6 Market Analysis Steps to Building a Surefire Marketing Strategy
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As market competition stiffens and technology shapes the future, data and insights regarding market dynamics and market conditions are an essential weapon for any company looking for dominance on the competitive playing field. With this fact in mind, however, questions arise. Where can you gather good market data? And how do you organize it in a way to generate good insights?
If you’re not sure, you’re in the right place—we’ve got answers!
In this post, we’ll guide you through the main steps and techniques for market analysis to make sure you’re ready to embrace vital opportunities that can bring your company to the next level and help you get an edge on the competition.
Market analysis is a process of assessing and identifying various internal and external factors and conditions in a given market, or within a specific market niche. Some key insights you might gain from market analysis are:
Carrying out market research enables companies to stay informed on the latest market trends, their audience’s buying patterns, the introduction of new technologies, and the shifts in competitor activity.
To be more specific, market analysis allows businesses to uncover:
On top of these benefits, market research provides a data-driven approach to creating a high-impact and realistic plan for better business and marketing decisions in the future.
There are many ways to arrive at business goals and better understand and clarify your company’s business objectives. Since we’re talking about data-driven approaches to market analysis, we’ve picked the Critical Success Factors analysis as a “non-classical” system for better defining your business goals.
In a nutshell, CSF analysis is a technique businesses can use to pinpoint areas that are essential in fulfilling the business’s mission and goals. Of course, CSF will vary from business to business, but some common patterns exist.
Generally, CSF sources fall into the following categories:
Assessing all of these factors can help your company prioritize its efforts and track and measure progress towards fulfilling your strategic goals.
Market size can mean different things in different contexts, but generally it’s the number of people or companies who can be counted as potential purchasers of a given product or service. Market size evaluation can give you an estimate on audience size, potential sales volume, and revenue streams.
There are a few measurement methods out there, but we will outline two different approaches that you can take depending on your budget, business size, and industry specifics.
Information, data, and measurement firms like Gartner, Nielsen, and Statista are invaluable sources of in-depth information about the market. While data from these sources often come with a cost, they also provide lots of free information that can be useful in your market research.
On the downside, data from these firms, especially data provided at no cost, is widely accessible—often, it’s only a matter of a download. This means competitors may already be aware of the information included in these kinds of reports.
Also, the reports created by these firms require a lot of effort and time to create, which causes a delay in the period between data collection and insight generation and access for the general public. Markets move fast, so by the time you get access to a given report, the market may have already shifted in a different direction. Because of this, pairing reports with real-time data is often best.
Semrush’s affordable competitive intelligence solution can provide great real-time data for any market, including insights into market size and market dynamics. The latter is important because, as mentioned, industry reports are often released with a time lag, and timing is essential for spotting industry fluctuations and the arrival of game-changing companies.
The Market Explorer tool can help the customer estimate the overall market size for a particular niche based on online traffic trends and organic keyword data. You can begin by entering competitors into the tool, or you can select an entire industry, which is especially useful for assessing the market broadly.
Let’s take a look at the Beauty & Cosmetics industry in the U.S. to explore the data on market size and think about how it might be useful.
In the Market Summary section at the top of the Overview report, we find a variety of data points to help us better understand our market. The Market Competition section to the left reveals how the market share is distributed among various market players.
The Beauty & Cosmetics market has low consolidation, meaning many small players own a small portion of the market share. This typically means it will be easier for new players to enter the market. We can also see the top three players and their market share, but we’ll explore this metric below in the section on analyzing competitors.
The Market Size graph reveals the Total Addressable Market (TAM) and Serviceable Available Market (SAM). These metrics reflect the amount of demand within the Beauty & Cosmetics market.
It’s important to remember that the numbers here aren’t the number of customers. Makeup and cosmetics run out, so this market’s customers may buy products over and over again. This means one customer can generate multiple units of demand.
For the Beauty & Cosmetics market, the TAM is 2.1B and the SAM is 1.1B. With a large TAM, and a SAM that’s only half the size, the market looks healthy and still has room to grow. Also, taking a peek at the market traffic metric above the Market Size graph, it looks like it grew by 8% across the previous month, which is another good sign.
You can’t stop once you identify the market size, as this metric is never constant. Market growth and market trends are essential factors to regularly revisit so you can take timely action and fine-tune your business and marketing strategies accordingly.
Market growth refers to an increase in market size or overall sales within a given niche over a certain period of time.
To estimate market growth, you can look at indicators such as the year-on-year (YoY) industry trend, shifts in the number of customers, and the number of complete purchases per client (internal or industry report data only).
Let’s look at an example from the Apparel & Fashion industry using Market Explorer. Here’s the Market Summary for May 2022:
Now, compare it to the Market Summary from May 2021:
In May 2022, the industry had a Total Addressable Market of 4.5B. But if we look at historical data, we can see in May of 2021 the Total addressable market was 2.3B. As shown, the market nearly doubled in a year’s time!
You need to consider market growth trends throughout the market analysis process to get an understanding of how fast the market is growing, what its growth potential is, and whether it is generally on the rise or in decline.
