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How to analyze the market when launching a product

Study the market before launching a new business

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Before launching a new business, you need to study the market: assess demand, and analyze the strategy of competitors. We show how to do this using public data – and avoid mistakes at the start.

How to estimate the demand for a product

Market capacity is an indicator that reflects the aggregate demand for certain goods or services. It is calculated as the sales volume for a certain period.

To calculate the demand as accurately as possible, you must determine:

  1. Market geography
    So, if you want to open a barbershop in a small town, the market will probably be limited to your city – it is unlikely that you will have customers from other cities (at least in the beginning).


  2. Target audience (TA)
    Let’s say you want to launch a new dating service. Most likely, your target audience is unmarried men and unmarried women aged 25–34 living in a big city. The more accurately you define your target audience, the better.


How to analyze competitors: step-by-step instructions

  1. Make a list of competitors
    These may be companies that provide the same services or sell the same product. Let’s say you want to open a bar in St. Petersburg. Find other bars in Google search, Yandex maps, and 2GIS and make a table with a list of competitors.
  2. Analyze competitor offers
    Here’s what you should pay attention to:

    – Positioning in the market (a feature of the offer)

    – Price policy

    – Strengths and weaknesses (competitive advantages and disadvantages compared to your offer)

    – Sales and promotion channels

    Some information about bars, such as a menu with prices, can be found on social networks or on the websites of institutions. If you often go to bars, then you roughly imagine the menu. For example, some bars specialize in cocktails, others specialize in simpler alcoholic drinks (such as tinctures) and serve food. What to do with this information – see below.


  3. Analyze competitor marketing strategy
    Learn what channels competitors use to promote. So, most of the small bars in St. Petersburg only run social networks. A site or a mobile application with discounts is developed by large network players – they have more money for marketing and promotion.

    If you open your first bar, chances are you won’t have the same budget. Analyze the social networks of competitors: what posts they post, which of them cause the greatest response (likes, comments, reposts). Some good tricks you can use later.

    Some businesses need a website. Analyze competitor websites using the SimilarWeb service. Pay attention to the following:

    – Traffic sources: this way you will understand where you can get potential customers from
    – The demographics of website visitors will show which audience (buyers) you should count on in the first place
    – The interests of the audience will tell you where it is better to advertise
    – keywords that users find your site for use in your site description to get traffic.


How to make decisions based on this data

An analysis of the market and competition will not give unambiguous answers, but will help you navigate the following:

Choose a specific business niche

One option is to try to find an unoccupied niche. For example, even in a big city, there may not be a bar for students that specializes in inexpensive tinctures. Opening such an institution can be more profitable than another cocktail bar with a big check.

If you see that the market for a certain product or service is steadily declining, that is, demand is declining, and most likely, you should not open a business in this niche. It is much more promising to open a business in a fast-growing market, especially all other equal things, for example, with low competition.

Find out how many outlets can be opened to saturate the market

Let’s go back to the photo studio example: the annual market volume is 20 million dollars. The revenue of one of your ateliers is 4 million dollars a year. Suppose you decide to take out a loan, actively invest in marketing and the cost of services – and force out other photo studios from the market due to low prices. It can be said for sure that five points will be enough to cover the market, and it is not worth opening more.

Evaluate business performance

If there is comparable data, you can evaluate the dynamics of the market – how fast it has risen or fallen in recent years. For example, if the market has grown by an average of 50% per year over 5 years, and your business has only grown by 20%, then you are starting to concede to competitors. Analyze the reasons for the delay.