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Market Analysis Overview

Market Analysis

The next section of the feasibility analysis is the market analysis.  This portion may be the most important in determining whether an idea is a valid business opportunity. It focuses on determining whether there is a potential market for the product.  Every market analysis should contain the following five sections:

  • Customers (Segmentation) – Identifying the customer segment will allow you to understand who wants or needs your product and is qualified as a potential customer.
  • Price (determined for each customer segment) – You need to know how much a potential customer in a given customer segment would be willing to pay for your product or service (i.e., how much revenue you can expect from each customer segment).
  • Market Size – The market size (made up of all of the identified customer segments) will tell you how many of those people who want your product(s) are in the market.
    • Market Size = the number of potential customers  x  the quantity purchased by an average buyer  x  the price of the unit.
  • Priority – Priority shows the willingness of customers to purchase at a given level of information about the product (i.e., sales and marketing effort by the business).
    • In summary, the number of potential customers, market size, price, and customer priority, taken together, will allow you to make projections of how many sales you will make at a given price.  For example, grabbing 1% of the market value yields a specific amount of potential revenue.
  • Important Strategic Information About Market:
    • If you are unable to serve all segments, then you will choose the customer segment and corresponding price point that maximizes your value.
    • Customer trends give rise to increased demand for your product, higher prices at the level of demand, and new customer segments within the market.

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