I have most of my best ideas around 3:00 a.m. or in the shower. However, turning these shower ideas into a business opportunity requires further research. This is where the market opportunity analysis comes into play.
While you and your team may have many new business ideas to explore, you don’t have the time to go down each route. Some of these paths can even be dead ends.
How do you choose which ideas to pursue and which to let go? Market opportunity analysis can help you narrow down your options to those with the greatest potential.
What is a market opportunity analysis?
The market opportunity analysis examines where and how you can reach more potential customers or increase your share of sales. It’s about identifying contests, understanding your audience, and uncovering potential risks. A market opportunity analysis allows you to prioritize new business ideas based on their potential profitability and risk.
Who should conduct a market opportunity analysis?
That answer is “all”. Businesses of all sizes benefit from a better understanding of the industry in which they operate or are approaching. Whether you work in B2B, B2C, government or nonprofit organizations, defining and analyzing the market will help you make better decisions.
This type of analysis can help you grow your existing business, open up new markets and opportunities, or expand into the periphery of your current market.
5 advantages of a market opportunity analysis
- Make better strategic decisions over the long term.
- Assess the product or service requirement.
- Identify possible marketing strategies.
- Uncover areas for further research.
- Identify and navigate potential roadblocks.
There are many reasons to take the time to review all of your options before proceeding. Here are five key benefits you can get from researching the market.
1. Make better strategic decisions over the long term.
Your business is influenced by many external factors. Without taking the time to study current market trends, you will be flying blind.
A market opportunity analysis can give you the insight you need for the future. What will the market look like in a year? 5 years? ten years? What forces are affecting the market today? How is the population of your target group changing?
2. Assess the product or service requirement.
You may have invented the next Google Glass: a great product with strong niche demand. A market assessment shows the potential for selling your product or service. With the help of this analysis, you can assess whether expanding into a potential new market is worthwhile for your company.
There may not be a market for your idea, which leads to a “blue ocean strategy”. “Blue oceans”, explain the authors W. Chan Kim and Renee Mauborgne, “describe all industries that do not exist today – the unknown market that is not affected by competition.” In the blue oceans, demand is created rather than contested. There are plenty of growth opportunities that are both profitable and fast. “
While it may, you may also not be able to create the market or spend the time and energy educating customers about the value of your new idea.
3. Identify possible marketing strategies.
The four Ps of your marketing mix are price, location, product and promotion. Through the process of market opportunity analysis, companies can gain a deeper understanding of who their target customers are, what they want, and how they make their decisions.
After evaluating the current market, you can effectively evaluate your product and know which advertising strategies work best. Are there any partnerships you should pursue? Does direct sales or inbound marketing work best?
4. Uncover areas for further research.
As you begin to understand the market better, you can identify even more new opportunities for you to explore. As the saying goes, “You don’t know what you don’t know.” You may discover a new government initiative promoting sustainable businesses.
A customer research project can identify a new pain point that you don’t know exists. The benefit of having a thorough understanding of your market is that you are ready to take advantage of any new opportunity that presents itself.
5. Identify and navigate potential roadblocks.
A SWOT analysis examines the strengths, weaknesses, opportunities and threats of a potential strategy. Recognizing the weaknesses and threats to your market opportunity is key to your success. No business idea is perfect. However, knowing where you might get into trouble before you even start can help you plan ahead and mitigate those risks.
Examples of market opportunity analyzes
Before we go step-by-step into performing your own analysis, let’s look at the results of two very different case studies. The aim of these two research projects was to identify new possibilities. However, they were carried out in two different industries: elderly care and the automotive industry.
1. Say yes! ElderCare case study
Consulting agency Say Yeah! conducted a market opportunity analysis for a company that wants to expand its business model to the geriatric care industry. They started by mapping the customer journey for an adult child caring for their older parents, along with any decision points they encounter.
By examining market forces – like government subsidies, changing demographics, and all of the options older adults have – say yes! was able to uncover several options that ElderCare could use to increase its profits.
Specifically, they recommended ElderCare to add retirement homes, home care, and other social services to its referral business.
“Your initial business premise is confirmed: By moving the industry to a subscription-based model run by an online marketplace, this company could make a significant profit in the geriatric care industry by providing retirement homes with far less value than costs.”
2. Ipsos Business Consulting Automotive case study
A global automotive conglomerate took an interest in the growing electronic vehicle (EV) market, particularly three-wheelers in India. Ipsos conducted a study of the EV market through customer interviews, business model analysis, and government research. At the end of the study, they made recommendations on charging station locations, leasing and purchase options, and other infrastructure requirements.
How to conduct a market opportunity assessment
1. Identify potential opportunities.
Your first step is to outline the potential opportunities that you want to explore. Which segment do you want to expand into? What kind of customers do you want to attract? Do you want to acquire or work with another company? Did current events create a potential opportunity?
Knowing whether you want to expand, pan, invest, create or reposition your offerings will let you know about the next steps in your market research.
Once you’ve identified market opportunities, you can begin researching them.
2. Understand the customer.
At every opportunity the customer will share your success. Does this product meet your requirements? Do you have the purchasing power to make this idea profitable? How do you make your purchasing decisions? The second step in the analysis is to really and deeply understand your prospects and their needs. This research can include any of the following tools:
3. Research Competitors.
Next, you want to understand who all of the players in the existing market are. With the help of competitive research, you can understand what the market share is, how existing products are positioned in the market, and how crowded the market is. Here are some questions you might want to ask:
- What is their value proposition?
- How does your product range differ from ours?
- Who are your partners?
- What do your reviews say about your product or service?
- Are there any gaps that we could fill?
- How likely are new competitors?
4. Take external factors into account.
External factors shape and change the market again and again. The acronym “STEEP” can help us immerse ourselves in the five main forces that we need to be aware of.
How does culture change the market? For example, more employees working from home during the pandemic have entered an entire sector of the market that did not exist before. Jumping on trends can be a lucrative strategy if the trends don’t go away too quickly.
Which new innovations have influenced the market? Can you apply this technology in other ways or in new industries?
What is the current business climate like? Can you take out a loan if necessary? Do your customers have an disposable income? What is the market forecast for the next year? 5 years?
What impact does this idea have on the environment? Can you improve the sustainability of the product or service?
You may be pleasantly surprised to learn that your local government offers grants, tax breaks, or other incentives for businesses in your industry. Alternatively, you may find that there are regulatory obstacles in your way that you need to consider in your analysis.
5. Pay attention to internal forces.
Finally, immerse yourself in the skills of your own company. Do you have the skills, workforce, technology, and financial resources to invest in a new product? If you bring a very innovative product to market, can you hire people with the skills you need? What new departments or teams will you need to create to manage this new opportunity?
Make better decisions by analyzing market opportunities.
Not every idea is worth pursuing – but many are. With the market opportunity analysis, you will find out which business strategies will help you to grow and which potential risks exist. Don’t launch your next product or service without doing your homework.