Step-by-Step Guide to Conducting an Effective Market Analysis

Understanding your market is essential before launching a product, expanding your business, or investing in a new opportunity. A well-executed market analysis helps you make informed decisions by revealing the size of your market, the competition, customer needs, and industry trends. This guide breaks down the process into seven clear steps to help you perform a thorough market analysis.

Analyzing market data on a laptop

Define the Purpose

Start by clarifying why you are conducting the market analysis. This focus will guide your research and help you avoid unnecessary information. Ask yourself:

• Are you validating a new product or service?

• Assessing a potential investment?

• Preparing for business expansion?

  
  

Write a concise statement summarizing your goal. For example:

“The purpose of this market analysis is to identify underserved segments in the scheduling software market.”

This statement will keep your research targeted and relevant.

Analyze Market Size and Growth

Knowing how large your market is and how fast it is growing helps you decide if the opportunity is worth pursuing. Focus on three key metrics:

• Total Addressable Market (TAM): The total demand if you could sell to 100% of the market.

• Serviceable Addressable Market (SAM): The portion of TAM you can realistically serve based on your capabilities and location.

• Serviceable Obtainable Market (SOM): The share of SAM you can capture considering competition and resources.

  
  

For example, if you develop scheduling software for gyms, your TAM might include all gyms in the U.S., while your SAM would narrow down to gyms that fit your ideal customer profile.

Tools like Semrush’s Market Overview can help estimate TAM and SAM by analyzing your domain and competitors. For instance, a TAM of 7 billion and a SAM of 258.9 million might indicate a large market with a focused segment to target.

Study the Competition

Understanding your competitors reveals gaps and opportunities. Identify who your direct and indirect competitors are, then analyze:

• Their market share

• Strengths and weaknesses

• Pricing strategies

• Customer feedback and reviews

  
  

This information helps you position your product or service effectively. For example, if competitors lack user-friendly scheduling features, you can highlight that in your offering.

Identify Your Target Audience

Pinpointing your ideal customers makes your marketing and product development more effective. Define your target audience by:

• Demographics (age, gender, income)

• Psychographics (values, interests, lifestyle)

• Behavior (buying habits, brand loyalty)

  
  

Create customer personas to visualize your audience. For example, a gym owner aged 30-45 who values efficiency and technology might be your primary user for scheduling software.

Analyze Industry Trends

Stay updated on trends that affect your market. Look for:

• Emerging technologies

• Regulatory changes

• Economic factors

• Consumer behavior shifts

  
  

For example, the rise of mobile apps and remote management tools could influence how gyms want scheduling software. Incorporating these trends into your analysis helps you stay competitive.

Graph displaying industry growth trends

Do a SWOT Analysis

A SWOT analysis summarizes your internal and external environment:

• Strengths: What advantages do you have?

• Weaknesses: Where do you lack resources or skills?

• Opportunities: What market gaps or trends can you exploit?

• Threats: What external challenges could impact you?

  
  

For example, a strength might be a unique feature in your software, while a threat could be a new competitor entering the market.

Summarize the Data and Provide Recommendations

After gathering all information, create a summary that highlights key findings and suggests next steps. This might include:

• Market segments to focus on

• Product features to develop

• Pricing strategies

• Marketing channels to use

  
  

Clear recommendations help stakeholders understand your conclusions and act on them.

Printed market analysis report with charts and notes

1. Define the Purpose

Begin by identifying the goal of your market analysis to maintain focus in your work. Are you aiming to validate a new product or service, evaluate a potential investment, or prepare for expansion?

Next, craft a brief statement outlining the purpose and scope of your market research. For instance:

“The purpose of this market analysis is to determine whether there’s an underserved segment of our market for our scheduling software.”

This will guide the rest of your process.

2. Analyze Market Size and Growth

Determining your market's size and growth rate will help you evaluate if a potential opportunity is worth pursuing.

Key metrics to examine include:

• Total addressable market (TAM): The total demand for your product or service, assuming full market penetration

• Serviceable addressable market (SAM): The market segment you can realistically serve, considering your capabilities and geographical reach

• Serviceable obtainable market (SOM): The portion of your SAM you can realistically capture, considering resources and competition

Use Semrush’s Market Overview tool to discover the TAM and SAM for a specific market by entering your domain (or a substitute if not yet launched) and those of your top competitors.

For example, in our scheduling software scenario, your TAM might include all gyms and fitness studios in the U.S., while your SAM would focus on those fitting your ideal customer profile (e.g., independently owned gyms in urban areas).

Your SOM will always be an estimate. Consider:

• Realistic visibility based on your marketing budget

• Conversion rates for similar products or services

• Your pricing strategy

Understanding market size allows you to assess growth potential by analyzing:

• Market growth rate: Is demand for your product or service increasing? Examine historical search data, industry reports, and financial data from public companies in your sector.

