A cool business idea is half the battle. The second half is painstaking analytical work and careful planning. Moreover, it is better to spend time on this before you invest at least a ruble in your offspring, so that it will not be excruciatingly painful.
On the Internet, you can find dozens of stories in which the business was falling apart simply because the entrepreneur did not pay enough attention to analyzing the market at the start. What to go far, the author of this article also has his sad experience. Therefore, I can say with certainty: market research is not a formality. It will allow you to make the right decision in cases where it is better not to start at all, or to correct plans if there is a chance of success.
We will understand how to analyze the market before starting a business and not spend a lot of time and money on it.
- We collect information
- Analyzing the overall market performance
- We investigate the demand and target audience
- Search engines
- Social network
- User Content
- Value competition
- Competitors' websites and social networks
- Customer surveys
- mass media
- Online tools
- Financial reports
- Offline point
- Price Monitoring Services
- We look at external factors
- We structure and process data
- Graphs and Charts
- Maind cards
- Draw conclusions
- SWOT analysis
- PEST analysis
- And finally
We set goals and goals
Someone this stage seems unnecessary and redundant. However, it is worth taking it seriously. It is objectives and goals that determine what information is sufficient for analysis. If you explore the market without having a list of questions in front of you, you risk spending a lot of time collecting and processing unnecessary information.
Before starting a business, first of all you need to understand how promising it is to make up this story. Therefore, the main objective of the study will be:
Determine the feasibility of starting a new business in the selected niche.
I will consider each stage on the example of an analysis of a hypothetical business - a barbershop, which is scheduled to open in Tver. My goal is to determine the feasibility of opening a new barber shop in the city.
Now we need to formulate the tasks, the solution of which will help us to achieve the goal. To determine the feasibility, you need:
- Learn the capacity and dynamics of the market.
- Assess the level of demand and the relevance of your offer to the needs of the target audience.
- Analyze the competitive situation on the market, identify strong players.
- Examine external factors and global trends that may affect the market.
The task list can be used as a plan that will guide you in market research.
For my hypothetical hairdresser's task will look similar. In the future, we will expand each item into a detailed list of questions.
We collect information
Market analysis begins with the collection of data that will later need to be structured and processed.
Analyzing the overall market performance
To understand that a new business has no chance in the chosen niche, sometimes it is possible already at this stage. Then do not have to spend time researching customers and competitors.
To have a general idea of the prospects of the market, you need to answer the following questions:
- What is the market capacity?
- What is its dynamics?
- How has the market changed in the last few years?
Calculate accurate indicators in some areas, and even more so for specific regions is problematic. But for our purpose this is not necessary. It is enough to find evidence that the market is not falling, and there is room for new players. If you are not opening an online store and do not plan to work for the whole country, it is important to consider issues in the context of a specific region.
Since I am more of a theorist than a businessman practitioner, we will turn to marketing theory for the definition of capacity and related concepts.
Market capacity is the amount of goods or services that buyers are willing to buy at prevailing prices.
It is usually calculated for a specific territory and for a specific period, most often for a year. So, for my example, I need to calculate how much hairdressing services the residents of Tver are ready to buy per year. The indicator can be presented in kind - for example, the number of haircuts - and in terms of money.
Market capacity depends on:
- the level of consumption of the product;
- having similar ways to satisfy the same need;
- price level;
- the quality of the goods;
- the effectiveness of marketing and advertising investments, etc.
The indicator is calculated in several ways: expert approach, economic and mathematical modeling, the method of industry growth and others. All of them are rather laborious and time consuming. In addition, to obtain more accurate results, it is better to use several methods. However, to determine the feasibility of starting a business rather approximate numbers.
It should be borne in mind that there is a potential and real market capacity. The latter is difficult to calculate: you need to sum up the sales of all players in the region, and this information is usually not advertised. The exception is some large companies that publish online financial results. An inexpensive way to find out the real capacity of the market is to look for Rosstat data and open marketing research. True, detailed information in them is presented mainly throughout the country and major cities, regional reports are poorly detailed. But such data will be useful.
