Part of being an effective leader of your small business is to be able to make sense of the numbers and to avoid profitability pitfalls! Understanding market factors is important because your business must be able to understand how to properly understand market factors in order for your business to remain competitive and grow in an ever-changing business environment.
In order to improve the odds of your business succeeding, you should monitor market factors or else you might find yourself obsolete and out of business in a few years. Monitoring your market can help you to know when to:
- raise or lower prices to meet what your market can afford and your competitors are charging
- adjust your product and service to meet your market’s changing needs
- target new demographic or geographic markets that can add to or replace your current one
Some market factors that you should monitor are:
- Geographic Market – It would make sense to access information on census data, employment rates, local economies and more. There are several government agencies that offer a variety of reports on consumer and business data. Another resource can be local newspapers, business journals and chambers of commerce to see what is going on in your market.
- Demographic market – Knowing who your target customer demographics is vitally important in order to know who to sell to. Create a profile of your target customer and refresh this information frequently. In addition to utilizing the methods for geographic Marketing, you can follow the same social media as your target or you can conduct focus groups or conduct surveys.
- Competitors – The marketplace of yesterday is not necessarily going to be tomorrow’s marketplace. Put a plan in place to keep up with your existing competitors and to identify new ones. Conducting a SWOT analysis periodically on your business is a great way to ensure that you are staying on top of your competitors.
- Industry – As solid as you may think your foothold is in the marketplace, this is of little value if your industry changes around you. The only thing constant is change and you need to stay on top of the trends that are transforming your industry. Look for things such as new technology and tools to help your businesses be more productive. Joining and participating in industry associations events, conferences and seminars can allow you to make the connections that allow you to stay on top of the changes in your industry. You need to put yourself into a position to know in advance when your demographic is changing so you can plan to deal with the change. Perhaps you can innovate and expand into new markets and take advantage of them.
- Pricing – The old adage “price sells” is something that you shouldn’t get blindsided by if your industry is being affected by pricing adjustments such as discounting or rebating. You must be in a position to stay competitive in such a landscape.
- Technology – Is there new technology that can, or will, affect your business. There is an old saying that technology first kills technology and then technology kills industries. You need to be proactive to ensure that you are staying relevant amid increasing technology.
- Economy – Monitor and predict where the economy is going is important. If your industry relies heavily on credit, things such as such as interest rate changes can have a noticeable impact on your business. Monitoring the business cycle is important so that you can be ready for when the market changes.
- Global factors – Even small businesses can be affected by distant factors in today’s global economy. As a small business owner, you need to know what factors to monitor in order to ensure that you stay relevant.
- Social factors – Being aware of changes in social behavior such as online networking and the use of social media by customers is something that can affect your business. Word can travel around the world in a second with the Internet and you need to have steps in place to ensure that you are ahead of this.
Looking at market trends can help you identify changing customer needs, such as increasing or decreasing product or service usage as well as changing demographics.