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How to Write a Market Analysis: a Comprehensive Guide

A market analysis is essential for any business, be it a tech startup or a traditional brick-and-mortar establishment. It provides invaluable insights into the competitive landscape, consumer behavior, and market trends.

This guide will illustrate the process through the lens of both a digital product (a Fitness app) and a physical service business (a hair salon). Let’s dive in!

How to Define Your Target Market

Defining your target market is the first step in a market analysis. It involves identifying and understanding the specific group of consumers you aim to serve. By segmenting the market based on demographics, behaviors, and needs, you can focus your efforts on the most lucrative market segments.

  • Example for a Hair Salon: If you’re opening a salon in an upscale urban area, your target market might be professionals aged 30-50, looking for high-end hair care services and willing to pay a premium for organic or bespoke treatments.
  • Example for a Fitness App: Imagine you’re launching a fitness app aimed at busy professionals. Your target market might include individuals aged 25-40, with full-time jobs, interested in quick and effective home workouts.

How to Use TAM, SAM, SOM to Determine Market Size

Understanding the size of your market is crucial for setting realistic business goals and attracting investment. Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) are metrics that help quantify the market opportunity for your business.

  • Example for a Hair Salon: The TAM could be all individuals seeking hair care services in the city, the SAM might be those seeking high-end services, and the SOM could be professionals in the downtown area looking for organic hair treatments.
  • Example for a Fitness App: For the fitness app, the TAM could be all individuals interested in fitness apps globally, the SAM might be those in countries you plan to operate in, and the SOM could be busy professionals in those countries looking for quick workout solutions.

How to Conduct an Industry Analysis

An industry analysis provides a deeper understanding of the market environment your business operates in. It examines market trends, key competitors, regulatory landscape, and technological advancements. Utilizing frameworks like a SWOT analysis can help assess the competitive intensity and attractiveness of an industry.

  • Example for a Hair Salon: Analysis might show a trend toward more personalized hair care experiences. Also, you could show an increase in male grooming services, and a growing emphasis on sustainable practices within salons.
  • Example for a Fitness App: an industry analysis might reveal a trend towards personalized workout plans. Or even a high competition among apps, and the importance of partnerships with fitness influencers as a key strategy.

How to Write a Customer Analysis

A customer analysis gives you insights into who your customers are, what they need, and how they make purchasing decisions. This component of the market analysis is essential for tailoring your product, marketing strategies, and customer experience to meet your target audience’s needs.

  • Example for a Hair Salon: you may find that your target customers value convenience and quality over price. Also you could find that they prefer booking appointments online, and are influenced by social media trends and testimonials.
  • Example for a Fitness App: customer analysis might show that busy professionals prefer apps that offer short, varied workouts. You may also find that customers are influenced by recommendations from fitness experts and user reviews.