A market is just a group of consumers who seek to satisfy similar needs through some form of exchange.

First, the participants in the market must have something to exchange. That is, both parties have to have something of value so the consumer in order to be part of a viable market.

Further, there must be demand on each side for the value that market participants are supplying.

Lastly, there must be some common identifying element among the individuals who participate in the exchange. This could be any number of characteristics, such as demographics, social status, wealth, geographic location, etc.

How do we Describe Markets?

Describing a market or market segment can be difficult. We generally describe a market with the type of good that they market participants will consumer – hence the term, “product market”.

Commonly, the geographic region in which the market is located can also be used a descriptive characteristic for the market.

Another method of describing a market is by the need that we meet or intend to meet. This method may be beneficial when you sell the same product to diverse groups of people, each with a different need or use for the product.

Yet another method of describing a market is by the characteristics or traits of the customers, such a demographics, social status, etc.

What is a Market Analysis?

The next section of the feasibility analysis is the market analysis. This portion may be the most important in determining whether an idea is a valid business opportunity. It focuses on determining whether there is a potential market for the product.

What should be included in a Market Analysis?

Every market analysis should contain the following five sections:

What is Customers (Segmentation)?

Identifying the customer segment will allow you to understand who wants or needs your product and is qualified as a potential customer.

What is the Price (determined for each customer segment)?

You need to know how much a potential customer in a given customer segment would be willing to pay for your product or service (i.e., how much revenue you can expect from each customer segment).

What is the Market Size?
The market size (made up of all of the identified customer segments) will tell you how many of those people who want your product(s) are in the market.

Market size = the number of potential customers x the quantity purchased by an average buyer x the price of the unit.

What is Priority?

Priority shows the willingness of customers to purchase at a given level of information about the product (i.e., sales and marketing effort by the business).

In summary, the number of potential customers, market size, price, and customer priority, taken together, will allow you to make projections of how many sales you will make at a given price. For example, grabbing 1% of the market value yields a specific amount of potential revenue.