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16 Parameters for Conducting Market Opportunity Analysis

(Last Updated On: October 21, 2021)

Market opportunity analysis is an inevitable part of the business. We always worry about whether a new product or service has enough market potential when we introduce it. Before launching a product or service, it is widely understood that market potential must be calculated. This post will assist you in determining 16 fundamental characteristics that will help you evaluate whether you have good market potential as well as market opportunity analysis.

How to Conduct a market opportunity analysis

Simply said, the market potential is the entire demand for a product in a certain business context. So, if you’re going to create a business book, you’ll look at all the other business books and see how well they sold. That is the size of your market. Of course, establishing the real values is tough, and here is where numerous techniques and tactics come in handy.

Let’s go over the 16 factors that go into determining market potential and chalk out market opportunity analysis.

1. Market Capacity

The market size of your product is the first and most essential aspect to consider when assessing market potential. The entire market sales potential of all firms is referred to as a market size.

So, if I were to create a new soap or shampoo, all of the firms like HUL and P&G would be my rivals. And my total market size is comprised of all sales of soaps, both branded and non-branded.

When it comes to consumers, the market is typically enormous. The market would be measured in millions or billions of dollars. However, at the industrial level, market size might range from a lakh to a thousand or even a hundred dollars.

If you were a distributor of industrial ball bearings, all manufacturing businesses would be prospective customers. So, if you calculate the number of industries in your area, you’ll have a good notion of the optimal market size to aim for when launching a new Ball bearing product.

This is a 100 percent market size, mind you. It’s a different story when it comes to the market you’ve grabbed and who will be your future consumer.

If you’re a small firm, the easiest approach to figure out market size is to call local research organizations. If you have a huge company, you should use market research data from organizations like Nielson or IMRB. The first stage in determining market potential is to ascertain market size.

2. Take a broad picture of the market.

Assessing your consumers and rivals, on the other hand, is insufficient. You must also get a deeper grasp of the market as a whole, as well as the market’s potential for success.

Otherwise, your company may fall into the trap of believing that a few percentage points of growth are sufficient when there is actually a lot more room for improvement. Market researchers are specialists at presenting a broad, impartial view and can help you look beyond the box.

These high-level questions come into play while assessing a market:

  • What is the size of the market?
  • What is the rate of market expansion or contraction?
  • What is the total number of buyers?
  • What are the admission requirements?
  • What is the supplier’s bargaining power?
  • What is the value chain of the industry?
  • What is the competition’s level of difficulty?
  • Is there a risk of new entrants or alternative items entering the market?

3. Concentrate on customer segmentation.

There’s little doubt that if you want to develop a worldwide brand, you’ll be selling to a variety of target audiences. That doesn’t imply you should tailor your product to the audience you’re targeting. What this means is that your messaging and marketing strategy will have to alter.

Different people will have different difficulties and place a higher value on different product aspects.

How do you offer the same product to everyone in a different way? How can you tell what appeals to a certain group of people? This is where market segmentation and consumer profiling come into play.

Your market opportunity study will help you to split your user base into personas and discover market potential on a case-by-case basis if you ask the correct questions to the appropriate individuals.

These personas will then assist you in developing a customized marketing strategy and sales funnels, as well as increasing your conversion rates. It’s not only about finding new markets; it’s also about figuring out how to sell to the ones you already have.

4. Profitability

Returning to the E-commerce example, many small companies have conflicting feelings about this type of company. Some claim that the market is enormous and that there is a lot of room for growth.

Others, on the other hand, claim to have incurred significant losses as a result of the amount of packing and transportation expenses associated with shipping across the nation. These are two opposing viewpoints, and both are accurate.

Understanding the market potential necessitates determining and projecting your profitability. If the firm is going to have a low-profit margin, then the volumes must be large (ex. FMCG items), or if the profit margin is going to be low (ex. industrial goods), then the profit margin must be greater.

Profitability analysis to determine Three primary elements may be used to determine the market potential.

ROI – Return on investment
ROS – Return on sales
RONA – Return on net assets
ROCE – Return on capital employed

Any of the formulas about market opportunity analysis stated above may be used to assess the likelihood of profitability and the profitability of an industry or product.

5. Focus on price, forecasting, and sales.

Doing a cost analysis is the last step in performing a market opportunity study for business growth. From your competition study, you should have a decent understanding of average pricing points; nevertheless, there are a few more factors to consider.

Your margin comes first, and it’s usually the most visible. How much does it cost to create and maintain your product? Consider resources, time, company expenditures, and the like.

Once you’ve determined the average cost per product build and maintenance, you should set your profit margin to be competitive with other brands while still providing you with enough profit to work with in the future.

Second, forecasting must be taken into account.

