Business Plan: What It Is and How to Write One in 9 Steps - Shopify
How to write a business plan in 9 steps · 1. Draft an executive summary · 2. Write a company description · 3. Perform a market analysis · 4.
market analysis
A business plan is a strategic document that outlines a company’s goals, strategies for achieving them, and the time frame for their achievement. It covers aspects like <anchor>market analysis</anchor>, financial projections, and organizational structure. Ultimately, a business plan serves as a roadmap for business growth and a tool to secure funding.
What Is a Market Analysis? 3 Steps Every Business Should Follow (2023) - Shopify
What Is a Market Analysis? 3 Steps Every Business Should Follow (2023) - Shopify

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Shopify app store](https://apps.shopify.com/)
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Domains & hosting](/domains)
- [Explore free business tools.\
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Tools to run your business](/tools)

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Sell online or in person](/sell)
- [Check out customers.\
\
World-class checkout](/checkout)
- [Sell online.\
\
Grow your business online](/online)
- [Sell across channels.\
\
Reach millions of shoppers and boost sales](/channels)
- [Sell in person.\
\
Point of Sale (POS)](/pos)
- [Sell globally.\
\
International sales](/markets)
- [Sell wholesale & direct.\
\
Business-to-business (B2B)](/plus/solutions/b2b-ecommerce)
- [Accept online payments.\
\
Set up forms of payment](/payments)

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Reach & retain customers](/market)
- [Market across social.\
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Social media integrations](/facebook-instagram)
- [Chat with customers.\
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Shopify Inbox](/inbox)
- [Nurture customers.\
\
Shopify Email](/email-marketing)
- [Know your audience.\
\
Gain customer insights](/segmentation)

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\
Track sales, orders & analytics](/manage)
- [Measure your performance.\
\
Analytics and Reporting](/analytics)
- [Ship orders faster.\
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Shopify Shipping](/shipping)
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\
Inventory & order management](/orders)
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\
Shopify Fulfillment Network](/fulfillment)
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- [Shopify blog.\
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Business strategy tips](/blog)

Popular topics

- [What is Shopify?.\
\
How our commerce platform works](/blog/what-is-shopify)
- [Shopify Editions.\
\
New, innovative Shopify products](/editions)
- [Founder stories.\
\
Learn from successful merchants](/blog/topics/founder-stories)
- [Branding.\
\
Build your brand from scratch](/blog/how-to-build-a-brand)
- [Marketing.\
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Build a marketing plan](/blog/marketing-plan)
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Improve your search ranking](/blog/ecommerce-seo-beginners-guide)
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Turn social into sales](/blog/topics/social-media-optimization)
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Scale your business](/blog/how-to-scale-small-business)

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- [Business name generator .](/tools/business-name-generator)
- [Logo maker.](/tools/logo-maker)
- [Stock photography.](https://www.shopify.com/stock-photos)
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[blog](/blog) \| [Starting Up](/blog/topics/starting-up)

# What Is a Market Analysis? 3 Steps Every Business Should Follow

Your market analysis validates demand and helps you understand where you fit in the competitive landscape.

by [Alexandra Sheehan](/blog/authors/alexandra-sheehan)

Feb 10, 2023

![Market Analysis featured image. ](https://cdn.shopify.com/s/files/1/0070/7032/files/Market_Analysis.jpg?v=1676237082)

On this page

On this page

- [What is a market analysis?](#1)
- [How to do a market analysis](#2)
- [How to write a market analysis for a business plan](#3)
- [Moving forward with your business plan](#4)

Start your online business today.

For free.

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Wouldn’t it be great if you could launch a business knowing, without a doubt, that you’d succeed? While literally seeing into the future isn’t plausible, savvy ecommerce entrepreneurs know there are a few steps you can take to [validate your business ideas](/blog/validate-product-ideas) and make sure there’s a customer base and target market ready to spend their money on your offer.

One of those business planning steps is conducting a market analysis, and it's critical for winning over the hearts and minds of potential customers in your target market.

In this guide, we'll cover the market analysis process, and how to utilize your findings into your own marketing efforts using market data.

## What is a market analysis?

Market analysis is the process of evaluating various factors that impact a specific market, such as industry trends, customer preferences, and competitor behavior. It involves gathering and analyzing data to understand market size, growth potential, target audience, and competitive landscape. Market analysis helps businesses make informed decisions, identify opportunities, and develop effective marketing strategies.

