How do you conduct a market analysis?

You find a report describing a ten-billion-pound market. Good news? Perhaps. If that figure includes countries you do not serve, customers you cannot reach and categories far removed from your offer, it is impressive but not particularly useful.

Market analysis defines the real opportunity.

Defining the scope

Write one sentence that describes the market and includes:

• the problem or need being addressed;
• the type of customer;
• the geographical area;
• the category of solutions;
• the time horizon.

The definition is not neutral. If you describe the market through your current product, you may overlook very different alternatives that solve the same problem.

Which evidence does a market analysis require?

An essential analysis should cover size and growth, segments, purchasing behaviour, channels, prices, regulation and leading providers. For the Italian market, you can start with ISTAT; for European comparisons, use Eurostat. Always associate every reported figure with its year, geography and definition.

Then combine public data with what the company observes directly: sales enquiries, reasons for lost opportunities, support tickets, internal searches, interviews and the behaviour of existing customers.

What do TAM, SAM and SOM mean?

• TAM: total theoretical demand without geographical or operational constraints.
• SAM: the part of the market compatible with the offer, territory and distribution model.
• SOM: the share that can realistically be reached within a given period using the available resources and capabilities.

False precision is unnecessary. A range with visible assumptions is more useful than an exact figure built on fragile definitions.

From evidence to a decision

For every important finding, ask: “What changes?” A segment may be growing but have incompatible acquisition costs. A need may be widespread even though customers will not pay to solve it. A market may be small but accessible and profitable.

Conclude with three things: priority opportunities, risks to monitor and questions to validate. This synthesis becomes the starting point for the analyses that follow.

Primary and secondary research

Secondary research uses evidence that already exists: official statistics, financial statements, industry studies, trade associations, regulatory documents and information published by market participants. It is often the fastest way to understand a market’s size, dynamics and language.

Primary research gathers new evidence through interviews, surveys, observation, tests and data produced through commercial activity. It is useful when existing sources do not answer the specific question or when you need to understand motivations and behaviours that aggregated figures cannot reveal.

The two forms complement one another. A report may show that an industry is growing but not explain why a particular segment would choose your offer. Ten interviews may reveal a recurring problem, but they cannot establish by themselves how widespread it is.

How do you assess the reliability of data?

Check who produced the data, using which method, on which sample and with what interest. Research commissioned by a supplier may be useful, but you need to understand its purpose. Even an institutional source may be unsuitable if it uses a different definition of the market or obsolete data.

Compare at least two sources when an estimate affects an important decision. If their results differ, do not automatically choose the most favourable number. Reconstruct their scope, period, geography and unit of measurement. The difference may reveal something more important than the final value.

In interviews, avoid questions that suggest the answer. Asking “would you use a simpler solution?” easily produces agreement. It is more useful to reconstruct the last time the problem occurred, what the person did and what leaving it unresolved cost.

How long should a market analysis take?

The duration depends on the decision and the financial risk. An initial assessment may take a few days, while entering a regulated market may justify weeks of research. Set a deadline and progressive deliverables: scope, initial evidence, interviews and synthesis.

If a new piece of information could not change the choice, it probably does not need to be collected. Open questions can become later experiments instead of blocking the entire project.

When should the analysis be updated?

Update the document when a change could alter the chosen segment, investment or value proposition. You do not need to rewrite the entire analysis. Record the new evidence, its effect on assumptions and the resulting decision.

Stay in close contact with all departments involved in the projects. They will tell you what results they are seeing, making it easier to decide how to optimise.