How to Do a Market Analysis on a Product
No matter what type of product you are trying to sell, you need to do some type of market analysis for it. Even if it's just getting an idea of what other products are out there would compete with yours, a market analysis is a good way to save you time and money. It can also give you peace of mind about the steps that you will take in rolling out and advertising your product.
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Instructions
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Determine the size of your market for the product. You can do this by looking at current sales data for similar products, or by conducting a research survey of potential customers to gauge their interest in the product. If you know what percentage of your target market is interested, you can then estimate the total market.
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Figure out the estimate growth rate of the market. In the next 5, 10 or 15 years, where do you estimate sales of the product will be? Remember that products have life cycles, which means that at some point the number of people in the market will plateau and will eventually decline with time. The main reason for this decline is that new and better products are introduced to the same market. As an example, the market for dial-up Internet service declined with the introduction of cable and DSL Internet.
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Analyze the product's profit potential. This is the chance it has to turn a profit. You must look at the buying power of the market you are targeting, along with threats from competition and any advantages that this product has over others in its category.
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Decide where the product should be distributed in order to achieve the most sales. This could be in retail chains, small stores, business-to-business platforms, schools or new untapped channels that have potential.
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Look at the trends in the market that could affect your product. For example, if you find there is a trend of middle class people losing their jobs and trying to save money in the current market, you probably should hold off on releasing a luxury-type product to that segment.
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Identify any additional factors that could make your product absolutely irresistible to your market. For example, if you are selling jewelry, you might have sole access to a special, rare style of diamond that could not only generate a higher demand compared with your competition, but also allow you to charge a higher price and increase your profit potential.
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