At minimum, your market analysis should identify the following:

- Who your target customer is
- Where, why, and how they shop
- The size of your target market
- The price people are willing to pay for what you sell
- Your competitors and their strengths and weaknesses

Keep in mind that the market changes, so conducting a market analysis isn’t just for new businesses—established businesses can also use market analysis to validate new product ideas or address challenges.

Here’s a quick market analysis example to demonstrate exactly that: [iHeartRaves](https://www.iheartraves.com/) analyzed the market when the COVID-19 pandemic first hit. The clothing brand sells apparel people wear at music festivals and gatherings—events that slowed down or even halted during the pandemic.

As such, [the brand needed to pivot](/blog/struggling-business). So, it changed promotional tactics and added face masks to its product lineup after conducting a quick analysis to see what opportunities it could pursue.

Free competitor research template

Find a strategic angle to achieve sales success, uncover your product-market fit, and stand out from the competition with our free template.

[Learn More](/first-sale/market-research-competitor-analysis?utm_campaign=First_Day_to_First_Sale&utm_source=blog)

## How to do a market analysis

There are three main steps to completing a market analysis for your ecommerce business:

1. Research the industry
2. Understand your audience
3. Know how you stack up against competitors

### 1\. Research the industry

Now it’s time to understand the industry as a whole. Researching your chosen industry helps you get a bird’s-eye view of the market landscape.

When researching your particular industry for your market analysis, consider the following:

- **Market size.** Estimate how many businesses and customers are in your potential industry. A big market could be saturated and require you to niche down more specifically, whereas a smaller market could mean there’s lots of opportunity for new businesses.
- **Market value.** Get insight into how much money the industry generates each year. Lots of consumer spending means there’s plenty of opportunity for you to claim your slice of the pie.
- [**Market demand**](/blog/market-demand) **.** As many as [42% of new business startups](https://www.cbinsights.com/research/startup-failure-reasons-top/) fail because of insufficient demand, so it’s essential to validate that people want what you offer before you pursue your idea.
- **Market need.** Identify gaps in the market and how the existing landscape falls short in those areas.

Here are some reputable places to check for this data:

- [US Bureau of Labor Statistics](https://www.bls.gov/)
- [North American Industry Classification System](https://www.census.gov/naics/)
- [USAGov data and statistics about the US](https://www.usa.gov/statistics)
- [US Census Bureau Census Business Builder](https://cbb.census.gov/sbe/)
- [US Bureau of Labor Statistics consumer price index](https://www.bls.gov/cpi/)
- [US Department of Commerce Bureau of Economic Analysis](https://www.bea.gov/)
- [US Federal Reserve daily interest rates](https://www.federalreserve.gov/releases/h15/)
- [Federal Reserve financial data](https://www.federalreserve.gov/data.htm)
- [Bureau of Economic Analysis gross domestic product](https://www.bea.gov/resources/learning-center/what-to-know-gdp)
- [US Census Bureau Statistics of US Businesses](https://www.census.gov/programs-surveys/susb.html)

You may also find industry-specific resources. For example, if you’re looking to [start a pet business](/blog/pet-business), check out the [American Pet Products Association](https://www.americanpetproducts.org/press_industrytrends.asp) and the [American Veterinary Medical Association](https://www.avma.org/resources-tools/reports-statistics/us-pet-ownership-statistics).

### 2\. Understand your audience

Now it’s time to drill deeper into your research and understand your [target market](/blog/target-market "what is target market")—the people behind the demand in your industry. This step involves customer research and [segmenting your audience](/blog/target-audience "how to define target audience") based on shared characteristics.

When researching your potential audience, you want to know the following:

- How old they are
- Where they live
- Where they work, what they do, and how much they make
- Where and how they shop
- What they buy, and how much money they spend
- What technology they use
- How they interact with brands
- Their current market perceptions
- Their pain points and challenges

Audience research involves both internal and external sources. If you have an existing audience, you can tap them for valuable insights. Run surveys and questionnaires to get their thoughts, and pursue more thorough and in-depth interviews with individuals who exemplify your target customer. If you don’t already have an audience you can leverage, you might invest in focus groups for your own research purposes.

