How to Perform Market Trend Analysis?
A market trend analysis is an analysis of past and current market behavior and dominant patterns of the market and consumers. An important aspect of conducting a trend analysis for an organization is to obtain insights on the market scenario, consumer preferences, and the macroeconomic environment.
Marketing research methods, such as surveys, interviews, and observations of consumer behavior, help in understanding the trends and behavior in the market.
Trend analysis is a subset of the PESTEL Analysis—an examination of the Political, Economic, Social, Technological, Environmental, and Legal implications of the market as they relate to consumer trends. This analysis provides an all-round perspective of the external factors that impact the business.
While determining future objectives for a product or service, trend analysis is used as a basis on which future market projections are made. Market trend analysis involves analyzing the following areas:
Trends in Consumer Needs and Behavior—A business that is able to identify a specific trend in changing consumer needs and behavior may be able to cater to these needs and project higher growth rates.
Shifts in Consumer Perception of Value—Trend analysis involves timely analysis of consumer needs and positioning of the product or service in the consumer’s mind. An aspect of a product or service, which would at one point in time have contributed to the consumer’s perception, may later lose value if the competition replicates it. For example, if Shop A in a particular town was the only department store providing free home delivery for customer orders, it may hold a better perception in the consumer’s mind due to this additional service. However, if competitors start providing the same service, the value perception for Shop A would likely decrease.
Trends in Industry Cost Drivers—Businesses need to be aware of changes in composition of the cost drivers and also innovations that lead to lower cost alternatives. Companies that are able to find better alternatives, which are more economical or offer additional features, can gain a competitive advantage and achieve higher objectives.
Change and Evolution of the Industry—Companies continuously analyze trends in terms of product innovations, competitor product features, and new operation and delivery methods. Such analysis helps the business stay ahead of the curve to understand changing market trends and project objectives accordingly.
Trend analysis is a very common strategic tool for understanding the market maturity (i.e., whether the market is in a growth or decline stage) to gauge future market potential and the overall position of a business in the market.
Since market trend analysis involves understanding past market behavior and expected future market innovations, a major effort in conducting trend analysis is dedicated toward collecting relevant data. The authenticity of this data determines the accuracy of the projections, which subsequently impacts the objectives set for a particular product or service.
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