How to conduct a quick analysis of demand for a product or service?

The world's leading brands invest large sums in marketing research, the results of which largely influence key management decisions. The cost of such research starts from 60,000 rubles and above - astronomical amounts, especially for small businesses. However, knowing how to analyze the market, you can obtain key information yourself.

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First of all, you need to clearly define your goals. The subject of your research depends on what information you want to obtain. The main structural components of the market analyzed by the entrepreneur are:

• market condition (capacity, conditions, trends, reaction to new products);
• the share of different companies in the market, their capabilities and prospects;
• target segments, their behavioral characteristics and product requirements, level of demand;
• price level and profit margin in the industry;
• free niches in which you can do business;
• competitors, their strengths and weaknesses.

Speaking about how to correctly analyze the market, it is worth emphasizing that a specific, understandable goal allows you to reduce costs, not waste time processing useless information, and immediately select the most effective research methods.

Step 1: Gathering Basic Information

The “starting point” in conducting a comprehensive analysis is Market Research (in fact, the study of the market and its prospects). Ideally, it is necessary to analyze information for the last 3-5 years.

The key indicator here is market capacity. In simple terms, this is the amount of goods that consumers can buy in a certain period of time - a month or a year. The formula used for calculations is:

V=A×N

where: V is the market size, A is the number of the target audience (thousand people), N is the rate of product consumption for the period.

Based on this indicator, they calculate what maximum level of sales the company can achieve in a given region.

The next criterion to pay attention to is the level of demand. It is important to take into account the dynamics of the market, whether it is developing or, on the contrary, declining. In the first case, it is necessary to determine its potential and limits of growth, and at the stage of stagnation, it is necessary to understand how long this will continue.

Additionally, they study factors influencing the market, the share of key competitors in total sales, and methods of selling products.

Based on the data obtained, it is necessary to identify the main trends and directions of development, as well as analyze the market prospects - what consumers are choosing now and how their preferences may change in the foreseeable future.

Tip: Up-to-date statistics and research on individual markets at the international and national levels can be found in industry journals and economic reports.

Mistakes when conducting market analysis

Of course, each area and each enterprise has its own characteristics when conducting market analysis . It is clear that a study of, for example, the metallurgical industry will differ significantly from an analysis of the educational services market. But there is a list of mistakes that are made, as a rule, in all industries.

So, these errors include:

— Focus only on data for reporting (previous) periods. The situation in the present and future may change dramatically, and this should be taken into account. Therefore, focus not only on available statistics from past years, but also take into account the current socio-economic context and development trends in your chosen market.

— There is no consideration and analysis of consumer opinions. Briefly, the meaning of this mistake can be explained as follows: if you like the idea/product, this does not mean that consumers will like it and create demand in the market. The opposite statement is also true. Therefore, the main rule when creating any business is to focus on consumer preferences, and not on your own. To do this, we advise you to conduct serious marketing research, without saving on the associated costs and without neglecting to seek help from specialists in this matter.

Stage 2: Identifying target segments

So, we know the volume of the analyzed market as a whole. Now it is necessary to determine which consumer groups bring the company the main profit, what unites them. To segment the audience, different criteria are used - gender, age, profession, income level, social status, interests, etc. Depending on the priorities, the significance of individual factors may differ.

To decide which segments to target first, additionally analyze:

• volume of each segment (number of potential customers);
• geographical location;
• accessibility to different consumer groups;
• Estimated costs of time and finances to start activities.

A competent choice of target audience in the future will save the entrepreneur from unnecessary costs and will allow him to direct resources to attracting the most “profitable” buyers.

Stage 2: Study of external factors

Any market is constantly exposed to external influences. Modern marketers identify 6 types of external factors that influence organizations:

• political (state policy in the areas of transport, employment, education, etc., taxes);
• economic (inflation level, interest rate);
• social (population, worldview, level of education);
• technological;
• legal (laws governing the creation and operation of enterprises);
• environmental.

Some trends appear slowly and are easy to predict - for example, back in the 70s, society began to discuss environmental issues, and now eco-friendly business has become a global trend. At the same time, the economic situation can change at any moment, and it is simply impossible to say with certainty what will happen in 3-5-10 years.

Stage 4: Competitor Analysis

Speaking about how to learn to analyze the market, special attention should be paid to studying enterprises that are already operating in this industry. First of all, you need to learn as much as possible about the companies themselves and their capabilities:

• technologies used in the production of goods and services;
• availability of patents and unique technological advantages;
• personnel qualification level;
• access to limited, rare resources;
• possibility of obtaining additional investments.

