Market and demand analysis are functions carried out by the project manager of a company in the process of evaluation of a project idea.
There are six steps in the market and demand analysis but before jumping to the steps we must first know what exactly is market and demand analysis.
So, let us see what exactly these are;
Market Analysis: In simple words Market analysis is a study done to analyse the needs of the market and consumer preferences for a given project idea.
Demand Analysis: Meanwhile Demand analysis simply aims at estimating the aggregated demand for a particular product or service for a given time period.
- Key steps in marketing and demand analysis
- Components of a Market Plan
- Steps in the market survey
- Methods of DEMAND FORECASTING
- Uncertainties of demand forecasting
- How to tackle uncertainties of Demand forecasting
Key steps in market and demand analysis
To briefly learn about the relation between the product and its market, the project manager must informally talk to customers, competitors, middleman, and other people related to the project and industry.
Firstly, he must look at the experience of the company to learn about the preferences and purchasing power of customers, actions, and strategies of competitors and practices of the middlemen. Some of the most important questions that we need to find answers for are:
- What is the current demand for the new product/service?
- How is demand distributed temporally and geographically?
- What trade margins will induce distributors to carry it?
- Who are buyers of the new product/service?
- What channels distribution is most suited for the new product/service?
- What are the prospects of immediate sales?
Collection of Secondary Information
Information is indeed collected from various secondary and primary sources. Secondary information refers to the information that’s gathered from other sources and which is already available in the market.
Primary information, on the other hand, refers to the first-hand information that’s collected for the first time to meet the specific purpose. On the other hand, secondary information provides the base and starting point for market and demand analysis.
Some most important and popular sources of secondary data collection are:
- National sample survey reports
- Plan reports
- Annual survey of industries
- Monthly bulletin of the reserve bank
- Publications of advertising agencies
- National Census
- Annual reports of the Department of commerce and industry
- The exchange directory
- Statistical abstract of national union
- Statistical yearbook
Conduct of Market Survey
Firstly to obtain primary data and secondary information a detailed market survey is needed to be done. The market survey can be of different types. For instance, it may be a census survey or a sample survey.
In a sample survey, a sample of the population is contacted or observed but on the other hand in a census survey, the entire population is covered. The information collected from the market survey can relate to some of the following things from:
- Total demand and growth rate of demand
- Demand in different segments of the market
- Motives of the buyers for buying the product
- Purchasing plans and intentions of the buyer
- Social and economic characteristics of the buyer
- Unsatisfied needs and wants of the customer
- Attitude and behaviour towards various products
- Trade practices and preferences
- Satisfaction level of consumers with the existing products available in the market
Characterization of the market
Based on the information collected from various primary and secondary sources and through the market survey, the market for the product or service for which the analysis is being conducted can be described in the following terms:
- Effective demand for the product in the past or in the present
- Breakdown of demand for the product
- Price factors related to the product
- Methods suitable for distribution of the product and its sales promotion
- Consumers of the product
- Supply levels and the amount of competition for the product in the market
- Government policies relating to the market looking to work in
After the collection of information about various aspects of the market and demand analysis from suitable primary and secondary sources, an attempt is to made to estimate the future demand for the product or service.
However, a wide range of forecasting methods is available with the project manager to do the same.
We will learn more about the methods, uncertainties and ways to come with those uncertainties further in the post.
So, market planning is the process of organizing and defining the marketing aim of a company for a product or service and planning strategies and tactics to achieve planned goals.
A market plan may be different for different products and also it is an advice to have different plans for different types of product or services because one plans me not fit and may not be suitable for different types of product or service.
In addition let us now have a look at the components of a market plan;
Components of a Market Plan
Current Market Situation
Above all this component requires us to analyze certain things like where is the organisation now, who are the customer groups, what are needs and demands of the customer, how large and diverse is our target audience, which products and services do we provide, what is the amount of competition for our product or service in the market, are there any environmental factors associated with our product or service.
Answering these questions helps us analyze our current market situation.
