What distinguishes a good business idea from a bad one? Some believe that it should disrupt existing systems, or be outstandingly innovative to succeed.

However, the reality is that the best business ideas with the greatest potential are backed by a comprehensive understanding of the competition, the target audience, and the associated risks.

Any startup or business launching a new product or service should consider these factors to evaluate profitability and avoid wasting valuable resources and time.

This process is called market opportunity analysis, and it may spell the difference between success and failure.

What are the benefits of market opportunity analysis?

As previously mentioned, market opportunity analysis involves in-depth research on competition, audience and risk. It is best applied when a business is looking to reach more clients or increase its revenue share.

By conducting market opportunity analysis, businesses are in a much better position to evaluate the demand for a product or service.

Beyond getting insights into demand, businesses can also identify and prepare for potential challenges in bringing their products to market. This includes laws and regulations, economic uncertainty, social perception and more.

In addition, a more profound understanding of the target market may uncover additional areas for research or more opportunities to explore. For example, certain governments may offer concessions for specific business activities.

Also Read: Preparing your company for Southeast Asia market

And last but not least, with an in-depth understanding of a market, businesses can make more informed strategic decisions that have a greater chance for success.

How to analyse market opportunity

There are four main domains to pay attention to when analysing market opportunities: customers, competition, and internal and external factors.

Of course, this assumes that you have already narrowed down a good product or service to explore. If you haven’t yet identified such an opportunity, your first step will be creating a list of opportunities you are eager to explore. This includes what market segments you wish to penetrate, your target customers, potential partnerships and any other relevant information related to the opportunity.

Once complete, you can begin to unearth the market opportunity of your prospective product or service.

Learn about your customers

Whether a product or service succeeds or fails starts with the customer. You may need to ask questions such as whether your product solves an unmet need or desire, especially if you are looking to avoid challenging market climates.

You’ll need to learn about how your customers make purchasing decisions and what channels you’ll have to use to connect and engage with them. In general, the goal of this step is to acquire a complete evaluation of your customer’s needs and desires.

This can be done in several ways, including but not limited to conducting interviews and surveys, building a customer journey map, as well as leveraging paid or public demographic data.

Learn about your competition

Once you’ve gained a sufficient understanding of your customers, you’ll want to assess your competition. Researching your competitors will uncover insights such as existing products in the market and how they are positioned, the size of the market share, potential gaps to fill, and whether there’s room for differentiation.

Some of the questions you’ll want to ask include

• Who are your main competitors?
• How does your product or service compare to theirs?
• What marketing strategies are they using?
• What distribution channels are they using to reach their customers?
• What are customers saying about their products or services?

Take into account external factors

In addition to understanding your customers and learning about your competition, a comprehensive evaluation of market opportunity should also consider external influences.

Also Read: Bold moves: Capitalising on market dips in edutech

One way to study these key external influences is by using the PESTLE framework, which analyses political, economic, social, technological, legal, and environmental factors.

For example, from a technological standpoint, you may learn if any innovations influence the market. From a social perspective, you can learn whether new trends play in your favour or are poised to stymie your product or service launch.

Consider the impact of internal factors

Much like external factors, internal factors also play a crucial role in determining the success of a new product or service. Internal factors encompass technical skills, access to key partners, capital, manpower and any other resources required to bring a product to market.

Are you ready to scale up?

Expanding into new markets requires careful planning, extensive research, and expertise in the local landscape. Joining an accelerator program can simplify this process by tapping into the program’s network of partners, mentors, and deep knowledge of international markets such as Germany, Singapore, and the United States.

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The above article was originally published on Scaler8.

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