What are the upcoming events that your company has to plan for?
Are you working on a new feature that will require much more financial resources than your current product?

Consider what’s coming down the pipeline in terms of products and the expenditures you’ll need to budget for in the future.

6. Market growth rate

The Computer market is shrinking in comparison to the laptop and smartphone markets. So, if you’re a computer manufacturer, you should be conscious that you’re joining a decreasing market. Instead, if you have the ability, consider entering the Laptop or Smartphone markets.

The current industry trend is significant since it might predict the future of your product. Books were formerly popular, but now Ebooks have mostly supplanted them, and physical books are no longer required (though people still love to read them).

You must anticipate market growth based on the distinctions between product line expansions and a completely new idea in the market while studying market growth.

Samsung has the Galaxy series, which is one of the company’s pioneering series. Naturally, anytime a new Samsung Galaxy product line extension is released, it will sell in the market. Will a new product line, on the other hand, sell at the same rate? As a result, market growth rates are subjective and rely on the sort of product you’re launching.

The pace of market growth may be calculated by looking at the facts and data from the previous five years in your sector. Many popular websites will provide you with this information as a part of market opportunity analysis.

Even newspapers do regular analyses of which industries are expanding and by what percentage. If I were to enter the E-commerce sector now, it would be a good decision because the industry is booming. However, in ten years’ time, a new technology may be developed that renders E-commerce purchasing obsolete.

7. Explore adjacent opportunities.

Taking advantage of neighboring possibilities can also be a successful approach. Researchers looked examined the development and performance of 1,850 companies over the course of five years.

They discovered that the firms with the most lucrative long-term growth used a methodical, disciplined strategy to expand the limits of their main business into new territory. Some businesses grew from one geographic area to the next, while others adopted an existing business model to new markets.

Consider the Crest toothpaste brand from Procter & Gamble. The crest was struggling in the late 1990s, but Procter & Gamble resurrected the brand by expanding into two new categories: teeth whitening and brushing, with the launch of Crest Whitestrips and SpinBrush.

In one year, the firm gained more than $200 million in new sales for each new brand while using the same channels to reach the same clients with the same marketing strategy.

Maintaining a proactive attitude and financially outgrowing your competitors by discovering methods to expand beyond your core business will be easier if you have your finger on the pulse of the market.

8. Identifying new product prospects

There are lots of chances out there for your team that a little international investigation may uncover—at a minimal cost. Rather than wasting money on ad campaigns or pushing sales in areas that aren’t ready or interested in your product, try first asking that market whether they are interested in it.

Perhaps you’ll discover new markets, languages, demographics, or personas that are an unexpected match for your product by performing foreign research.

You’ll also be able to identify new features or product improvements that you may use to improve your product’s usability for a certain market segment.

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9. Type of product and consumer

Is your product a one-time sale or a recurring purchase? Soap and shampoo are products that people buy again and again in the instances above. However, after you’ve purchased a refrigerator, I doubt you’ll need another for another ten years. So, at most, you’ll buy 8-10 refrigerators in your lifetime.

However, you are likely to purchase 40-50 soaps separately throughout the course of a year. That equates to 300-400 soaps for each person in their lifetime. Multiply it by a billion to get a sense of the soap industry’s commercial potential.

10. Do some market research on your consumers and competitors.

Market research may be used to examine your consumers and rivals on a variety of levels. This will assist you in determining whether there is a genuine demand for a product or service and whether expanding into a possible new market is profitable for your business.

Identify customer categories based on age, gender, education, income, occupation, and residence, as well as softer aspects like lifestyle and values. Take into account the motive of your customers. What “task” is the client attempting to complete? What obstacles could be impeding consumption?

Knowing who your main rivals are and evaluating their strengths and shortcomings may help you develop particular growth plans and approaches to set your products and services apart.

11. Carry out a competitor analysis.

Competitive market analysis can assist you in determining why a rival exists in the first place. It will help you fine-tune your product message and value proposition, as well as evolve your product life cycles or features if done correctly. It can also help you set some growth goals to measure your progress against.

When doing a competitive market study, keep the following points in mind:

Determine who your immediate and indirect rivals are, as well as the items they sell.

Examine your competitor’s sales process, taking notice of their price, strategies, and promotions.

Examine the distribution methods and interaction of your competitors, including social media platforms such as LinkedIn, Instagram, Pinterest, and TikTok. Examine their email, blogs, videos, podcasts, and any other content marketing tools they employ.

Use internet reviews and quizzes to get a sense of how people feel about your brand.

12. Compile your facts using a SWOT analysis.

You can also think about indirect rivals at this stage. Indirect rivals are companies who don’t provide precisely what you do, but whose products may have an impact on yours in some manner.

For example, if your product is a photo-sharing app that connects with messaging applications, your messenger apps are your indirect competitors.