With potential capacity, everything is easier. Marketing practitioner Andrei Minin in the book "Marketing Planning: Russian Practice" for an indicative assessment of the market suggests starting from the norms of consumption. It is necessary to multiply the number of the target audience in the region by the maximum level of consumption and the average cost of one unit of production. The first indicator can be found on the website of Rosstat, the second - in industry publications or opinion polls, the third - to calculate independently based on market prices.
To determine the dynamics, you need to take the indicators of market capacity over the past 5 years. If it increases, then the dynamics is positive, if it decreases, it is negative. Such information will allow you to see the prospects of the market. Positive dynamics suggests that the market is growing, which means that new players have a chance to take their place. In the case of the negative, you need to find out the reasons, assess the competitive situation and the offers of other players, and only then decide whether to enter the market or not.
Let's try to find out the capacity and dynamics of the Tver hairdresser's market.
In the report of Rosstat "The structure of household services to the population" a separate line highlighted hairdressing and beauty services, their volume for 2017 and the percentage as indicated. The screenshot shows that the share is growing, and the volume is 97.4 billion rubles.
It would seem, here it is, the capacity, what else is there to consider? However, this table reflects the turnover throughout the country, but Tver is of interest to us. Since I did not find such accurate data for my region on the Rosstat website, we will try to calculate the capacity based on consumption rates.
The target audience of the hairdresser is wide: both men and women between the ages of 3 and 70-80 years old are having their hair cut. On the Rosstat website, you can create a report on the gender and age structure of the population for any region. I made such a table for Tver. Excluding the population under 3 and over 70 years old, we get 364.4 thousand people.
Now you need to understand how many times a year they use the services of hairdressers. For my hypothetical example, I found a survey on the network and will consider its results representative. For real business, this is not entirely true - we do not know who and from which regions participated in it. To collect data it is better to poll your target group. For example, you can target a post in social networks by gender, age and geography - many people flipping through the tape automatically reading a question and answering. Another option is paid survey services.
Most respondents voted for the options "once a month" and "several times a year." Since we are considering a wide target audience, you need to remember - some of these people go to the hairdresser every month, others - no more than once a year or not at all. Suppose, on average, Tver residents go to the hairdresser once every 3 months, or 4 times a year. The last parameter to calculate is the average cost of the service - 450 rubles.
Now multiply the number of potential customers by the level of consumption and the cost of one service.
364.35 thousand people × 4 services × 450 rub. = 655.8 million rubles.
Given that the actual capacity, which we calculated in proportion to the population of the national, almost 2.5 times more, the market has room to grow.
It remains to deal with the dynamics. I could not find reliable statistics for my region. However, according to Tverstat, since 2013, 23 new hairdressing salons have appeared in the city, and the number of chairs (yes, in the statistical reports and this parameter) has increased almost 1.5 times.
The situation on the Russian market is illustrated by the graph, which, based on Rosstat data, was built by the research company NeoAnalytics. If desired, you can buy the full version of the study and save time. But such a schedule, which I found in the demo version, will also help to form an idea of the market situation.
A similar chart can be drawn up independently - NeoAnalytics took the data for it in the open reports of the Rosstat. However, it can take quite a lot of time to do this - it’s not so easy to find the necessary information on the state statistics website.
We investigate the demand and target audience
Without analysis of the target audience in the business can not do any management decision. It is logical that at the start it should be carefully studied. At this stage, you need to find out:
- Who is your target audience: their gender, age, marital status, children, geolocation, nationality, level of education, professional sphere, income, etc.
- Why they will buy from you: what needs the product satisfies, how often and in what quantities they need it.
- How to choose and buy: what characteristics they pay attention to, which may hinder or push you to buy what you expect from your product.
- The size of the target audience.
This is not a complete list of options for potential customers that you can explore. However, at the stage of making a decision on starting a business, a detailed analysis is not needed: it is enough to understand that there is a target audience in the proposed region and a proposal that is relevant to its needs. There are many ways to get acquainted with potential customers. A brief look at some of them.
Search engine statistics is the easiest, but not universal source of information. If, in principle, the product is not searched on the Internet or you can find it and buy it in other ways: in an offline store, in an ad in a newspaper or on a billboard - it will not reflect the real picture. However, a general idea of demand can be obtained. Consider a few more tools.
