What Is Market Analysis?

No matter what type of business you run, you need a deep understanding of the core of your market. Obtaining this understanding is the primary goal of a market analysis.

You need to clearly know and sense what your customers want, what your competitors do, what is the size of the market, its growth trends, what critical and legal issues you have to face and there are many other questions you must know the answers. In addition, the market analysis is a key part of your business plan and overall strategy.

On this page:

  • What is market analysis? Definition and explanation.
  • What includes a market analysis? Key dimensions and elements.
  • Infographic in PDF

What is Market Analysis? Definition and Importance.

It is easy to define it:

The market analysis is a process of assessment and determining different factors and conditions in a market within a special industry. Analyzing your market is not a one-off. If you want successful marketing efforts, you need constantly updating your knowledge for the market.

Why is the analysis of a market important?

Why your business needs it? Well, there are a bunch of important reasons but here are some of the top:

  • You are up to date with what is going on with your competitors, customers, market trends, and etc.
  • It is a basis for developing better communications with your customers.
  • You are able to see different opportunities.
  • You know what is your reputation.
  • You are able to make better business and marketing decisions and strategies.
  • Forecasting sales for new markets and more.

What information can a market analysis give you?

This is the key question. To be able to take the right decisions and to plan successful strategies, you need the right information for the market dimensions and elements. So, let’s see what are they.

What Includes Market Analysis?
Key Dimensions.

Market Analysis Elements and Dimensions

Market Size

What is a market size?

Roughly said, this is the number of people or organizations who are the potential buyers and sellers of a given product/service. Particularly, the market size gives you an idea how big is the market, what is the potential sales volume, volume sold and etc.

Many businesses aim to find an as bigger market as possible. And it is a good goal but keep in mind that the bigger market size means also more competitors. So, you need to know how to be better than them.

How can you estimate the market size?

There are many methods but the most popular of them are: the information from trade associations, government research, customer surveys, different types of financial data and etc.

More on the topic of market size, you can find on our previous post: key market sizing questions every marketer should know the answer.

Market Growth Rate

The fact that market has a size doesn’t mean the size will be always the same. As everything in this world, market size changes and in some industries the changes are dramatically fast and enormous.

What is a market growth?

The increase in size or/and sales within a particular target market over a given period of time.

Market growth has a crucial role in your business, so you need to know how fast is the growing, what is the market growth potential, is the market increase or decrease and etc.

The market growth rate is also the basic information investors need before making an investment decision. If it is likely to grow then investors can decide to put in more money in it.

How to measure market growth?

For estimating the growth you can use indicators such as the year-to-year trend in the industry, the trend in the number of customers, the size of purchases per client and etc.

Market Trends

What is market trend?

A market trend is a perceived tendency of a market upward or downward movement over a specific period of time.

So if you are about to decide what kind of product you are going to sell, you need to know what is its market trend. Market trends are the key source of new opportunities and threats.

Knowing the trends will give you some important answers to the questions such as what the customers like, how much they are willing to spend on it, what other capture their attention and etc.

How can you measure the market trends?

In the marketing theory and practice, some of the most popular basic trend measurement approaches are: higher highs and higher lows, discretionary analysis, and the 50-period simple moving average. More on the topic you can read on Barry Burns post: how to determine the trends.

Customer Description and Segmentation

What is a customer description?

Well, it is to define your customers in geographic, demographic, psychographic (such as their lifestyle, beliefs, and behaviors that affect their purchasing decisions) and other terms.

All of these customer characteristics are the basis of creating market segmentation and defining your target market.

What is a market segmentation?

Market segmentation is the process of dividing a market (existing and potential customers) into groups of consumers known as segments. This splitting is based on some type of similar needs or demand characteristics.

Market segmentation plays a crucial role in satisfying your customers’ needs, increasing your business competitiveness and profitability.

How to do market segmentation?

More on the topic you can see in our previous post 51 market segmentation examples.

Assessing The Competition

Any business aims to be better than competitors as offer products and services that better satisfy the customer needs. In order to achieve this, you need a deep knowledge of who your customers are, what their strengths and weaknesses are, what they are offering and etc.

Understanding the competition doesn’t always have to be a complicated and expensive process. Nowadays, the Internet is an endless sea of information and you can use it to collect data for assessing your competitors.

By investing even a small amount of time, you can make competitive assessments and intelligence and come up with ideas on how to position your own brand in the marketplace.

Not only can you discover your competitor most effective ways to win customers but you can also learn to avoid their mistakes.

How to assess the competitors?

Some of the best ways to research and assess them are:

  • investigate their website (look at their products – how are they presented, look at the “about us” page, “mission” page and etc)
  • shop them yourself
  • ask your customers what they like about your competitor
  • follow their news and press releases.

Social, Economic, Political, Legal, and Technologies Factors

These factors represent the whole environment where your business operates. You need to have a bird’s eye view of the surrounding settings and conditions from many different angles.

There are some crucial points you need to be familiar with:

  • What is the political scene of the country – what is the sort of government leadership, policies, all the taxes laws and etc?
  • What are the economic factors (the interest rates, the foreign exchange rates)?
  • What are the main social factors (lifestyles, cultures, demographic picture)?
  • What are technological innovations likely to affect the market?
  • Main legal factors (safety standards, consumer laws, etc)?

How to measure business environment factors?

The most popular way is to use the PESTLE analysis model.


One of the biggest challenges any business faces is to gain the sufficient understanding of the market.

You can have many business ideas and expectations but they mean absolutely nothing if you don’t have a deep knowledge of your market characteristics and dimensions.

Market analysis is not an activity conducted just once.

If you want to offer the best possible buying experience to your customers and to get steps ahead of your competitors, you need to perceive market analysis as an ongoing cycle.

The power of information is notable when it comes to market analysis. The information you gain can direct your most crucial strategic business and marketing decisions.

Download the next infographic in PDF format: What is market Analysis?

What is Market Analysis - Infographic

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