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Market study is a prearranged activity that intends to collect all relevant information about a certain market to whom a product or a service can possibly cater. Usually, this is done before a product is released for public consumption to determine whether the said product can be a “hit” among consumers. It can also discover the different trends the product can either take advantage or be wary of.
One of the most important questions that a business owner should answer through a market study is, “Who is my market?” Answering this key question would then lead to the analysis of the other elements. Usually, the kinds of product and services offered would help in determining who the market is. For example, a line of cosmetics usually caters to a female demographic, ranging from the age of 15 to 50. The market study should establish as specific as possible the target market, limiting it according to gender, location, and other factors.
After zoning in on who the possible market is, a market study then begins analyzing different elements, such as the market size, market growth rate, market trends, and market profitability. Market size reveals the existing population of possible consumers. Market analysts would sometimes go from one location to the other in order to find out if the market size is big enough for the product to make a profit. Doing this can help a business set up in the right location.
Based on the existing market size, the growth rate can then be forecaste by a market study. Knowing the growth rate can help a business plan its future goals, whether to expand for the increasing growth rate or move to another location if the rate is expected to decrease. In these cases, market profitability also comes into play. The element of market profitability finds out the potential of a business to profit. This factor also takes into consideration the market trends and the different business competitions around the area.
Aside from the elements of the market itself, a market study includes the industry cost structure in their research. This aspect helps a business find ways to expand. Generally, industry cost structure evaluates the costs of manufacturing, which can also involve comparing the manufacturing costs of rival businesses. It can also include forecasting increase of costs for future preparations.
A market study also researches different distribution channels. This helps a business decide the ideal way of handing out the product to the consumers. For example, an entrepreneur can choose to set up his own store to sell his products, or tap into an existing shop to sell his products. Usually, the entrepreneur chooses the most efficient way to distribute his products at the cheapest cost.