Yandex.WordStat. The service shows how many times a month Yandex users searched for your product. It is convenient to analyze the statistics for individual cities and regions. The Query History tool allows you to understand how the interest in a product or service has changed over the past couple of years, as well as to identify seasonal trends. For example, the screenshot below shows that in Tver the demand for hairdressing services decreases in autumn and spring and takes off at the new year.
Google Trends. Something similar to the "Wordstat". Shows the dynamics of the popularity of the search query. You can select a region and adjust the period, as well as look at the situation in the search for pictures, news, products and YouTube.
Advertising office Mail.ru. Interesting in that it gives statistics of requests divided by gender and age. True, to detail the results for the region will not work. But you can roughly determine the age and sex characteristics of the target audience.
It is wrong to draw conclusions by driving out one request over several services. To see a clearer and more realistic picture, it is better to pick up a few queries that potential customers can search for your product, and collect general statistics.
Facebook tool. It shows how many active Facebook users match your audience by region, gender, age, interests, etc. You can specify more detailed settings - select those who like to travel or who have children of a certain age. The service will show the gender and age composition of this audience, marital status, education, and with a sufficiently large sample - the scope of activity. You can also see which pages these people view and like, which devices they sit on and which actions they perform on Facebook. This information may later be useful for promotion. But at this stage, attention to it can not pay.
I managed to find out for my hairdresser that on Facebook there are 30-35 thousand active users from Tver of the sex and age I need, most of them have higher education and are married.
Search by people. This tool can be used in any social network where our target audience is. Knowing gender, age, geography, marital status and other characteristics, you can see the approximate number of potential buyers. But not everyone is registered in social networks, one should take into account the error.
As the main segment of the target audience of my barber shop, I singled out women from 25 to 45 years old. Let's see what VKontakte tells me.
Here you need to take into account fake accounts and other garbage, so that the real figure will be slightly less.
It includes messages on the forums, reviews, posts and comments in social networks and other publications that users create. From previous sources of information, we learned about the size of the target audience, its field, age, marital status and education. In the user content you need to look for why and how often people will buy your product, as well as what characteristics they will pay attention to and why they will choose you.
It may take a lot of time for such an analysis of the audience, so at the stage of making a decision on starting a business, there is no point in digging deep into the jungle of client holeyok. It is possible to outline the main criteria and points with large strokes in order to assess whether your offer is able to satisfy the demands of customers.
About what goods and services uses the target audience, you can ask her herself. The main thing is to correctly compile a list of questions, obtain representative data and correctly process them. No need to get involved here either - we will collect detailed information later.
How to conduct a survey.
- Internally in places where there are many potential customers. If CA is the parents of children under 3 years old, you can send interviewers to a children's store, play center or family planning center.
- By phone. True, it is not easy to find a base that at least 70 percent consists of representatives of Central Asia.
- Through the service of paid surveys. Issue price - from 0 to 50 thousand rubles. But you can set the parameters that must correspond to the respondents.
Another option is to create a survey in Google Forms, and find respondents in social networks. However, here you need to think about how to motivate them to participate - people do not like to waste time just like that. It is also useful to create topics on forums, blogs and social networks where the target audience lives. However, from the discussion it is necessary to manually extract the necessary information, collect it into a table and translate it into quantitative indicators.
You are not running a business in a vacuum. There is competition in any field. The exception is new and unique products and services that no one except for you produces or provides. But even here everything is not so simple - the target audience can satisfy the same need in other ways.
An example from B2B - the company optimizes purchases. In the region, no one else provides such services. The competition consists of internal departments of enterprises and staff specialists, because potential customers can optimize purchases on their own. That is why in the previous step I added points about friends and private experts to the survey. They also compete with hairdressing, and it is important for me to understand how much of the target audience is being cut from them.
Analyzing competitors before starting a business, you need to know:
- How many companies work in your niche in the intended region?
- What level of competition: high, medium or low?
- What range of products or services do competitors offer?
- What pricing policy do they have?
- What are their strengths and weaknesses? How do they position themselves in the market?
- What channels promote goods and services?
- What are the sales and financial performance?
- What distribution and sales channels do they use?
This information will show who you will have to deal with when entering the market. If you have decided in advance which price segment you will work in and which part of the target audience you’ll be guided by, pay special attention to those in the same niches. However, the rest of the players are also worth exploring, albeit not so carefully.
