Posted: Thu 2nd Feb 2023
Everybody always says that knowing your market is everything. Saying it is one thing, but understanding why it's so important will help you stay ahead of the pack.
And because understanding your market is not something you only do when starting your business, we developed a 14-page Workbook To Understand Your Market to make the process easier for our customers.
One of the best tools you can use to organise your market research is the SWOT analysis.
Connect with Susana on Enterprise Nation today for more brilliant support!
What is a SWOT analysis?
A SWOT analysis is a very commonly used strategic framework in business. It is simple to understand and provides a great starting point for considering strategic choices.
It's also versatile, as you can apply it to a product (for marketing), a business unit or your entire company – in relation to strategic business goals.
A SWOT analysis has two key purposes:
To help a company to determine its strategic goals
To provide the foundation for developing a strategy
What does SWOT mean?
The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats:
Strengths are capabilities that enable your company to perform well and which you must leverage.
Weaknesses are characteristics that prevent your company from performing well and which you must address.
Opportunities are trends, forces, events and ideas that your company can capitalise on to succeed.
Threats are possible events or forces beyond your control that your company must either plan for or decide how to deal with.
A SWOT analysis has both external and internal components. The external analysis usually precedes the internal analysis, as often you appraise opportunities and threats first.
The external analysis examines opportunities and threats, focusing on the company's environment. They include the following factors:
Types of external analysis
There are two main types of external analysis:
PESTLE analysis (PESTLE being an acronym for Political, Economic, Sociological, Technological, Legal and Environmental): This summarises high-level trends as they relate to your target customers, markets and technology. It captures changes on a macro level (that is, the big picture).
Industry analysis (also known as the Five Forces Framework): This focuses on the immediate environment surrounding the company, competitors, customers, substitutes, suppliers and new entrants. It complements the PESTLE analysis.
The internal analysis examines strengths and weaknesses, focusing on the company's resources. They include the following factors:
Research and development (R&D) pipeline
As you can see, there's a lot of data you need to research to make sure you understand your market. Outsourcing the research to a market research company would be ideal, but we know when starting your business, sometimes resources are scarce.
So here's a simplified do-it-yourself guide to carrying out market research.
How to conduct market research
Your market includes three pivotal characters. Together, they define the success of your business.
1. Your customers
They are the ones buying from your business. Getting to know what they like, how much they'll spend, what they enjoy and what they need will give you a better understanding of what they want from you. In turn, that allows you to translate your product or service into something that will sell to your target market.
If your product or service offers a different solution to an existing problem, a good place to start to evaluate your customer is by looking at your competitors.
What are other people out there doing that are similar to your business?
What are they doing well?
What do your customers like and dislike about the competition?
This will give you the insight you need into how to make your product or service even better on price and quality.
Outsourcing your market research
This would be the more reliable way to get your data. However, there are quite simple ways to get to know your market. We encourage our customers to use social media and online tools as much as possible because they are generally free, quick and easy to use.
For example, with customers in the UK, we used Facebook to promote a poll about the impact of the pandemic on family (parents and children) relationship dynamics. We set our limit and got over 500 responses on the customers' Facebook page. For them, it was a great way to get to know their community and something we'd definitely recommend.
Other options could be joining Facebook groups where your customers hang out and interact by adding value (answering questions and providing advice) to ask a question later on.
However, group admins don't like other people doing market research on their group or trying to lure their community to other groups, so avoid it. It will damage your reputation!
You also can use some of the traditional informal research like customer surveys and collecting customers' feedback. Be on the look out for problems and watch for even the smallest signs of dissatisfaction – as people will often stop buying from you or using your service rather than complain.
Also, interviewing your sales team and customer service team (if you have one) will bring you a wealth of knowledge to understand your customers.
To understand the environment in which your business is operating, these are some things you should think about in your research.
The economy: Economic research can help you allow for a recession or boom in the future. Focus on trends that affect your industry.
The population: You may find statistics on the population, spending power and consumption patterns helpful in identifying which areas of your market to target. Understand how to address key customer trends in the market – for example, shifts in the culture, generations and demographics.
Other research relating to your market: Syndicating data from organisations providing reports like GFK or Nielsen would help you to find facts and figures particular to your market.
2. Your competitors
Again, if you want the most accurate data, the best way is to get a reliable company to do the research. However, there is always informal research to help you to understand your competitors:
Study trade websites, newspapers and the business sections of local papers
Look at trade directories as soon as they're published, and note any changes
Try out competitors' services as a mystery shopper
Have a talk with your competitors' customers
Chat with your competitors – although they're your rivals, they're also your industry colleagues
Review their website and social media activity
3. Your suppliers
Fact-finding from your suppliers should be part of your quarterly review meetings. Points you could add to your agenda could be:
performance reviews and trends
developing new products
new approaches to marketing their products
new suppliers in the marketplace
Remember, you aren't looking for confidential information from your competitors, but data they use for running their business.
The benefits of understanding your market
Understanding your market is not something you do once in the lifetime of your business, and you should review your SWOT analysis at least once a year.
Below are some of the benefits of doing so:
Helps your company to determine its strategic goals
Provides a foundation for developing a strategy
Identifies new opportunities to increase your market share and tap into new markets with your existing products or services
Identifies opportunities to develop new products or diversify
Future-proofs your business