External data is equally valuable. You’ll want to understand things like where your audience lives, works, and hangs out, as well as how much they make and spend. You’ll also want to gain an understanding of their current perceptions about your industry or product(s). Here are some places to get external data about your customer:

- [Bureau of Economic Analysis consumer spending](https://www.bea.gov/data/consumer-spending/main "consumer spending")
- [US Federal Reserve consumer credit data](https://www.federalreserve.gov/releases/G19/ "consumer credit")
- [US Consumer Product Safety Commission research and reports](https://www.cpsc.gov/Research--Statistics "research and reports")
- [US Census Bureau](https://www.census.gov "census bureau")
- [US Bureau of Labor Statistics demographic data](https://www.bls.gov/bls/demographics.htm "overview of BLS demographic data")
- [US Bureau of Labor Statistics employment (and unemployment) data](https://stats.bls.gov/bls/employment.htm "BLS statistics on employment")
- [US Bureau of Labor Statistics earnings data](https://www.bls.gov/cps/earnings.htm "earnings survey")
- [US Bureau of Labour Statistics employment data](https://www.bls.gov/data/#employment "employment data")

You can also do [social listening](/retail/social-listening-tools-retailers-can-use-to-monitor-online-chatter "social listening ") to see what people are saying online, [conduct SEO research](/blog/keyword-research-strategy "keyword research") to see what people are searching for, and check [customer reviews](/retail/how-to-encourage-customer-reviews-and-why-you-should "how to encourage customer reviews") to find out how people like or don’t like products that are already in the market.

### 3\. Know how you stack up against competitors

Much like you want to know about your audience when you’re conducting a market analysis, you also want to understand the competitive landscape. Knowing who your competitors are helps you pin how your brand is different and how you can differentiate yourself from other players in the market.

It’s important to differentiate yourself from competitors because this will increase perceived value and push customers to purchase your options instead of the same or similar options from other brands or businesses. When Albert Matheny launched his natural protein brand [Promix](https://promixnutrition.com/) he has relied on market research and analysis to remain competitive as the market evolves.

“Identify some unique propositions that you have for customers or unique values that your brand has and then make those really, really clear and simple. Don’t try to highlight too many different things,” [he said in an episode of _Shopify Masters_](/blog/promix-differentiation). “Constantly evolve and say, ‘How can I make this product better?’”

![Promix.png](https://cdn.shopify.com/s/files/1/0070/7032/files/Promix.png?v=1641521909)

The first part of understanding how to differentiate involves understanding your brand and your business and what you bring to the table. You can conduct a [SWOT analysis](/blog/swot-analysis)—which identifies your unique strengths, weaknesses, opportunities, and threats—to understand your position in the market.

Here’s a hypothetical SWOT analysis for an online t-shirt business:

![SWOT t-shirt.png](https://cdn.shopify.com/s/files/1/0070/7032/files/SWOT_t-shirt.png?v=1641522117)

You’ll also want to go ahead and conduct a [competitive analysis](/blog/competitive-analysis). Generally speaking, you want to pick seven to 10 competitors to include in your competitive analysis. Include a variety of competitors, such as those who sell a similar product to the same customer as you, as well as those who sell a slightly different product to a slightly different customer in the same industry. This means going for a variety of direct, indirect, and tertiary competitors.

When analyzing your competitors, you want to understand what they offer, how they position themselves, and how people perceive them. To help with your competitive analysis, we’ve created a free template you can use. It has rows for each competitor’s pricing, offering, marketing, shipping, and more, so you can cover all the bases.

![competitive analysis template.png](https://cdn.shopify.com/s/files/1/0070/7032/files/competitive_analysis_template_a61842af-1b8b-47c6-a1a6-5734086d69d3.png?v=1641522173)

## How to write a market analysis for a business plan

While you might have a comprehensive market analysis documented for internal purposes—this is especially helpful for marketing and business development teams—you may create a shortened version for your [business plan](/blog/business-plan).

Your business plan is another comprehensive document that outlines all areas of your business, including your market analysis and other elements such as [business structure](/blog/business-types), operations and logistics, and financials. So when you prepare the market analysis section for your business plan, you’ll want to summarize the findings from your full in-depth analysis.

