Analysing the market – the microenvironment

Getting started with analysing the market – An introduction to the Market analysis

Analyzing the market is not an easy task but absolutely a must in order to understand what strengths and weaknesses your competitor’s show that you can benefit from. Although, it is good to keep in mind that the customer is the one that has the best “SWOT” of the competition – he or she will always know what differs you from the others and vise versa. If you understand the “photography of all your competitors” you get a picture of what your differentiators would be.

The question you have to ask yourself ALWAYS is what your customer would ask you: “why do I have to buy from you”?

When you think of your offering you have to be able to answer “and what?” questinos. Imagine that your customer is continually saying “and what”? (every time you argue for what makes you special) when you have said your 3rd or 4th reason for why they should buy from you, you have probably reached the limit of what your strengths are and main differentiators.

What is a market?

A market is a combination of:

  • money to spend
  • willingness to spend it

When study a specific market always calculate the size in % and the revenues in real value € in order to understand what you are dealing with. This doesn’t only give you an idea of the size of your market, it also helps you identify if you market price is average, lower or higher than the competition.

For some products, the price is a strategic factor and differentiator but its good to remember that it has to be very high or very low in relation to the others to be interpreted as an advantage by the customers when taking a buying decision. If you are in-between something and very generic the price would not be interpreted as a differentiator.

Different types of markets

A market is a wide description of “something” but hard to grasp. It is easier to look at it if you subcategories it like this.

  • Current market: the present market I have currently. E.g TeaSuscription niche Market).
  • Target market: what I would be able to reach because it exists. I.e. the market I try to reach with my marketing activities (e.g. the tea lovers on that market, the not yet tea lovers).
  • Potential market: the potential of the market. Those markets that I’m not targeting now, but aware of exists to be targeted (e.g. schools, enterprises, joint offering with other subscription services).
  • Total market: the universe of needs you can cover with your offer (e.g. the whole tea market).

Market ratios

It is good to make a study of what penetration you have on the current market and how much your participation is in order to identify where you may have a problem. The way of doing that is to study the relation between market penetration and market participation. There are different ratios that can indicate where you may have a problem. Where shall you start to look?. You are comparing the market with to business. 

What happens if my penetration of the market is 10% but my participation index is 8%? A probable reason is that you are selling to a price that is too low price compared to your competitors.

How to limit your market

Previous years, the physical market was easier to identify (local, regional, global) but with the online business this is not valid anymore as competition becomes global. Limiting the market may be harder, more complex and the competitor analysis of course more complex as well.

Is it a B2C or a B2B?

There is a clear difference in behavior of these two that needs to be taken into consideration when working with an offering, a strategy and communication.

  B2C B2B
Neutrality of buyer Individual or familiar Company or institution
Reason for use Personal or familiar Production, reselling and manteinement
Professionalism of the buyer Little and no A lot
Demand Elastic Inelastic (expect the price to be lower, not affected by demand)
Motivation Subjective Rational
Production Based a stock Based on order
Distribution channels Long Short
Publicity Very important Little important
Selling process Short Long
Selling staff Straight forward Technical / sell person

 Would you add something to these notes related to how to work with a market analysis?

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2 thoughts on “Analysing the market – the microenvironment

  1. Pingback: What to think about when doing an External Analysis for your Strategic Marketing Plan | Patricia Polvora's Blog

  2. Pingback: Internal analysis -how to identify your competitive advantage | Patricia Polvora's Blog

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