13. Be aware of the elements affecting the business environment.

Another area to investigate is the general business climate, which has a significant influence on firm performance and industry operations.

Aspects of the corporate environment include:

  • Technological developments
  • Government regulations
  • Geopolitical shifts
  • Economic indicators
  • Trade policies
  • Social and cultural norms

According to market research firm Kalorama Information, companies in the life science and healthcare sectors are currently facing a number of potential disruptors that contribute to ongoing uncertainty, including attempts to repeal and replace the Affordable Care Act, health IT policies, and President Trump’s statements about drug pricing.

Brexit, growing out-of-pocket healthcare costs, and physician shortages are among the other issues affecting markets. Any new business opportunity in these industries must be assessed in light of these variables and obstacles.

14. Keep track of your brand’s exposure and knowledge.

Understanding how your brand is viewed and acknowledged inside that market is the first step in finding new market prospects.

Brand tracking may assist your team in determining overall brand sentiment as well as the success of any campaigns you are conducting. It can assist you in determining how your brand compares to competitors.

When tracking a brand, there are a few metrics to consider:

  • Brand sentiment & awareness
  • Product awareness
  • Logo recognition
  • Campaign effectiveness
  • Competitor recognition & sentiment

15. Assess Competition

To assess the market potential for the product you’re about to launch, you need to recognize and comprehend the competitors in the industry. When there is a lot of competition in a field, the entry barriers are likely to be high, and establishing yourself will need a lot of money.

Even if you are providing more value, you may need to reduce the price of your items. This necessitates having enough cash to withstand hits until the competitor exits the market.

When major brands join industries formerly controlled by smaller companies, this is precisely what occurs. Small businesses are now being hammered by huge multi-national stores.

Nonetheless, this does not imply that small companies have ceased to exist. They employ a variety of tactics to entice people to their establishments. Good customer service is one such technique, which is often lacking in huge businesses.

When there is little competition, there is also little market awareness. Take industrial refrigeration goods, for example, where not only is there little competition, but also little product expertise.

As a result, your rival has the same chance of influencing a potential buyer as you do. Because there is no reason to invest in distinction, differentiation will be modest. In such a market, the firms who truly differentiate themselves literally control the market.

In order to determine market potential, you must first understand the market position of numerous rivals, as well as have the appropriate strategies in place to combat these competitors when the time comes on the basis of market opportunity analysis.

16. Quickly locate the market research you want.

Getting information on all of these areas and synthesizing it might take a lot of time, effort, and skill, but market research studies can help you get a head start.

Many of the data you need for a thorough knowledge of the customer, competition, industry, and business environment may be found in “off-the-shelf” studies, such as those offered on

You’ll discover data on market size, market share, market projections, legislation, consumer demographics, and much more in these studies. Furthermore, many papers include analysis of major future growth possibilities, next-generation product innovation, and new marketing tactics.

You may also commission a bespoke market research study to meet your specific needs if you’re investigating a niche market that isn’t covered in a published report.

In-house analysts help organizations with critical choices and projects including new product development, global market growth, mergers and acquisitions, competitive intelligence, the voice of the customer, and strategic planning on a regular basis.

Core Elements of the Market Opportunity Analysis

1. Market Characterization – Extensive market definition, as well as market sizing, segmentation, and forecasting.

2. Competitive Analysis – A thorough examination of the competitive landscape, including the market share and SWOT analyses of all industry players.

3. Fit and Analysis – Unbiased and objective advice on the attractiveness of the opportunity in light of your organization’s goals and capabilities, as well as the best plan for moving forward.

4. Channel Analysis: Deep awareness of existing and emerging channel structure, product and service flows, and specific actors is required for channel analysis.

5. Trend Analysis: Expert analysis of current and upcoming trends and disruptors, as well as their consequences for market entrance strategy.

6. Customer analysis: Customer analysis entails a thorough examination of the customer’s pain points and requirements, as well as vendor selection factors, brand loyalty, and the purchasing process.

Take away

Make it a habit to go through the procedure on a regular basis. A market opportunity analysis is a crucial stage in every successful business strategy, regardless of your business type. It may provide you with the competitive edge you need, assist you in meeting current and future consumer demands, and motivate you to make crucial decisions.

It’s hardly a one-trick pony, either. Consider this procedure a case study or white paper, and repeat it every 6 to 12 months to stay on top of your game.

New rivals will undoubtedly emerge, as will better supply chains, technology, and a slew of other factors that might impact your firm. If you want to keep ahead of the game, you’ll have to be on your toes.

And, most importantly, the market opportunity analysis is meaningless if you don’t incorporate learnings into your marketing plan. Determine the importance of each endeavor on your business’s growth path. What is a low-risk, high-reward situation? Begin there and work your way through the list.

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