B2B Market Analysis - Providing Direction for Business Growth
Market analysis is a common term that can be interpreted in many different ways. Having conducted hundreds of market analysis projects over the past 25 years, Priority Metrics Group (PMG) has developed a solid understanding of what should be included within the scope of an actionable market analysis in support of overall business growth. The main elements we suggest are as follows:
1) Definition. Before estimating market size, clearly define what is and is not included within the scope of the target market, ensuring it is fully vetted and understood among all stakeholders. Oftentimes, in our experience, we find that what is NOT included is the more important of the two parameters as it will save many needless discussions and frustrations as the project unfolds.
2) Market size and growth. Fundamental to understanding a market is the total revenue generated within the defined market. For most companies, this is often a go/no-go criteria. Growth is also critical as it is the beginning point of estimating what revenue may be available to a market entrant over a longer time horizon, and the long-term potential of the market.
3) Key competitors. It is critical to understand size, location, capital assets, human resources, technology and patents, strategy, customers, relative pricing, and many other aspects of competitors. This allows a company to effectively estimate competitive response to a new market entrant, and the realistic market potential. The greater the competitive intensity within a defined market, the greater the necessity for the new entrant to have a well-defined and measurable value proposition.
4) Market Access/Distribution channels. We worked with a company interested in the Brazilian market for their products. The market itself was extremely attractive – large, growing, and profitable. The limiting factor was distribution. A handful of large distributors controlled access to the sprawling Brazilian market, and there was no way to get product to end-users without using this existing distribution network. Consequently, a major focus of the project became centered on understanding these distributors and identifying the best long-term partner for market penetration and growth.
5) Product attributes and features. Whether defined by geography or other factors, different markets may have very different preferences and expectations regarding product attributes. The residential swimming pool market is an interesting example. In the US, the standard is a large concrete in-ground pool. In other countries, due primarily to space limitations and cost, smaller, fiberglass pools are the market-leading solution. An up-front understanding of these product preferences can be critical to the success of a new market entrant.
6) Current and potential market disruptors. The current state can change quickly, even in mature, stable markets. For example, government bans on plastic grocery bags and single-use packaging are radically changing packaging markets globally. In many cases, packaging solutions that have been in place for decades are quickly being replaced by options that are perceived to be more environmentally friendly.
7) Flexibility. There is a saying that “you don’t know what you don’t know.” It is important to maintain flexibility in a market analysis to be able to accommodate unexpected findings. A small new market entrant may have potentially game-changing technology and is willing to sell or partner with a company with an existing position or a new market entrant. For various reasons, an entrenched competitor may be facing challenges and is considering pulling out of the market being investigated. A well-executed market analysis process will uncover these potential opportunities, providing potential market entry strategies that were not considered before these facts were uncovered. A market analysis is conducted with the purpose of finding profitable growth. This must be pursued even if it comes in unexpected places.
The next time your company wants to understand the attractiveness of a potential market, incorporate these 7 elements in your B2B market research project.