When you are starting a business, there are many things that will be required out of you in order to be successful. One such thing that you are going to have to learn how to do is research about the market conditions of the field that you are in. This is important if you want to maximize your profits and ensure the long-term success of your organization. Unfortunately, this is a step that many owners, especially novices, tend to overlook. They simply focus on the present without making long term considerations. Here is what you need to understand about market conditions of your business.
Economic Growth
One of the most important things you have to understand about market conditions surrounding your business is that there are two key indicators of how healthy the market is. The first of these factors is economic growth.
Economic growth basically measures the value of the activity that is taking place in the economy. In regard to the economic growth, the level of demand in most markets is typically influenced by the rate of growth. These economies tend to vary in terms of what their usual long-term growth rate would look like.
Market Demand
The second indicator of the strength of a market is the market demand. This measures how much of a service or good that a consumer wants and is able to pay for. As for a business, the market demand eventually turns over into sales.
The growth and size of a market are the key indicators of market conditions. If a market is quickly growing, this will encourage new people to enter, and present competitors will benefit as well.
If the market happens to be growing at a slower rate, then that is an indicator that conditions are significantly tougher. In these situations, you will see that competitors are fighting for a share of something that is shrinking in demand.
What is Market Research?
Learning about market conditions entails doing in-depth market research. Market research is a process in which you gather pertinent information about your target audience, your buyers’ personas and how viable your service can be among these people.
Adequate market research will also tell you where the members of your audience are doing their research for products and services similar to the one that you are advertising. This will be valuable in terms of determining what potential shortcomings your specific service may have.
Now that you have an idea of what market research is, here are some important steps that you need to follow. If you are still having difficulties in getting started, you can take a look at Fisher Investments’ market analysis for further information. This can provide a baseline to help determine which factors are important to follow and how to frame the results.
Define Buyer Persona
One of the first things you will want to do when learning about market conditions is defining your buyer persona. This is where your primary market research will come in handy. Buyer personas are sometimes referred to as marketing personas, as these are generalized representations of what your ideal customer would look like. Some of the key characteristics in who you believe is your ideal buyer persona include age, gender, family size, income and location.
The general idea behind using buyer personas is to use this as a guideline for when you learn about the actual customers present in the industry. There are plenty of templates that you can use to collect information and organize your audience segments.
Identify Persona Engagement
Now that you have successfully identified a buyer persona, your next priority should be to identify a portion of that persona to engage. This will be the representative sample of your target customers so that you can better understand buying habits, characteristics and challenges.
Ideally, these should be people who have recently made a purchase or made a conscious decision not to make one. You can engage these people in a number of ways, including focus groups, phone interviews and online surveys. When choosing these people, you should aim for a good mix of participants and people who you have had recent interactions with.
List Your Competitors
The next huge step you will have to take is listing your competitors. The bottom line is that every market is saturated to a certain extent. No matter what field you are entering, there are already people looking to occupy the lion’s share of the customers. Therefore, when you are analyzing market conditions, one of the most important aspects includes who you will have to compete against to gain the most customers.
In order to identify competitors whose services overlap with yours you should use high-level terms such as education, food service, healthcare or retail in order to broaden your search. You should also understand that your competition comes in both the direct and indirect variety.
Direct competitors are companies that your customers will be considering when they are thinking about buying. The indirect competitors are those who go after customers in unique ways. For example, movie theaters can face indirect competition from satellite services and cable television or at-home streaming services like Netflix.
Wherever the competition is coming from, it creates a threat to your profit potential, but can also create opportunities. How you handle these factors will determine the long-term success of your company.
Forecasting Your Climate
The final aspect of learning about market conditions is to forecast what your business climate will look like. Your market conditions can be affected by the economy. Some factors to consider include social trends, new rules and regulations, increasing labor or supply costs and emerging technologies.
When writing up your business plan, be sure to include highlights of your situation, most of which should include competitive threats and market segments that will provide you with the best opportunity for growth.