The next step is to study competitors' products and services. It is necessary to evaluate “through the eyes of the consumer,” taking into account both rational and emotional factors.

All that remains is to systematize the data and objectively compare the main market players. For convenience, we suggest using a simple template.

Company A	Company B	Company B
“Intersection points” (where exactly do you compete)
TA (target audience)
Market share
Product range and quality
Prices
Marketing strategy (offline)
Marketing strategy (online)
Sales Policy
Competitive advantages
Competitor's strengths
Competitor's disadvantages

By completing the table, you will get a basic understanding of the main market players and their activities, and you will also be able to compare their performance with yours.

How to correctly use Yandex Wordstat to determine demand

The Yandex application for market analysis - Wordstat - allows you to obtain all the necessary information on the demand for a specific product or service. At the same time, do it quickly, but with the highest quality. The program makes it possible to obtain information on demand both throughout the entire network and in a region, city or even district. This is especially true for megacities, where each district is equal to a small city.

Before determining demand using this service, you need to familiarize yourself with its functionality in detail.

The basic functions of Wordstat that give a correct understanding of the output result are “Quotation marks” and “Exclamation mark”. If you write a phrase in quotation marks, then the data for this particular query will be shown in this wording, and an exclamation mark placed in front of the desired word will allow you to see queries with this word with exactly this ending.

Additional functionality of Wordstat includes:

• “Or” is very useful when comparing and selecting semantics for a personal website. Specified by the “|” symbol.
• “Square brackets” - Fixes the order of words in a query, helps to evaluate the popularity of similar phrases and the frequency of the query. Specified by the symbols “[]”.
• “Plus” is useful when searching for queries that use stop words. Specified by the “+” symbol.
• “Minus” - used when excluding some words from the query for a narrower search. Specified by the “-” symbol.
• “Grouping” - makes it possible to group other functions that are described above. Specified by the symbols "()".

Stage 5: Price Analysis

Go ahead. Now you need to focus on one of the key aspects, namely, analyze the prices of your main competitors for goods and services.

To see the full picture, it is necessary to divide all market players into price segments - economy, premium, etc. It is also important to understand the price structure (cost, promotion and advertising costs, markup) and approximately calculate the profit from each sale.

In this case, you should take into account not only standard prices, but also the presence of bonuses, promotions, special offers, as well as installment terms.

Be sure to think about what reasons could lead to a change in average market prices upward or downward.

As a result, you should get a clear picture of competitors' pricing policies, find out what the reasons for the differences in costs are, and calculate the possible profit in N months/years. Based on this, you can determine whether the company’s prices are too high or low, how best to position the product - expensive but high quality, or affordable and economical.

We determine demand based on information from suppliers

Suppliers are entrepreneurs just like you, but they sell in bulk. Today, by the way, it is becoming fashionable to have your own online store for the supplier, where not only companies, but also any individuals can buy goods.

There are two options for determining demand in this way. The first is when communicating with a supplier (or personal manager), the second is by analyzing the price list. Let's start in order.

Option one. This is the easiest way to find out the demand for a product. You are not a single supplier, and many of your competitors also stock through him. And accordingly, the supplier sees which product is popular and which is not in great demand. Many wholesalers are also not interested in their warehouse becoming illiquid and react to the market by purchasing popular goods in large quantities. The supplier himself can be happy to tell you which product is in demand and which is not. Moreover, it may even draw your attention to a number of nuances that should be taken into account when selling. Of course, you don’t need to blindly trust the supplier’s words and it makes sense to double-check them using the methods described above. And if you can confirm his words, then you can continue communication in this vein. Unscrupulous suppliers will naturally try to deceive you and pass off illiquid goods as hot goods; you need to be careful here.

Second option. This is an analysis of attrition rates based on the supplier’s price list. Usually suppliers send their price list at some frequency, for example, once a day or every other day. Naturally, the same price list also applies to numerous competitors who order interesting and popular goods in their store. This will undoubtedly require patience, because... you need to collect several price lists to track the dynamics of changes at the supplier. Of course, if the supplier has a huge assortment, then it is quite difficult to evaluate it manually, but fortunately, this can be automated by writing a small program that will track this for you and issue a report in a simple and understandable form.

Stage 6: Research of main distribution channels

Marketers who analyze the market situation and participate in the development of business plans often emphasize that this point is one of the most significant.

When considering the current distribution system, it is necessary to highlight the main elements - wholesale and retail chains, individual stores, warehouses, transport companies.

They study both individual enterprises and the operation of the logistics system as a whole - how products move from manufacturers to final consumers, through which intermediaries they pass, how long it takes, etc.

