Market analysis: what it is and how to carry it out step by step

Market analysis is one of the most important tools for any business, entrepreneur or professional looking to make strategic decisions based on real data. It enables you to understand the market environment, customers, competitors and opportunities before launching a product, service or strategy.

In this practical guide, we clearly explain what market analysis is, what it is used for, how to carry it out using market research, what types of studies exist, examples of survey questions, and answers to the most frequently asked questions.

What is market analysis?

Market analysis is a process of collecting, analysing and interpreting information about a specific market. Its aim is to reduce uncertainty and facilitate strategic decision-making. Market analysis answers a key question: Is it viable and profitable to enter or grow within this market?

To answer that question, you will need to gain an in-depth understanding of various aspects:

• Potential customers or consumers and their needs. Market analysis involves studying potential customers, enabling us to understand who they are, what their needs are, and how they make purchasing decisions. This knowledge is key to defining a value proposition that aligns with the target audience’s actual expectations
• Market size and trends. Another fundamental aspect of market analysis is estimating the volume of demand and assessing whether there is real potential for growth. Added to this is the analysis of trends, which shows which product or service categories are growing most rapidly and helps to anticipate changes in consumer behaviour and the competitive environment
• Purchasing and consumption habits. A significant part of market analysis involves gaining a detailed understanding of consumer behaviour. This covers both purchasing behaviour – how they research, which channels they use to buy, what quantities they purchase, at what price, etc. – and consumption behaviour – when they use the product or service, in what situations, and whether they associate it with other products or services, etc
• Competitors. Market analysis also includes an analysis of competitors, with the aim of understanding their positioning, strategies, and strengths and weaknesses, which helps to identify opportunities to enter the market by targeting those segments that are not well served. 

As you can see, market analysis involves both quantitative and qualitative data to understand not only what is happening, but why it is happening.

When should you carry out a market analysis?

A market analysis should be carried out whenever a company needs to make important strategic decisions or is facing changes that could affect its business. Market analysis is not a one-off exercise, but a tool that should be used on a regular basis over time.

• Before launching a new product or service, as it allows you to validate demand, understand the potential customer and reduce investment risk.
• When starting a business or project, whilst the business model, target audience and value proposition are still being defined.
• When seeking to enter a new market or expand internationally, as each market has different dynamics, competitors and consumer behaviours.
• When sales stagnate or decline, to identify changes in consumer needs, new trends or competitor movements.
• Before making significant strategic decisions, such as price changes, brand repositioning, changes to sales channels or the launch of major marketing campaigns.
• From time to time, as a way of ensuring that you always have up-to-date information for decision-making, especially in dynamic markets that require the ability to adapt quickly.

A deep understanding of your consumers or customers: qualitative research

If you don’t fully understand your consumers’ needs, or if you think they may be changing, qualitative research can provide the answers you need. This type of research is used in market analysis to explore consumers’ motivations, perceptions and attitudes in depth, enabling you to understand the reasons behind their decisions and behaviours. Unlike quantitative research, this type of study does not seek to obtain representative numerical data, but rather to understand how people think, feel and value a brand, product or service. By using in-depth interviews, focus groups or online communities, you can identify needs, barriers to purchase and perceptions that are not always expressed directly.

Quantifying purchasing habits. Purchasing habits study

Purchasing habits studies are essential for quantifying the size of a market and the different segments into which it is divided based on purchasing patterns. That is why they are an indispensable part of any market analysis.

In this case, we are talking about quantitative research, generally carried out through surveys that include questions such as:

• Who buys this product category? What is the buyer’s profile?
• Which varieties are purchased? What is the profile of the buyer for each variety?
• How much is purchased? Whether in terms of units or expenditure per purchase
• How often? There are more regular and more occasional buyers. What are the profiles of each?
• Purchasing channels. How much is bought online and how much in physical shops? Which online shops? Which physical shops?

Quantifying consumption habits. Study of consumption habits

The moment of purchase is the moment of truth when the consumer decides between one brand and another. But it is not the only important aspect to cover in your market analysis. If the product is not used or consumed immediately, it is also necessary to understand usage or consumption habits. In a study of consumption habits, we gather information on aspects such as:

• Who is the user? Many products are bought for the home and then used by specific individuals. What is the profile of the user within the category?
• Differences between varieties. Who is the end user of each variety within the household? Are there differences by age and gender?
• Usage patterns. What is the product used for? In what situation? At what time?
• Related products at the time of consumption. Is it used in conjunction with other products (for example, in the case of cosmetics)?
• Preparation. How is it prepared if it is food?