Narrow your analysis down to the most important information that most convincingly validates your idea and likelihood of success. Remember what type of business plan you’re writing and who you’re writing it for. Feel free to use bullet points, tables, and charts to make the information presentable.

If you’re drafting a business plan for your business, you can start with our free [business plan template](/blog/business-plan-template) to guide you through each section.

## Moving forward with your business plan

Though an important component, your market analysis is just one piece to your overarching [business strategy](/blog/business-strategy) and plan. Careful business planning across all areas of your entrepreneurial endeavor will set you up for success and ultimately help improve the chances of your marketing strategies paying off down the road.

## Read more

- [AliExpress Dropshipping- How to Dropship From AliExpress](/blog/117607173-the-definitive-guide-to-dropshipping-with-aliexpress)
- [The Ultimate Guide To Dropshipping (2024)](/blog/dropshipping-guide)
- [6 Creative Ways to Start a Business With No Money in 2024](/blog/start-business-without-money)
- [25+ Ideas for Online Businesses To Start Now (2024)](/blog/online-business-ideas)
- [How To Write the Perfect Business Plan in 9 Steps (2024)](/blog/business-plan-examples)
- [The 13 Best Dropshipping Suppliers in 2024](/blog/dropshipping-suppliers)
- [How To Find the Best Dropshipping Niches](/blog/dropshipping-niches)
- [How To Source Products To Sell Online](/blog/product-sourcing-apps)
- [Business Valuation- Learn the Value of Your Business](/blog/business-valuation)
- [How One Couple Raised Over 500% of Their Crowdfunding Goal on Kickstarter in 28 Days Without an Audience](/blog/36179141-how-one-couple-raised-over-500-of-their-crowdfunding-goal-on-kickstarter-in-28-days-without-an-audience)

## Market analysis FAQ

### What is market analysis?

Market analysis is the process of assessing a specific industry, niche, or market segment with the goal of understanding a target audience and competitive landscape.

### What is the purpose of market analysis?

Market analysis helps brands better understand how to promote their products to a specific target audience. It can also help to demonstrate the viability of a business idea for the purpose of securing investments.

### What are the steps to performing a market analysis?

1. Research the industry. Consider market size, value, demands and needs.
2. Understand your audience. Research age, location, and how they interact with brands.
3. Know how you stack up against competitors. Examine your strengths and weaknesses, and identify opportunities and threats.

by [Alexandra Sheehan](/blog/authors/alexandra-sheehan)

Last updated Feb 10, 2023

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by [Alexandra Sheehan](/blog/authors/alexandra-sheehan)

Feb 10, 2023

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[Social Media Optimization](/blog/topics/social-media-optimization) [How To Make Money on Instagram in 2024 (9 Actionable Ideas)](/blog/make-money-on-instagram)[Starting Up](/blog/topics/starting-up) [How To Start an Ecommerce Business: Guide for 2024](/blog/ecommerce-business-blueprint)[Guides](/blog/topics/guides) [What Is Dropshipping and How Does It Work? (2024)](/blog/what-is-dropshipping)[Find an Idea](/blog/topics/find-an-idea) [What Is Print on Demand & How To Start a Business (2024)](/blog/print-on-demand)

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popular posts

[Sell Online](/blog/topics/sell-online) [How To Create a Website in 9 Steps (2024)](/blog/build-a-website)[Starting Up](/blog/topics/starting-up) [How To Start an Online Store in 2024 (Step-by-Step Guide)](/blog/start-online-store)[Find an Idea](/blog/topics/find-an-idea) [How To Make and Sell Merch Your Fans Will Love (2024)](/blog/make-sell-merch)[Sell Online](/blog/topics/sell-online) [10 Best Ecommerce Website Builders for Your Online Store (2024)](/blog/best-ecommerce-website-builder)

##### popular posts

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2023-11-08

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[Starting Up](/blog/topics/starting-up)

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[What Is Print on Demand & How To Start a Business (2024)](/blog/print-on-demand)

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[How To Start an Online Store in 2024 (Step-by-Step Guide)](/blog/start-online-store)

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[How To Make and Sell Merch Your Fans Will Love (2024)](/blog/make-sell-merch)

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[Sell Online](/blog/topics/sell-online)

[10 Best Ecommerce Website Builders for Your Online Store (2024)](/blog/best-ecommerce-website-builder)

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[Guides](/blog/topics/guides)

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