What you need to find out:

1. Which trading enterprises operate in a certain area (specialized and branded stores, supermarkets, kiosks, etc.), their relationship.
2. Location, size and sales level of major stores.
3. Distribution intensity is the percentage of points where you can buy goods from a particular manufacturer in a given region.
4. Which contingent purchases more often in stores of one type or another (place of residence, average check amount, percentage of regular customers).
5. The level of distribution density is the ratio of the total number of stores to the population density in the study area.

A key indicator of the efficiency of a distribution system is the level of expenses. It is calculated by the formula:

VD = T + Sp + C9 + G

where: VD - distribution costs, T - transport costs, Sp - fixed warehouse costs, C9 - variable warehouse costs, G - the amount of orders not completed on time (in monetary terms).

How to determine the demand for a product in your region

To enter the market only in your region, you need to do all the same work, but with a geographic limitation. This way you can find out not only the demand in the region, but even in the city district. for example, coffee to go or fast food will be in demand on a college campus, but are unlikely to find the same demand among factories, which often have their own canteens with low prices.

Do you want your own profitable business? Get a free Skype consultation on opening an online store

Studying demand in the region is relevant not only for offline segment services, but also for online sales, if you need to reduce transportation costs and thereby make a more favorable price. Although there are also those who are so excited by the idea that they are ready to buy what they want and take on all the expenses themselves.

Stage 7: Evaluating the effectiveness of advertising campaigns

Another aspect that needs to be addressed when discussing how to analyze the market. You need to find out what tools other companies use and what they do to attract and retain customers.

The main elements of the marketing communications mix are:

• advertising (in newspapers, magazines, on Internet resources, TV, radio, outdoor, etc.);
• PR/propaganda - creating a positive image of the company and its products through the publication of news, reviews, interviews and other materials in the media;
• sales promotion - special events to encourage purchases (coupons, competitions, free product samples, discount programs);
• personal sales.

Where do competitors advertise most often? What do they write about them in the media? What discounts and bonuses do they offer? The more information, the better.

At this stage, special attention should be paid to the numbers:

1. The average number of contacts a potential client has with different advertising media.
2. Ad effectiveness. The easiest way to track statistics is on Internet sites - modern services provide information on the number of views and clicks on links, the time the user spent on the site and its activity.
3. Conversion is the percentage of site/store/event visitors who made a purchase or other targeted action, out of the total number of visitors.
4. Cost of contact - how much money the company needed to invest in advertising for 1 person to leave their details or contact the manager (the ratio of the amount of the advertising budget to the number of consumers with whom they were able to contact).

To understand where and how best to “catch” potential clients in a specific niche, you should separately study the effectiveness of each method in the chosen niche.

Example

Advertising in traditional media (TV, radio, popular magazines) works great in the B2C segment, but is completely ineffective for B2B - serious managers often don’t even spend time on it. But they may be interested in statistics, plans with clear numbers, “dry” facts that prove benefits for business - something that will only bore the average consumer.

How to Research the Market When Writing a Business Plan

Market analysis can be primary and secondary. Primary analysis studies the consumer directly, while secondary analysis examines information about the consumer that others have already collected. Primary analysis involves telephone interviews or online surveys with randomly selected target group members. You can also review your company's sales records and include them in your primary analysis. Secondary analysis may rely on reports found on other organizations' websites or industry blogs. For a business plan, you can use one of these types of analyzes or combine them.

The main questions you should try to answer through your research are:

Describe them, taking into account age, profession, income, lifestyle, education and other indicators.

Describe their purchasing habits related to your product or service. How much do they buy? Who is their favorite supplier? What product features are most in demand? What is the standard price for the product?

This is a tricky question that companies use to try to get into the consumer's head. The answers will depend on the product and what it is used for. Thus, when buying kitchen utensils, people may pay attention to the fact that it has a non-stick surface, or that a set offers a large number of pans and pots for a certain amount, or that it simply has a nice color.

• What will make them buy your product?

Some of these questions may seem strange, but by answering them, you will be surprised at how much detailed information can be gleaned about markets, sales, and customer motivations. By researching information resources to find answers, you will make your plan more compelling and increase your chances of success.

Some specialized business plan software includes detailed market research and online analysis. You can also use this opportunity. You can also use a company that offers a full range of services, from industry research to player-specific credit reports. Market research is expensive. And in order for it to look solid, it requires expertise, human resources, and technology. Large companies regularly spend tens of thousands of dollars studying aspects that they sometimes don't even need. Smaller companies can't afford to do this kind of work too often.

