Better understanding your market means better understanding the context in which your business exists. With the right takeaways, you can make better products, improve your business to be more competitive, and ultimately make more money.
A market analysis is your gateway to better understanding, but there are many ways that market analysis can go wrong. In this article, we’ll discuss some of the top market analysis mistakes to avoid and how to become a better analyst in this context.
What Is a Market Analysis?
Market analyses are performed by entrepreneurs, marketers, and investors looking to invest in new startups (as well as some other folks). In these rounds of research, you’ll take a close look at your target demographics, the current state of your company and your industry, and even some of your top competitors. You’re looking to better understand what drives people’s decisions and come up with new ways to innovate so you can remain competitive.
There are many different tools and approaches you can use, including surveys, demographic research, and interviews. Each business will need a unique approach, given its market and competitive landscape.
The Biggest Market Analysis Mistakes to Avoid
These are some of the most common and most significant market analysis mistakes to avoid:
1. Relying on instincts or intuition.
Market analysis should focus on objective takeaways rather than subjective instincts or intuition. Many newcomers to the world of market analysis believe they can come to new conclusions simply by brainstorming or observing, but it’s much better to rely on quantifiable information. Rely on both primary and secondary sources to fuel your analysis.
2. Doing everything solo.
Even if you don’t have much experience in the world of market research, you may feel capable of finding information on your own. After all, modern search engines and the expansive web world make it easy to find relevant content for your needs. However, it’s usually a mistake to do everything solo. Working with a market research firm or a team of market analysts will usually yield superior results.
3. Failing to ask questions.
Don’t look for information generically. Instead, you should ask critical questions for which you can find meaningful answers. What are you trying to find out about your competition? What are you trying to find out about your target audience?
4. Asking the wrong questions.
That said, it’s essential to ask the right questions. Asking inappropriate questions might lead you to information, but that information isn’t necessarily valuable unless it’s relevant to your business and the products and services you’re offering. Phrase your questions in ways that lead you to answers that can meaningfully change your business. Don’t ask questions simply out of curiosity or for the sake of asking questions.
Confirmation bias is one of the most notorious cognitive biases, but it’s also one of the easiest to avoid (if you know it’s lurking). This bias makes us susceptible to overvaluing information and sources that already agree with our foregone assumptions. It also makes us dismiss and undervalue information and sources that contradict our existing assumptions. The easy remedy to this is to always look for information that challenges you. Always try to prove yourself wrong. If you can’t, you know you’re onto something.
6. Ignoring the competition.
In a market analysis, demographic research and audience sampling are very important, but it’s also important to focus on your top competitors. If you ignore the competition in favour of your prospects and customers, you’re going to miss a significant chunk of the information you need.
7. Using a small sample size.
Seasoned statisticians know that sample size is imperative if you want accurate, meaningful results. If your sample size is too small, you won’t be able to form meaningful conclusions about your audience. You might be able to find three people who like your hamburgers, but that doesn’t mean that people who share characteristics with those three people will also like your hamburgers. Generally, bigger sample sizes are more reliable.
8. Focusing exclusively on quantitative or qualitative data.
Quantitative data can be numerically and objectively measured, such as a person reading your business as a 10 out of 10. Qualitative data is more subjective, such as a person describing your business as “totally awesome.” If you focus only on one type of data, you’ll put yourself in a losing position. You need both quantitative and qualitative data to see the bigger picture.
9. Failing to organize your data.
It’s also important to organize your data. Within your organization, you should have a single source of truth and protocols for how to store and retrieve information. If your market analysis data is segmented, sloppily organized, and hard to retrieve, you’re going to struggle.
10. Failing to make your data actionable.
Finally, make sure your data is actionable. You may find interesting data points or form stunning conclusions – but this is meaningless unless you can change your business in response to these new developments.
There’s no such thing as a perfect round of market analysis. No matter how careful you are or how much attention you pay to your work, there are probably going to be data points you miss and inaccurate conclusions that you form.
However, by avoiding some of the most prominent mistakes in this field, you’ll instantly put yourself ahead of the pack and maximize your chances for success.