"Получить более полное и объективное мнение о конкурентах в определенной степени помогает метод, предложенный Райсом и Траутом в "Маркетинговых войнах". Попробуйте рассмотреть сильные стороны конкурента с точки зрения слабости. A large and powerful company is often clumsy, a monopolist may have problems with reputation, the strongest company on the market, strong in all areas of activity, may not be the strongest in a particular sector. "
Konstantin Ivlev, Content Strategist, Texterra
The first step is to understand how many companies provide the same services or sell the same goods. To do this, you can use the company's catalogs, data from 2GIS or Yandex.Maps, as well as Rosstat reports. The latter, by the way, do not differ much from 2GIS. According to regional statistics, in 2017, Tver employed 380 companies providing hairdressing and beauty services, and 2GIS finds 342 organizations on a city map.
Competitors' websites and social networks
Here we are interested in the range of goods and services, prices, strengths and weaknesses, positioning. Of course, when hundreds or even thousands of companies work in the market, it will not be possible to analyze each player in detail. Yes, this is not necessary - time is too long. We are interested in key players and direct competitors - a sample of 10-20 organizations. In this volume, the information actually collected in 1-2 days. For convenience, you can think over the parameters that interest you in advance. For an online store, it can be the quantity of goods, methods of delivery and payment, regions and delivery costs, return terms, etc.
The list of parameters is useful in the development of other sources of information, which we will discuss below.
The target audience can tell not only about themselves, but also about competitors. In order not to conduct dozens of studies, you can kill two birds with one stone. Just complete the survey with, for example, such questions:
- What hairdresser you know in our city?
- What hairdressing salon do you usually use?
- Why did you choose her?
You can formulate similar questions for your niche. This information will help identify the most popular companies in the market and understand why customers choose them.
Industry ratings, reviews and analytical articles can contain a lot of useful information about the market and its individual players. However, analytical companies carry out most of the detailed research by order or sell ready-made ones. In open sources, you can find the names of key players in the market in order to later collect data about them yourself.
If companies in your industry are represented on the Internet and are actively engaged in internet marketing, you should use the services of competitor analysis. There are many similar tools, paid and free:
- SimilarWeb and others.
The functionality of the services is slightly different, but most of them let you know:
- site traffic;
- reference profile;
- what queries are presented in the search and advertised in context;
- contextual advertising budgets, etc.
At the stage of making a decision on starting a business, this will allow you to understand how actively competitors are promoting on the Internet, what methods and channels they use. For online stores and online businesses, leadership in these parameters is tantamount to a key position in the market.
This source of information can not be used by everyone and not in any niche. Financial performance indicators publish mainly large companies. Finding them is not so easy. However, if you manage to do this, according to the financial indicators of market leaders, you can draw conclusions as a whole about the profitability of business in this area.
This method is time consuming, but effective. If you plan to work offline, browse by competitors and see how things are going with the assortment and prices, how the staff communicates with visitors, how convenient it is to buy a product or use the service.
Before you go, make a list of the parameters you want to evaluate. So you can objectively compare the offers of competitors and do not miss anything.
Price Monitoring Services
Several options - Priceva, Competera, Price2Spy and others. Tools will be useful to those who plan to open an online store, as they work mainly with eCommerce. Analyze sites of retail and wholesale stores, prices of suppliers and manufacturers, data of marketplaces. Find competitors by product name, brand, model and other parameters.
If you do not plan to use the service all the time, you can choose the option with a test period or a free tariff.
We look at external factors
The market situation is influenced not only by its participants, but also by events beyond its borders. Influence from the outside can be negative: lead to a fall in prices and demand for a product, and positive: cause an increase in sales, an increase in marginality, etc.
On the market, and therefore on the success of your future enterprise, may affect:
- Changes in legislation. For example, the introduction of excise taxes on e-cigarettes affected their margins.
- Events in the import-export market. The ban on the importation of any goods frees the market for domestic producers, which is happening recently with farm cheeses.
- The emergence of new, more modern analogues. So, at one time the release of MP3-players led to a decrease in demand for "sitis".
- A massive change in public opinion that may affect the attitude to your product. The craze for a healthy lifestyle has increased the demand for the services of nutritionists, fitness clubs and other players in this field.