Also Read: How to write a effective business plan
S.W.O.T Analysis refers to identification and analysis of the 4 components of our organisation which are namely Strength, Weakness, Opportunity and Threats. Moreover, these four components can be grouped into internal and external factors.
Strength and weakness are part of internal factors while threats and opportunities are part of external factors. In other words, SWOT-analysis helps us to identify key issues and opportunities for our organisation and it comprises an analysis of your internal operations as well.
After identifying the key issues affecting your organisation you can now make some decisions about future objectives. These will guide the development of strategies and action plans.
- Objectives should meet certain criteria e.g. financial, and marketing which must be customer-focused.
- The objectives should be clearly stated, must be measurable and also listed in order of importance
- Above all, they should be attainable and consistent with your organisation’s culture.
Certainly, it refers to the strategy that needs to be implemented to achieve the desired objectives. It takes into account some areas like whom are the firm targeting, will the firm change the way to promote and advertise the product or service, is there a need for more research etc.
After all of the above-mentioned steps have been followed now comes the time to decide how to start to take action. Basically to finalise what will be done, when it will be done, by whom it will be done and how much will it cost to execute it.
Budget and Controls
The Budget is basically a cash flow statement along with a profit/loss statement to support the marketing plan made by the firm.
Along with budgets control mechanisms and procedures also needs to be established to monitor the progress of the plan to determine if anything needs to be changed or not. It must also include a contingency plan in case something adverse or some mishappening happens.
Steps involved in conducting a Market survey
Steps to conduct a market survey:
- Firstly define the target segment of the audience for conducting the market survey
- Select the sampling scheme and sample size for which survey is to be conducted
- Develop the questionnaire, it must be developed keeping in mind the required information to be collected and the people from whom information is to be gathered
- Hire and train the field investigators who fill finally go to the ground level to conduct the survey
- Try to collect the information as per the questionnaire from the sample of respondents
- Scrutinise, analyse & interpret information from the data collected on the basis of the market survey
Methods of Demand forecasting
Also read- How to do financing of projects in business
Uncertainties of Demand forecasting
While demand forecasting is considered to be a great tool in terms of benefits it offers but as the word itself suggests it is forecasting which means to estimate thus it is not foolproof. It has its own uncertainties and errors which comes majorly from 3 sources which are:
- Data available about the past and present market
- Lack of Standardization of market features including the price of products, its quantity, quality etc.
- The number of observations available to conduct the analysis
- Abnormal and external factors may also cause errors in the forecast
- Methods use for forecasting may also cause errors in forecasting because of the unrealistic expectations set by us or unable to handle quantifiable or unquantifiable factors may be cause for errors.
- Changes in the environment may also cause uncertainties and errors. The reason may be from:
- Technological Change
- Change in Government Policy
- Discovery of New Sources of Raw Material
- Changes in weather or the occurrence of natural disasters
How to tackle uncertainties of Demand forecasting
While uncertainties are present but there is a way to tackle them. Some of them are:
- Conducting analysis taking data which is based on uniform and standard definitions.
- Evaluate the assumptions of the forecasting methods and choose a method which can prove to be most suitable for the process.
- Preparing and considering alternative scenarios and their impact on market and competition.
- Monitoring the environment closely so that important changes can be observed and tapped easily.
Also Read: Components of Technical Analysis in Business
When it comes to the business market and demand analysis plays an important role. It is true that both of these analyses are based on forecasting and assumptions which may be uncertain to a large extent but that does not hinder their value.
Therefore, by using these assumptions and predictions in our business we are making ourselves future-ready to tackle any kind of uncertainties and misshapen.
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Frequently Asked Questions
Best way to improve demand forecasting is to improve the data points in your research. The more accurate are the data the more accurate and effective the forecasting will be.
Demand forecasting provides an insight into the organization’s capital investment and expansion decisions and thus becomes important to execute.
The best supply chain system is the one which can manage any amount of traffic size and adapt to changing times. Thus it becomes important to estimate future demand one can face.
It majorly helps an organization to reduce the risks involved in business activities and make important business decisions and to plan itself for the future upcoming demand and scenario.