What is a Market Analysis?

The next section of the feasibility analysis is the market analysis. This portion may be the most important in determining whether an idea is a valid business opportunity. It focuses on determining whether there is a potential market for the product.

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What should be included in a Market Analysis?

Every market analysis should contain the following five sections:

What is Customers (Segmentation)?

Identifying the customer segment will allow you to understand who wants or needs your product and is qualified as a potential customer.

What is the Price (determined for each customer segment)?

You need to know how much a potential customer in a given customer segment would be willing to pay for your product or service (i.e., how much revenue you can expect from each customer segment).

What is the Market Size? 

The market size (made up of all of the identified customer segments) will tell you how many of those people who want your product(s) are in the market.

Market size = the number of potential customers x the quantity purchased by an average buyer x the price of the unit.

What is Priority?

Priority shows the willingness of customers to purchase at a given level of information about the product (i.e., sales and marketing effort by the business).

In summary, the number of potential customers, market size, price, and customer priority, taken together, will allow you to make projections of how many sales you will make at a given price. For example, grabbing 1% of the market value yields a specific amount of potential revenue.

Important Strategic Information About Market:

• If you are unable to serve all segments, then you will choose the customer segment and corresponding price point that maximizes your value.
• Customer trends give rise to increased demand for your product, higher prices at the level of demand, and new customer segments within the market.