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How to do a good market study

Do you want to start your own business? But you don't know where to start. First of all, it is necessary to know the market in which you are going to set up. To do this, conduct a market study. This study will give you the possibility to test your idea beforehand and to make your project evolve if it contains inconsistencies. Without a well done study, no business creation is really possible.

But, what is a market study?

A market study is simply a study that allows to analyze, understand and measure the supply and demand of a market. Its objective is to reduce the risk of failure, by allowing you to take the appropriate measures to establish yourself in your market.

The market

To properly study your market, you must define it by answering certain questions:

- Which market(s) will you operate in?

- Who will be your customers?

- What is the geographical dimension of the market?

- Which products will be your direct or indirect competitors?

Then, after having answered the questions, you will have to analyze the demand.

The demand

  • What is the size of the market?

  • What is the number of customers in the market? How does this number evolve?

  • When do they buy (the customer) or use (the user) the product and/or service you offer? How do they do it? Where do they buy or use it? Why or why not?

  • Are they satisfied?

  • What are their motivations? What are their obstacles ?

  • What is their perception of the product and/or service ?

  • What are the characteristics of the product and/or service that could encourage the act of purchase or use ?

The offer

  • Once you have analyzed the demand, it's time to understand how the offer of your market works. First of all, take an interest in the global evolution of the offer, you can then look at the questions about your competitors below:

  • Who are they?

  • What do they offer? At what price?

  • How do they sell? What are their financial results? Who do they sell to?

  • How do they communicate? What are their competitive advantages?

  • What is their market share?

  • Are customers/users satisfied?

The market environment

Analyzing the environment is done with the help of a PESTEL, the objective of this model is to evaluate the influence of external factors that can have an impact, positive or negative, on your company. It provides a global view of your company's environment. It is an indispensable starting point for any study on the business environment.

The PESTEL model is based on these 6 components:

P: Political: the political dimension includes the external factors caused by the interference of the public power on the market studied.

It includes:

  • The level of political stability

  • The level of regulatory stability

  • Free or regulated access to the market (authorization or empowerment)

  • Fiscal policy (taxes) and pricing policy (fees)

  • The level of corruption

  • The possibility of social conflicts

  • Import/export regulations (for an international market)

  • Environmental constraints

  • Level of government intervention (subsidies)

  • Freedom of the press

  • Lobbying activities

E: economic: the economic dimension aims to evaluate the economic performance and stability of the market studied.

It includes:

  • Current growth rate

  • Future growth forecasts (GDP)

  • Level of income

  • The level of the budget deficit

  • Inflation rate

  • Price stability

  • The level of interest rates

  • The conditions of access to credit

  • The unemployment rate

  • The exchange rate (for an international market)

  • The dynamism of financial markets

S: social: the social component includes external factors related to demographics and social norms applicable in the target market.

It includes:

  • The birth rate

  • Mortality rate

  • Life expectancy

  • Population pyramid

  • Number of marriages

  • The number of divorces

  • The immigration rate

  • The distribution of wealth

  • The socio-professional categories

  • Lifestyles

  • Average income level

  • Attitudes towards work

  • Purchasing habits

  • Savings habits

  • Leisure habits

  • Cultural aspects

  • Religious aspects

  • Male/female relationships

T: technology: this dimension looks at existing or future innovations in a market and aims to assess whether they are likely to disrupt it (i.e. significantly change its business model).

It includes the following factors:

  • R&D budgets

  • The level of automation

  • The pace of innovation

  • Infrastructure in terms of internet coverage

  • The infrastructure in terms of telecommunications

  • The level of access to new technologies in different regions

E: ecological: this dimension has become much more important in recent years. It is closely linked to the political dimension.

It includes :

  • Climate

  • Environmental policies

  • Natural disasters and their frequency

  • The level of pollution (air, water)

  • Pressure from NGOs

  • Attitude of the population towards ecological issues

  • The level of renewable energies in the energy production

  • The habits in terms of recycling

L: Legal: This is more specifically concerned with the legal framework that can affect a market. This can strongly affect the freedom of maneuver of a company.

It includes :

  • Labor law

  • Anti-discrimination regulations

  • Regulations governing competition

  • Consumer protection regulations

  • Intellectual property and patent regulations

  • Data protection regulations

  • Health laws

  • Laws governing the safety of citizens

  • Laws related to education

Our advice is coming to an end. But remember, the more you know about your market, the better your business will grow. And, above all, don't despair if you don't see results right away, as Paulo Coelho said so well:

"Do not be discouraged, it is often the last key in the bunch that opens the door".

Have confidence in your work and you will accomplish great things!

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