any business. It’s no different when you’re going through the process of market analysis.
Having a deep understanding of your customers will help you find, launch, and develop future partnerships as well. It’s important to continue to monitor and understand who your target customers are through every stage of your business lifecycle and keep iterating on that as you go. People change constantly and your target customer won’t be the same tomorrow as it is today.
Step 4: Evaluate Your Competition
No market analysis is complete without proper analysis of all competitors. Understanding the lay of the land, so to speak, will help you as you try to figure out how to move forward. Some markets are over-saturated with more businesses already soaking up business than you can compete with. Others will show key areas of potential that you can target, which may not have been clear from other data.
Additionally, evaluating the competition will help you come to terms with what makes you different. In order to enter a market effectively, you have to be able to successfully show potential customers what makes you stand out. Why do you matter and why should they care? Knowing the competition will help you figure that out.
Step 5: Put Your Analysis to Work
After doing all the heavy lifting of putting together a thorough market analysis, you can now use the findings to make your business more efficient, competitive, and profitable. Make sure you set achievable goals and continuously measure for success.
A successful market analysis plan allows for measurable impact and provides high-level guidance that puts your organization in a position to create long-term value. This is one of the best things you can do for the health of your future business.
We recommend completing a market analysis every 1-2 years, depending on your industry, to make sure you’re still in alignment with the market and your customers.
What is a Market Analysis for Business Development?
Fundamentally, a market analysis is an exercise in which you gather information about a specific market to determine the viability of a business or product. Think of market analysis as a way to understand how your business is positioned against all the other organizations in the same industry and what the potential of that market can be.
Understanding data like customer segments and buying patterns, competitor positioning, and barriers to entry are all part of comprehensive market analysis. Market analysis for business development is the same process and has the same meaning as it does for any other business function conducting one. So, the question becomes, why should your business development team conduct one?
Why Business Development Teams Conduct Market Analyses
Greg Plumb believes conducting market analyses are critical for prioritizing where to invest your resources. In Plumb’s case, while he was working for a software company specializing in AI for small and medium-sized businesses, he was tasked with trying to figure out which market would be the best one to enter into.
“Coffee was picked as the initial market for a number of reasons. First, there is a very small number of mobile point-of-sales that already had a dominant market share within coffee. So, instead of doing 10 partnerships we only needed to do three and get the majority of the market share. Second, coffee as an industry was growing massively,” says Plumb.
By conducting a market analysis, Plumb was able to strategically select coffee shops as the industry to focus all the organization’s energy on, and form strategic partnerships quickly. As you can see, a proper market analysis will help a smart BD team find and implement partnerships that can spur long-term growth.
Conducting a rock-solid market analysis is more than just an exercise. It’s the best way to uncover long-held biases, make your business more competitive, and align your team towards a common mission. Your existing customers, as well as future customers, will also benefit from a service that will better fit their needs in the long term.
A proper market analysis is one of the many things that BD professionals must have in their toolkit to do their job effectively, and the full list can be quite daunting. If you need help navigating this or other topics, you should try out a Firneo membership and learn from the industry’s best when it comes to business development and partnerships.
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