Purchasing and consumption habits are usually organised within the same survey to make the collection of data more efficient, which you can then incorporate into your market analysis.

Quantifying consumer attitudes. Attitude survey

If, during an initial phase of market analysis, we have carried out a qualitative study to understand consumers’ attitudes, motivations and perceptions, we will likely want to quantify them to identify which ones are significant. An attitude survey allows you to gather information on the motivations and reasons behind consumer behaviour and to quantify the importance of each. Understanding the reasons behind habits helps us connect better with consumer segments that share common attitudes.

• Attitudes towards the category. These are the beliefs and feelings regarding the category under study. For example, which attributes they consider important when choosing a product, whether they use certain varieties in specific situations, or whether they feel that particular varieties or brands are suitable or relatable to them.
• General attitudes. In some cases, general attitudes regarding values or beliefs that go beyond the category itself are often included. For example, the importance placed on certain aspects such as healthcare, sustainability, or the importance of enjoying time with family when consuming.

Understanding the competition. Brand survey

A key aspect of market analysis is brand analysis. Brand research helps to understand which brands are the most significant within a category and how potential buyers perceive them.

Everything relating to the size and value of each brand can be answered through a brand funnel. This funnel can be created both for the brand under study – if it has already been launched – and for its competitors.

• Brand awareness within the category, both in terms of spontaneous and ‘top-of-mind’ awareness, as well as prompted awareness.
• Brands that are purchased. What is each consumer’s portfolio, and how closely do the brands align with the buyer’s profile?
• Brands that are used and the profiles of different users.
• Reasons for choosing each brand
• Satisfaction levels
• Future purchase intention.

The second part, relating to brand image, is usually covered by a positioning study, which measures how each brand is associated with a set of potential brand attributes.

Validating the acceptance of a product or service. Concept and product testing

As part of your market analysis, all the research carried out so far aims to provide a good understanding of consumers. With this information, you will be able to define a new business, a new brand or a product offering with a greater chance of success. However, we still do not know for certain whether our idea will be accepted by the market. Therefore, as part of the market analysis, we must validate the concept and the product with real consumers and users. This is achieved through concept testing and product testing surveys.

Concept testing serves to validate whether an idea for a new business or product will be successful in the market. This test is used in the early stages of innovation processes and is employed to prioritise the best ideas, so that investment is directed solely towards developing prototypes for those with the greatest potential for market success.

Product testing takes place at a more advanced stage, when a prototype already exists and the aim is to validate that the development meets consumer expectations. In this case, consumers are not evaluating a concept or an idea, but an advanced prototype of the product or a final product.

Tips for improving your market analysis

Here are some tips that can help you carry out your market analysis more effectively.

• Combine quantitative and qualitative methods to gain a comprehensive overview. A common mistake is to quantify certain aspects of the market without first fully understanding the needs of the target audience. If this happens, you may find it difficult to interpret some of the data you obtain and may need to carry out qualitative research ‘after the fact’.
• Iterate your research as your understanding improves. Trying to gather all the key insights in a single study can make your research slow and difficult to manage. If you want greater agility, you can prioritise the most important research first and add to it as your knowledge of the market grows.
• Use real-time technologies and data to speed up decision-making. If you use a platform such as We are testers, you can conduct research quickly and get started straight away.
• Remember that no single person represents the consumer. It is very easy to assume that other consumers – or most of them – think like us, but this often leads to decisions based on intuition. Ensure your approach is sound by consulting real consumers or customers.

Market research with We are testers

When planning your market research, remember that our team of research experts is always on hand to help you with everything. They can advise you on the specific studies you can carry out to obtain the information you need. What’s more, they’ll support you throughout the entire process, from designing the questionnaires to launching them, or even analysing the results if you wish. And if you prefer, you can do all of this yourself on our research platform. With it, you can manage all your research effectively and obtain the information you need as quickly as possible. As for the sample, we have a comprehensive consumer panel that will allow you to reach your target audience directly.

Now you know. Ensure the success of your new business launch with a rigorous market analysis!