Now, we’d like to introduce a widely employed technique that can help you assemble all the data to gather actionable insights for your business: The BCG Matrix.
Developed back in 1968, the BCG matrix is a framework that helps large corporations manage their portfolio and prioritize budgets and operations across multiple business units based on market growth and market share numbers.
However, the BCG matrix can be employed by any business, large or small, as its logic can be applied to prioritizing customer segments, products, services, marketing channels, markets (GEO), and brands.
Let’s return to the Semrush Market Explorer tool to gather all the necessary market data to build up a BCG matrix. For this example, let’s say Elon Musk wants to see if he should prioritize Tesla over SpaceX, SolarCity, or OpenAI.
Side note: Of course, with companies like Tesla who are publicly listed on stock markets, we can rely on their annual reports to do the measurements. As for companies like OpenAI, we can only rely on external tools that gather various market data to spot and interpret some trends. In Market Explorer’s case, traffic growth numbers can potentially indicate a rising interest in the product or
Initially, you’ll need to collect data on your market share and the growth rate of your products, business units, customer segments, and any other important factors. With the help of Market Explorer, we can see that among Musk’s businesses, Tesla has the highest traffic share of all of the businesses examined, though growth has been slow.
Open AI, on the other hand, has seen strong growth this past year. And when we compare Open AI to other companies in the artificial intelligence space, we see that their growth has moved steadily upward, while the market has remained relatively stable.
Running Tesla, SolarCity, Starlink, and and SpaceX through the tool to get a similar analysis, we discovered that:
The BCG matrix’s horizontal line represents the market share, and its vertical line stands for the growth rate. What we should do now is place each of our research items within the designated box, reflecting how they rank in terms of market share and growth.
BCG’s definition for the terms within the matrix are:
It won’t always be immediately obvious which box the items you’re considering should fall. Yet, when you look at each of them in relation to the other, you can see that Tesla is Musk’s Cash cow, SpaceX is a Star, OpenAI falls under the Question mark, and SolarCity can be considered a Pet.
To get an edge over your competitors, you need to have an understanding of your competitive landscape to find the best strategy to position your brand in the market.
Porter’s Five Forces analysis offers a strong foundation for analyzing not only competitors, but also factors that affect competition—from new entrants to existing rivals to additional products and services you might not have considered.
Porter’s five forces analysis allows you to evaluate opportunity and risk based on five essential industry factors:
The first thing to look into is how intense the competition is within your niche. The key insights you should gather at this stage are:
To explore the competitor aspect of the market analysis, we’ll take a data-driven approach, and use both Market Explorer and Traffic Analytics to view the competitive landscape in the food delivery space. Using Doordash as our focus, let’s look at their top 5 competitors.
The Market Summary in Market Explorer’s Overview report shows the market is moderately consolidated, meaning a small number of players own a majority of the market. These larger players—like Doordash, which owns 42% of the market—can be difficult to compete with.
Clicking the ‘view details’ button brings you to the Domains vs. Market Dynamics graph, found further down in the Overview report.
Here, we see Doordash and their top 5 competitors. Notice that the closest competitor is Domino’s. Despite their proximity to Doordash, however, Domino's market share is close to half of what Doordash owns. In the third spot, Ubereats owns only a third the market share of Doordash.
Let’s dig a little deeper into these two competitors using Traffic Analytics. Here we’ll consider the Traffic Journey report. With all of the reports in Traffic Analytics we can learn a great deal about our competitors strategies, strengths, and weaknesses. We will just offer one example here.
Let’s start with the Traffic Journey report, which lets us see where competitor traffic comes from and how they shape up against one another.
Looking at the Traffic Sources graph, we see that Doordash is the clear winner when it comes to direct traffic, with Domino’s next in line. Looking at Referral traffic, however, Uber Eats comes out on top with 700k more visits to the site in August 2022 than Doordash.
In this regard, it appears Uber Eats has a stronger referral strategy than the other two companies, which may be of interest if we’re looking to examine competitor strengths. But we can go one step further.
Using the Traffic Journey Details graph, we can uncover what sites send traffic to our chosen websites. This data can help us better understand Uber Eats’ strategy.
Here’s a selection of websites from the report. We can view some of the sources sending traffic to Ubereats.com as well as to other sites and we might look more closely at businesses like the LA Times or Starbucks to better understand their relationship with Uber Eats.
This is just one example of the type of data we might want to dig up when using the Porter’s Five Forces Model. Between Market Explorer and Traffic Analytics, Semrush can help you dig up a ton of competitive intelligence that will be useful when looking at competitors.
Online or offline, businesses are heavily reliant on other businesses in their operations. This factor of Porter’s Five Forces examines the power a supplier might hold over your business.
Your procurement, security, and other departments will have information about the following factors you should consider when it comes to assessing the threat of over dependence on suppliers:
Your customers can also have some bargaining power over your business. While this may seem like a customer-centric factor, you should be looking at your competitive landscape once again to determine the costs of the buyer’s entry and exit.
The overall audience size, the number of competitors, their pricing, and quality factors will matter when you are shaping or reshaping your business and marketing strategies.