To find information about events outside the market, analyze:
- legislation novels;
- industry media;
- portals for importers and exporters;
- general media in the context of trends and events that could theoretically affect the market.
To get involved and pull over the ears everything is not worth it. You risk yourselves to convince yourself that there are no prospects for the market, and in general everything will collapse soon. We take into account only the facts that have already happened, which directly affect the industry.
For example, in 2014, sanctions, the crisis and the fall of the ruble affected the hairdressing market. Remember the schedule? After 2013, the growth rate of the market went down sharply, although until then they had confidently flown up. However, such global events are usually reflected not in any one market, but on the economy as a whole. Spheres for which they pass unnoticed, rather the exception.
We structure and process data
If you do not present the collected information in a clear and easy-to-analyze form, it will be problematic to draw the right conclusions. Consider a few common formats.
Graphs and Charts
In this format, it is convenient to analyze statistical and other quantitative data. Remember the schedule of the market for hairdressing services at the beginning of the article? For your analysis, you can build something like this.
In the form of pie charts, you can visually present the survey data and, by the size of the segment, evaluate what percentage of respondents voted for a particular answer. If you use paid survey services, you can transfer data to this format directly in the interface. Another option is to enter quantitative indicators in Excel and build a diagram in the same place.
In this format, you can visualize any information - the structure of the article, a plan for preparing for a holiday or vacation, etc. However, unlike graphs, quantitative indicators are so inconvenient to analyze, but qualitative ones - completely. When analyzing the market in this format, for example, you can provide data on the target audience.
Mind cards are also convenient because the objects can be interconnected with comments, which can then be useful in formulating conclusions.
Perhaps the most universal data format. Both quantitative and qualitative indicators can be summarized in tables. When analyzing the market in this format, collect information about competitors. The most convenient way to do this is in Excel or GoogleSheets. Each competitor is a separate line, and in the columns are the parameters we are interested in. Do not forget to add your future company to the table and register everything you can to compare it.
When data is collected, structured, and visualized, it's time to analyze and draw conclusions. To do this, you can use two fairly simple and common methods - SWOT and PEST.
The advantages and disadvantages of this method is enough. However, at the decision-making stage, it is important for us that it is easy to use and not time consuming. To draw conclusions about the prospects of the market, you need to decompose the factors that influence it, in 4 squares, indicated by the letters abbreviation SWOT:
- Strengths - strengths;
- Weakness - weaknesses;
- Opportunities - opportunities;
- Threats are threats.
Internal factors relating to competition and the target audience will fall into the first two squares, external factors will get into the second. Strengths in this context include everything that can help you succeed in your chosen niche.
This method is similar to SWOT - factors affecting the market should also be placed in 4 squares. The difference is that here we consider only the influence of the external environment in the context of political, economic, social and technological factors.
When all the factors that may affect success, identified and decomposed on the shelves, it is possible to draw conclusions. It is convenient to formulate them in the form of answers to questions-problems that we set at the beginning of the article. In order not to be mistaken in the conclusions, it is necessary to follow several rules:
- Be objective. Even if you collect a large array of representative data, create tables and visualize everything, the risk of making the wrong conclusion remains. At this stage, you need to abstract as much as possible from the fact that you assess the chances of success for YOUR company. Look at the situation through the eyes of an outsider. If you understand that it is not possible to distance yourself, it is better to entrust this business to a person from the outside.
- Use only valid and sufficient data. It is necessary to draw conclusions on the basis of stable trends, and not random events. From the information that could not be verified and confirmed it is better to refuse.
- Take into account only those factors that directly affect the market. Do not hold long chains of consequences. This is difficult to predict without the use of complex methods of economic modeling.
Even a competent analysis of the market will not protect against failure by 100%. You can burn for a hundred different reasons: the wrong strategy, unreliable partners, cunning competitors. However, such a study will allow us to brush off obviously losing business ideas, and for projects that have chances - to collect information that is useful for solving other business problems:
- development strategy;
- product and service improvements;
- creating a competent marketing policy;
- launch effective advertising
- expanding the scope of activities;
- create new products;
- planning integrated online promotion, etc.
The latter, by the way, can be trusted to Texterra specialists so that you have more time left for business development.