In business, the terms “market research” and “market analysis” are very often used interchangeably. And it’s not hard to see why! They both sound very similar and, to those not in the research fields, it could even be seen that their aims and outcomes are the same.
However, they actually have some stark differences. This means that, despite both being extremely important within your business and in terms of making your product a success, they are not interchangeable.
If you have done market research, it doesn’t necessarily mean that you’ve done a market analysis. And vice versa!
So, today we wanted to walk you through the differences to help you ensure that the research you are doing is as effective as possible for you. We’re going to go back to the basics, defining what each of these terms means, as well as giving a practical overview of how to do both of them.
What is a market analysis?
A market analysis is the study of how attractive a specific market is to your business, as well as the dynamics of that market within its wider industry.
To put it simply, it involves looking at the historical data from an industry, to gain information including market sides and competitors. This allows a business to assess how their product or service can fit within the market, so that you can strategically position it for a higher chance of success.
How to conduct a market analysis
There are two types of markets: supply side and demand side.
Demand side is the market that demands your product; your customer. Supply side is the market that provides the products; the market you operate in where your competition lie. So, keep in mind that your market analysis may need to look at these two different directions.
One of the primary aims of market analysis is to assess Compound Aggregate Growth Rate (CAGR), which will indicate how enticing a market is based on its growth rate.
Finding out these sorts of statistics is simply a case of hunting out industry reports through Google. This may be more difficult for emerging markets, where there are less statistics in general related to that area. Mintel reports can be extremely helpful, though they are often expensive to access.
Bear in mind that some businesses operate at the intersection of two (or even more!) markets.
Market analysis can show trends that are happening, as well as customer and user needs. As such, it can be used to do market segmentation, to look at who you can target your products and services within a market. Sources such as PwC and Deloitte can be particularly good for finding market trends.
Market sizing is usually done at this point too, through the “TAM, SAM and SOM” framework. TAM is the Total Attainable Market, meaning the market size and growth rate. SAM is the Serviceable Attainable Market, meaning a specific segment of the market. Finally, SOM is the Serviceable Obtainable Market, meaning the portion of “SAM” which you can obtain based on things like your marketing plan and budget.
For more information on analysing the size of your market, check out this brilliant article.
For new and emerging markets, a “bottom up” approach to market analysis is wise:
“A bottom up analysis is calculated by estimating potential sales in order to determine a total sales figure. A bottom up analysis evaluates where products can be sold, the sales of comparable products, and the slice of current sales you can carve out.” (Jeff Haden, Inc.).
Find out more about bottom up market sizing and analysis here.
What is market research?
Market research can be seen as a part of a market analysis, though it can also stand alone. It is the process of gathering information about a certain market and the customers within it.
To put it simply then, Market research is the process of gathering information about what your customers and users want and need, so that you can ensure your product is as good as it can be.
How to conduct market research
As with all research, there are two key types of market research: Primary and Secondary.
Primary Market Research is research that a business does itself, on its own customers or users. It usually consists of a company asking their customers or potential customers questions about a product or a business. With this information, they can better predict customer behaviour and de-risk some of the decisions we make.
Primary market research is either done quantitatively – Data is gathered and mathematically analysed. For example, number of sales or site visits. – or qualitatively, which focuses on understanding behaviours, opinions and conduct.
Secondary Market Research is research that another company has completed on a similar market to yours. It is less expensive than primary research and is usually gathered through things like books or reports. We recommend that this isn’t ever the full extent of your market research, as it is not tailored to your company.
For a more detailed look at how to conduct a market and competition analysis, check out this blog post.
The key takeaways
Of course, market research and market analyses are both huge topics and large endeavours for any company. This is a subject that it’s simply impossible to cover in its totality in a single blog post. It would be difficult to do it in a single book, in fact!
However, this has hopefully given you a good overview of each and what their differences are in terms of conducting them.
To re-cap: Whilst a market analysis focuses on how attractive a market is to your business, market research is more focused on what your customers within that market want and need.
Each is hugely important in terms of ensuring that your business will be a success. Whilst market analysis allows you to test for viability in terms of how you position your product, market research allows you to learn more specifically about the needs your product or services has to fulfill within that market.
The Snap Out Team ⛰️