This post will help you find the right tactics that enable you to:
On top of keeping an eye on competitors and their marketing strategies, it’s crucial to remain aware of products or services your rivals offer that may be substitutes to your products or services. An indirect competitor might be impacting your profitability as your customers are switching to a different product or service.
With this portion of the Porter’s Five Forces Model, Semrush can again provide a ton of useful information. Let’s look at the Audience Insights and Top Pages reports.
Beginning with Audience Insights, we can use the Audience Overlap widget to see how audiences overlap among players. This can be useful for seeing how your audience engages with competitors, and may substitute with their products. It can also help you identify opportunities to move in on your competitors’ audiences.
Sticking with food delivery, we can see that Domino’s and Doordash have the largest overlap. 13.7M customers visited both sites in the month of August. For those customers, either company could be a substitute when it comes to food delivery.
When looking at Uber Eats represented by the orange circle, they also have a large overlap with Doordash, though a much smaller overlap with Domino’s. This could represent an opportunity. If they were able to offer a service that Domino’s offers but Doordash doesn’t, they might be able to seize some of Domino’s audience with a replacement service.
The Top Pages report can also provide useful information about competitor products and promos. The report offers a variety of filters to gather the most relevant information. Here, we set the tool to show new pages on the Domino’s site, and pages with the word “coupon” in the URL.
You can also filter by traffic type, which can help you identify top promos. Click on the “Paid” tab to the right of the report results to bring the pages with the highest paid traffic to the top.
Exploring competitor offerings through the use of various tools across the .Trends solution can provide you with the data you need to complete the substitute products analysis for your Porter’s Five Forces Model.
This factor considers how easy or difficult it is to enter the market for up and coming brands. While you may be all set with your market analysis, this factor requires ongoing market monitoring.
Again, the Market Consolidation measure in the Market Overview provided by Market Explorercan help you understand the lay of the land. Markets where a small number of larger players own the majority of the market share will be more difficult to enter.
Get familiar with the consolidation level within your market and keep an eye on shifts in market share among the most important players. As markets evolve, you may be able to develop an entrance strategy that will help you break through at the right opportunity. Try this article and checklist to get ready.
Defining the right customer has to start with such basics as geographic, demographic, psychographic and other characteristics. Essentially, all of the factors involved in creating your buyer personas.
Once you have buyer personas defined, you can start segmenting your target audience based on similar needs or demand features to provide tailored and more targeted customer experiences.
Buyer persona research is a thorough process that helps you understand who your target customers are and how to reach them. Essentially, your buyer personas are fictional characters with the following features:
This comprehensive post will walk you through the entire buyer persona creation process, uncover where you can gather your data from, and provide a template that you can use to fill in all the details.
Now, once you’ve identified all imaginable buyer personas, it’s time to break down your customers into separate segments to tailor more relevant messaging, solve different problems, and offer different product features.
You can divide your customers however you'd like, but here are the key customer segmentation criteria widely used across various companies:
Using Hooley’s Segment Attractiveness and Resource Strength framework, you can assess the appeal of each market segment before setting your priorities to address budget, employee resources, product, or other limiting factors.
Create a matrix similar to the BCG framework used earlier—with market segment appeal reflected in the vertical line, and the horizontal line reflecting your resource capabilities.
All that’s left for you to determine is which customer segments fit within any of the boxes of your matrix.
Market Explorer and Traffic Analytics offers demographic information that can help you better understand any market’s audience characteristics. For example, here’s a look at the Demographics report in Market Explorer.
With this report, we can learn a lot about our audience in terms of age, gender, media preferences, and interests. All of these factors can influence the way we reach, communicate with, and meet our target audiences desires and needs.
The steps you previously took to carry out a market analysis should have uncovered a wide range of insights you need to consider before finalizing your business, sales, and marketing plans and strategies.
The very last step is to gather your findings and organize them to assess how you can:
One of the best ways to get there is by conducting a SWOT analysis.
SWOT analysis is probably the most popular strategic analysis framework, and for good reason. It’s a simple and powerful way to consider your business’s strengths and weaknesses, while also staying alert to opportunities and threats.
The upside of SWOT analysis is that it gives you an overview of both internal and external factors that can affect your business and marketing models.
To complete a SWOT analysis, you simply make four quadrants and label them Strengths, Weaknesses, Opportunities, and Threats.
While SWOT analysis is fairly straightforward, tools like Miro allow you to create a comprehensive illustration of your insights that you can share with the entire staff and edit with the key stakeholders.
Gaining sufficient market understanding is a prerequisite for business growth and success. Without deep insight into market characteristics and nuances, your business ideas and expectations will have little value.
Your business and marketing plan should be based on market research, otherwise, you might end up like the Detroit Three automakers, who failed to account for scenarios other than low fuel prices and traditional customer preferences. With exploding fuel prices and a shift in customer demand towards smaller vehicles, the Detroit Three’s market failure paved the way towards the fall of the Motor City. And, according to Forbes, it’s all because they didn’t run through all the scenarios you see while carrying out market research.
