Market Analysis should not be too difficult. I’ve written this post to guide you to collect data and have your own market analysis in just 3 steps.
You are convinced that your idea is so disruptive as to become the next Unicorn Startup – like Airbnb, Stripe, Asana.
You have already developed your prototype and are ready to go into production to win millions of customers.
Your warehouse is full of fabulous products but you don’t understand why nobody wants to buy them.
What do all the above situations have in common? You need to analyze the growth trends of the market and the main competitors before you spend time and money to develop a project. Otherwise, you risk throwing money and time into products and services that no one will ever buy.
Follow these 3 steps to collect and analyze as much data as possible and make correct and informed decisions:
- Demographics analysis
- Size and Value
- Target Market
Demographic analysis
The first values to look for are the number and demographic characteristics of the population (if B2B or B2C) and companies (if B2B). They will help you visualize your potential market and purchase reasons, which we will elaborate on in point 3.
These are my sources for a demographic analysis:
- ISTAT database of statistics currently produced by the Italian National Statistical Institute
- Censis economic and social research
- CNR National Research Council
- Eurostat statistics office of the European Union
- World Bank Open Data database of all countries in the world
- ADB Data Library database of the Asian Development Bank
- CCIAA business register (Registro Imprese)
- Google Market Finder guided market analysis for expansion in foreign markets
- Info Foreign markets (Info Mercati Esteri) of the Farnesina
- International chambers of commerce
- Industry associations
If you’re a fashion startup in the luxury sector that wants to sell in Italy and Europe you need to collect the following data: female population (direct buyers or recipients of a gift) and personal income tax income for municipalities (important to understand how many can afford a luxury product and where are). You can find this data on the ISTAT website. Using dynamic tables it is possible to obtain more detailed results based on the queries entered. My advice is not to stop at a single source but to use as many as possible for relevance.
Market size
At this point, you will be overwhelmed with data and probably also quite confused. But don’t worry, because we’re going to skim to define the volume and value of your market and the trends to keep an eye on.
The main sources are:
- Google search bar
- Websites and blogs of large consulting firms
- Open Data Italian portal of the Open Data
- Dati.gov.it open data of the public administration
- Osservatori.net of the Politecnico di Milano
- Statista business data platform
- Google Trends tool for analyzing web searches carried out in the last 12 months
- Consumer Barometer with Google tool that analyzes how people use the Internet
- Global Web Index consumer analysis
Here too, the rule is to use as many sites as possible to get a more detailed view.
You should also input the following keywords in the Google search bar: “luxury market” – “luxury market trends” – “personal luxury goods” – “luxury market reports” – “fashion luxury market analysis”. Several “packaged” market researches may emerge that can guide you in defining the market of interest with more precision. We have noted the following numbers: total market value in euros, CAGR (compound annual market growth rate), average EBIDTA margin, turnover of the top Italian companies. Where the indices were not already available, we calculated them.
TAM, SAM, SOM
Making reasoned assumptions, we estimated the size and value of the luxury TAM, SAM and SOM market for your luxury product:
- TAM 10% (estimated percentage of affluents in target by age, gender, and interest in the product) of the Personal Luxury Goods Market = € 26 billion
- SAM 38% (percentage of luxury sales that take place in the EU) of the TAM = 10 billion euros
- SOM 1% (market share that could probably be interested in Laura’s product) of the SAM = 100 million euros
These initial data must make us reflect if it is actually worth making an investment for a market worth 100 million euros. If we are an SME developing our product/service and promotion is low costs probably yes. Instead, if the costs are high but we do not want to give up our product, we could develop it and then sell the patent.
Target market
We are now ready to analyze the reference market. The watchword is segmenting: to whom I want to communicate my product/service, what exact characteristics it has, where it lives, what it does, what its needs are. We will need all the qualitative and quantitative information collected previously.
From the reports downloaded in point 2, we know that the luxury consumer we want to identify has the following characteristics:
- the demographic composition is 33% Gen X, 33% Millennials, 8% Gen Z
- the most represented nationality is the Chinese one with 36%, followed by North America at 21% and Europe at 17%
- about 40% of customers are tourists, that is, people who buy on trips abroad
- in 2017 the online channel accounted for 9% of sales, with a marked growth trend reaching a fifth of sales in 2025
- 80% of the purchasing decisions mature online and the search on mobile is 4 times that of the desktop
- a not negligible figure is represented by male expenditure in the luxury market, 30% of this expenditure is destined to be given away
Tools to define your audience
We have a good starting point, let’s arm ourselves with post-its and markers we start with brainstorming. Another good tool: the Value Proposition Canvas, which helps you compare your ideal customer and your product. The Canvas guides the entrepreneur in describing his Value Proposition and assessing whether there is a “fit” between the value offered and the identified customer segment. In practice, the needs, the difficulties encountered and the advantages of the customer are identified and in a specular way, one tries to provide solutions with one’s own product or service. This Strategyzer introductory video explains its importance very well:
Once the canvas is finished, we can finally create an avatar of your ideal customer or buyer persona. Another interactive tool to use is Hubspot Make My Persona. Through a series of questions, you define the demographic, working characteristics, objectives, difficulties, methods of communication and presence on social media of potential customers. This is particularly important not only for the development of a product/service that meets the customer’s needs but also for the communication strategy that we will then have to develop.
Now you have all the information necessary to proceed with the analysis of your market. Remember to follow all the steps and not to skip even one. Later, after you have become familiar with the various tools, you will see that you will get more and more precise results that will help you identify your reference niche.
When you’re ready, read my post on how to find your competition.
If you want my support in your analysis, just book here your free consulting:
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