Market analysis is a critical component for preparing a business plan. Startup entrepreneurs using bootstrapping need to understand the customer, competition and market segments before they dive into the business. An analysis of the above factors will help them to avoid the minefields they may face while the business starts.
This will facilitate formulation of marketing strategies like target segment, pricing, promotion etc.
“If you believe you have an excellent idea for a business, you mustn't allow yourself to get fooled into a false sense of optimism. You must test it thoroughly by doing some basic market research. Only then can you move forward on any sound basis.”- startupdonut
Prior to starting business a market analysis of the following will enable you to emerge stronger than your competitors.
A great example of a company which performed such market analysis is JetBlue, which prior to launching, determined that airline passengers cared more about comfortable leather seating and TV entertainment than a hot meal, a first class cabin, and the other “amenities” offered by legacy carriers. JetBlue invested in upgraded seating and TVs and emphasized a relaxing, calm journey at a relatively modest price. The strategy campaign was so successful that other airlines soon followed suit and numerous imitators emerged.-Shawn O'Connor Contributor –Forbes
A young startup entrepreneur Uma , wanted to set up a business for providing recreational facilities for young children. She wanted to prepare a business plan or a roadmap before she started. She participated in a training program where there was a competition for the best business plans.
“I have used the knowledge I gained there to create a business plan, not just for the sake of the competition, but also genuinely to provide me with a roadmap to grow and further my business.. I have made a few alterations to my plan even after the culmination of our sessions, and have finally arrived at a document that I am satisfied with (for the time being). I am proud to say that I have already begun putting some of my plans into action, and hope to achieve the success that I have shown on paper, in reality.”
Uma considered the following factors for her target group of 6 months to 10 year old children.
1.Size , growth trends and forecasts
I. The town had around 2500 schools. .
II. There were 700 play schools around 5 km radius of her location.
III. Based on major hospital records, close to 30000 children are born every year in that town.
2.Influencing factors that will have an impact on her business
I. Parents want children to develop social skills and play outdoors.
II. Double income couple families look for moderately priced school
III. Apartment complexes lack recreational facilities and supervision.
I. Three existing players
II. Pricing high for middle income parents
III. Target segment different-. 5-12 years
4.Strengths and weaknesses of competitors
I. High end customers were the targets
II. Lack of school in the downtown area
III. Limited activities
IV. Owner not present physically
She set up the children’s recreation facilities downtown and was able to enroll 50+ students within the first six months. She is already toying with the idea of opening another center, based on parents’ feedback.