For companies of any size, the best market research is the work they do themselves. In such an analysis, you can use the format of telephone interviews with consumers and process data about competitors collected through social media. You may also find the likes and likes information available on Facebook useful. Use Google Analytics to filter data relevant to your online visitors.

You must do your due diligence in everything related to your industry. By observing similar businesses and analyzing their data, try to find matches. For comparison, consider:

1. companies of similar size;
2. companies located in the same region as you (if we are talking about Internet business, then these can also be global companies);
3. companies with the same ownership structure;
4. new companies. Of course, you can learn something useful from old players, but they can only be successful today because they have been in the market for 25 years and have managed to acquire a certain reputation.

You will want to use the information you gather to determine not only how many successful deals you can make, but also how you will fit into and adapt to the existing market.

What points should be considered in order to spend your budget on market analysis wisely?

1. Determine what you need to know about the market. The more accurate the analysis, the more useful it will be.
2. Set your priorities. You can't analyze everything, so focus on the information that will help you achieve ROI faster.
3. Look for less expensive alternatives for market research.
4. Estimate the cost of conducting the analysis yourself. The Internet can help you in many ways. If you are considering hiring a consultant, remember that in any case, it is about your dream, your goal and your business. And don't pay for what you don't need.

Based on materials from Entrepreneur.com

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Step 8: Study Consumer Behavior

To develop a strategy, it is not enough to know general characteristics such as age and income. You need to understand how to work with a specific type of people, how they make purchasing decisions, what they pay attention to, etc.

Consumer analysis is carried out in several directions:

• motivation, identification of needs and goals;
• expectations regarding service standards and prices;
• key criteria (what does one want to get from the product/service in the first place);
• reasons for dissatisfaction and complaints (what you are not satisfied with in the product or service);
• decision-making process (what is guided by logic or emotions, who is consulted with).

Understanding your target audience is an important step to building a strong, trusted brand.

Research format

Let's talk about how to analyze the market in practice. Modern marketers use several basic programs for data processing:

1. SWOT analysis. Ideal for developing company strategy. The information is entered into a table with 4 blocks: Strengths, Weaknesses, Opportunities and Threats/Risks. This takes into account both internal and external factors.
2. PEST. Allows you to see the real position of the company in the industry, as well as the influence of external factors (economic, political, technological and social).
3. PESTLE. An extended version of PEST analysis, which also takes into account the influence of climate, geolocation and legal factors.
4. "Porter's Five Forces" One of the most powerful tools for those who want to know how to analyze the trading market. According to this methodology, it is necessary to highlight 5 key factors that determine the company’s strategy and tactics. However, there are also disadvantages - this methodology does not take into account all exceptions and particulars, but is developed for each line of business separately.

The format directly depends on the purposes of the study and the availability of information. Sometimes it is much more clear to present information in the form of charts and graphs based on ordinary tables.

Let's summarize

There are other tools, for example, Google Trends or contextual advertising Yandex.Direct and Google Adwords - which are also sometimes mentioned in some articles. I would not recommend analyzing using contextual advertising, because... a lot of money goes down the drain there, especially for beginners, and this can only mislead you.

When determining demand for a product, I recommend using multiple methods, or even all of them, to get a more complete picture. Because each individually does not always give a clear picture...

As for the much-advertised Yandex.Wordstat as the main tool for analyzing consumer demand, I hope you understand that it does not give a clear answer. Moreover, it can greatly distort the state of affairs, both up and down. I got burned by this more than once until I started analyzing in all four ways!

Update 07/25/2017. Video on the topic

Main sources of information

Although you can find ready-made analysis of any industry online, it is better to take the time to do your own research. This is the only way to get detailed, up-to-date information specifically on your niche and region.

Speaking about how to analyze the trading market or any other, we can highlight several methods of data collection:

• surveys and questionnaires (open or closed type - with answer options);
• focus groups - a round table with several representatives of the target audience to discuss the company’s products and services;
• experiments and A/B testing;
• personal interviews with clients and partners;
• studying thematic forums and groups on social networks;
• work with industry experts - interviews with specialists, researchers, marketers who can confirm the accuracy of information from open sources and make their forecasts regarding market development;
• study of open state and regional statistics;
• documentation and reports on the activities of various enterprises.

To see the full picture of the state of the market, it is necessary to understand the patterns of its functioning and development, and the ability to analyze the situation on the labor market. Acting consciously and having a clear strategy are the most important conditions for success in the 21st century, when the old truth “who owns the information, owns the world” becomes even more relevant.