Study notes

Introduction to Market Analysis

The challenge for any business is to gain a sufficiently detailed understanding of the fundamentals of a market. Without this insight, it is unlikely that marketing strategies will prove effective or that marketing objectives will be met.

Gaining this understanding is the task of market analysis.

By market fundamentals we mean understanding issues such as:

  • How big is the market? (for example, measured by sales value, volume sold etc.)
  • How fast is the market growing and what is the market growth potential?
  • The key social, economic, political/legal and technological factors that drive change in the market
  • Who are the existing competitors and what market shares do they have?
  • The extent of branding and customer loyalty in the market
  • How the market is segmented to meet different customer needs
  • Customer preferences in terms of when and where they buy, what prices they pay and which methods of promotion are effective
  • The potential for developing a competitive position in a market – either through a USP or through effective price competition

The process of analysing the market should not be considered as a one-off. An effective marketing team is constantly searching and updating their market knowledge.

However, detailed marketing analysis is particularly important for tasks such as:

  • Forecasting sales for new products or investments into new markets
  • Gathering evidence to support a finance-raising exercise
  • To support a new marketing strategy or significant changes to the marketing objectives
  • To help make decisions in relation to significant organisational or operational change

There are several methods of analysing a market that are in common use. The following methods are covered in the following sections:

  • Test marketing
  • Trend analysis (extrapolation, moving averages and correlation)

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