Market Analysis

Definition
• A market analysis is a quantitative
and qualitative assessment of a
market
Use of Market Analysis
• Avoid putting a lot of resources and
time into creating a product or service
before you’ve determined that your
solution is needed.
• Determine that the need for your
product or service is big enough that
people will pay for it.
What to include in your market analysis

• Industry description and outlook

• Target market
• Competitive analysis
Industry description and outlook

• This is where you’ll outline the current

state of your industry overall and where
it’s headed. Relevant industry metrics
like size, trends, life cycle, and
projected growth should all be included
here.
Target Market
• a particular group of consumers at which a product
or service is aimed.
• The target market section of your business plan
should include the following:
– User persona and characteristics - You’ll want to
include demographics such as age, income, and
location here.
– You should know what their interests and buying
habits are, as well as be able to explain why you’re in
the best position to meet their needs.
• Market size - How much do your potential
customers spend annually on the types of
products or services you plan to offer? How big
is the potential market for your business?
Competitive analysis
• Identifying your competitors and evaluating their
strategies to determine their strengths and
weaknesses relative to those of your own product or
service
The competitive analysis should contain the following
components:
• Direct competitors: What other companies are offering
similar products and services? What companies are your
potential customers currently buying from instead of you?
• Indirect competitors: If your company is creating a new product
category, perhaps you aren’t competing with similar companies,
but instead competing with alternate solutions.
– Competitor strengths and weaknesses: What is
your competition good at? Where do they fall
behind? Get imaginative to spot opportunities
to excel where others are falling short
– Barriers to entry: What are the potential
pitfalls of entering your particular market?
This is where you examine your weaknesses.
Be honest, with investors and yourself. Being
unrealistic is not going to make you look good.
– The window of opportunity: Does your entry
into the market rely on time-sensitive
technology? Do you need to get in early to
take advantage of an emerging market?
Pricing Policy
Definition
• The policy by which a company determines
the wholesale and retail prices for its
products or services
• Pricing strategy refers to method companies
use to price their products or services
Common Pricing Strategy
• Penetration Pricing
• Price Skimming
• Product Life Cycle Pricing
• Competitive-Based Pricing
• Temporary Discount Pricing
Penetration Pricing

• The primary objective of penetration

pricing is to garner lots of customers
with low prices and then use various
marketing strategies to retain them
Price Skimming

• The key objective of a price skimming

strategy is to achieve a profit quickly
• a company sets its prices high to quickly
recover expenditures for product production
and advertising
• Companies often use price skimming when
they lack financial resources to produce
products in volume
Product Life Cycle Pricing

• All products have a life span, called product life

cycle. A product gradually progresses through
different stages in the cycle: introduction, growth,
maturity and decline stages. During the growth
stage, when sales are booming, a small company
usually will keep prices higher. For example, if the
company's product is unique or of higher quality
than competitive products, customers will likely
pay the higher price. A company that prices its
products high in the growth stage also may have a
new technology that is in high demand.
Competitive-Based Pricing

• A competitive-based pricing strategy may be

employed when there is little difference
between products in an industry
Temporary Discount Pricing
• Small companies also may use temporary
discounts to increase sales. Temporary
discount pricing strategies include coupons,
cents-off sales, seasonal price reductions and
even volume purchases.