Knowing your startup’s target market is important to the success of your company. It is imperative that you complete a market analysis, this will allow you to have insight on the economy, competitors, market trends, and your target customer. The information that you gather will aid you in making business decisions, ultimately helping you reduce the risk. When developing a marketing analysis there are five components you should be aware of: 1) Total Addressable market, 2) addressable market, 3) Market Share, 4) Competitors analysis, 5) Target customer. As an entrepreneur, you need to become an expert in the industry, and knowing the market is one of the many things you need to learn. Let’s start by going over these five components.
1. Total Addressable Market (TAM)
The total addressable market is the total revenue opportunity for your product or service in your country, or worldwide. Be creative and see what avenues your product can enter, or what markets your product might also add value. Investors are interested in seeing a big TAM, this means that your company has a lot of opportunities to grow and scale.
2. Available Market
The available market is the segment of the TAM you are initially going to target. The idea of starting a company is to think big, start small. You must determine the segment of the market you can corner and grow from.
3. Market Share
The market share is the portion of the market your product or service controls. To discover your companies market share you first most have an in-depth forecast of your financials. Typically, you will have a financial forecast of the first three to five years. This is a complete breakdown of your revenue and expenses. To determine your potential market share, you take the estimated revenue and divide it by the available market size.
4. Competitors Analysis
It is important to spend a lot of time researching your competitors. The more you know about your competitors, the better you can position your company within the market. For every competitor, complete a S.W.O.T. analysis:
Strengths (S) – What is your competitor great at?
Weakness (W) – Are there complaints about your competitor’s serves or product?
Opportunity (O) – Are your competitors creating an opportunity for you to capitalize on?
Threats (T) – Are your competitors doing anything that can be seen as a threat to your business?
By completing a S.W.O.T. analysis, you will understand your competitors’ strengths, their weaknesses, how to capitalize on new opportunities, and better hand the threats.
5. Target Customer
As you are developing your product it is important to constantly communicate with your target customers. A great way to better understand your customer is through test groups. These are individuals that have agreed to test your product and give feedback in a group setting. The goal of this test group is to prove our concept and learn valuable information that can help the business grow. Learn the demographics of your customer: age, gender, income level, education, marital status, and hobbies. Learning your customers' demographics will allow your company to market more efficiently and effectively.
Having a good research marketing analysis is very beneficial for your company. This is why here at Innovative Software Lab we spend time understanding the TAM and available market of your product and service. In the process, we contact and build relationships with your target customers to see how your product can add value to the market, and how you stand out compared to your competitors. From the data, we collect we create go-to-market plans and a five-year financial projection giving you confidence in your business.