• Market consolidation: Is the market dominated by a few large players, or are there many smaller competitors? If many smaller companies exist, there may be more room for innovation.

3. Study the Competition

Analyzing your competition helps identify market gaps, opportunities to differentiate, and refine your positioning.

You likely know your main competitors. For example, if you offer scheduling software, you might compete with companies like Calendly.

To discover more competitors, try these methods:

• Ask customers and prospects about other solutions they use or have used

• Visit industry forums and communities to see what solutions potential customers discuss

• Check review and comparison sites for other solutions in your category

Besides a one-time competitive analysis, continuously monitor your competition. Semrush’s EyeOn tool can assist with this.

Track rivals’ content, social media, and ads to stay updated on strategy, pricing, positioning, and more.

4. Identify Your Target Audience

To better understand your target audience and potential customers’ needs and behaviors, use these methods:

• Surveys: Gather data from a large number of prospects for quantitative insights. Surveys help identify customer behavior or preference patterns.

• Interviews: Conduct one-on-one interviews to explore customer motivations and pain points, uncovering qualitative insights.

• Social media listening: Use tools like the Brand Monitoring app to track mentions of your brand, competitors, and industry terms on social media, gaining insight into real conversations with target customers.

• Review tracking: Analyze reviews of your product or service and competitors to learn customer likes, dislikes, and ideal solutions.

• Customer support log analysis: Review support logs to identify common customer questions and issues, revealing pain points and expectations.

• Audience research tools: Use the Demographics dashboard from Semrush’s Traffic & Market Toolkit to learn about your audience’s age, gender, and geographic distribution.

By combining these methods, gain a comprehensive view of your target audience, including their thoughts, needs, and frustrations.

Define your target market using these attributes:

• Demographics: Age, gender, location

• Socioeconomics: Income, education level, household size

• Psychographics: Behaviors, interests, values, lifestyle

• Firmographics (for B2B): Company size, industry, revenue

Use these to create buyer personas or ideal customer profiles, representing target customers or companies that fit your product or service best. This helps craft more effective messaging.

In our scheduling software example, the ideal customer profile might be independently owned gyms with fewer than 10 employees, located in urban areas, needing an efficient booking system.

5. Analyze Industry Trends

Analyzing industry trends helps anticipate changes in customer behavior, identify emerging technologies, and uncover potential risks.

For example, analyzing trends might reveal a shift toward mobile booking or AI-based appointment scheduling in the scheduling software industry. Identifying these trends early can shape your product roadmap and messaging.

Learn about industry trends from these sources:

• Market research firms: Independent firms like McKinsey & Company, Gartner, and Forrester publish detailed industry reports, offering insights into high-level trends and forecasts.

• Market data platforms: Platforms like Statista and IBISWorld provide information on specific market changes over time.

• Trade publications and industry blogs: These sources help track emerging topics and competitive moves.

6. Do a SWOT Analysis

Perform a SWOT analysis to understand your current market position by outlining strengths, weaknesses, opportunities, and threats.

Use these questions to guide each section:

• Strengths: What do you excel at? What sets you apart from competitors?

• Weaknesses: What are your shortcomings? What do competitors do better?

• Opportunities: Are there external market factors (trends, gaps, changes) you can leverage?

• Threats: Are there potential negative impacts, such as regulatory changes?

For our scheduling software example:

• Strengths: User-friendly interface and quick setup

• Weaknesses: Limited third-party calendar integrations and brand recognition

• Opportunities: Untapped market segment of small, independently owned gyms

• Threats: Larger competitors offering freemium versions

7. Summarize the Data and Provide Recommendations

After gathering market insights, compile them into an actionable report. Organize findings into categories:

• Market size and growth

• Customer needs and behavior

• Competitive landscape

• Industry trends

• Opportunities and risks

Highlight key insights that impact decision-making and connect each insight to the main purpose of your analysis.

For example, your market analysis might reveal that many small, independently owned gyms still use manual booking systems. This could lead you to focus your strategy on businesses yet to adopt digital tools.

How Experts Perform Market Analyses in 2025

We surveyed 100 marketers on their market analysis methods, finding the most common reasons include:

• Identifying customer needs and pain points (59%)

• Analyzing competitors (39%)

• Improving targeting or segmentation (37%)

• Spotting industry trends (31%)

• Sizing the market (31%)

Many marketers (40%) conduct market analysis monthly, often triggered by product or feature launches.

Marketers primarily rely on these data sources:

• Google Search (53%)

• Customer surveys (45%)

• Competitor websites (38%)

• Social listening (38%)

• Customer interviews (36%)

The main challenges in market analysis are a lack of reliable, up-to-date data and limited access to customer insights.

Analyze Market Trends and Beat the Competition

Conducting a market analysis is essential for developing strategies to outperform competitors and succeed in your market.

Semrush’s Traffic & Market Toolkit offers detailed insights into your competition and target market.

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