Market analysis

Gathering numbers about a market has become easy. In one evening you can find out how many people search for a product, what it sells for, and who is already selling it.

The hard part comes next. Those numbers say nothing on their own. They only mean something together, and that is exactly where people go wrong: they read what they were hoping to read.

Here is how to read them without fooling yourself.

Collecting is not analysing

The two words get used for each other, and yet they name two different moments.

Collecting is going and fetching. How many searches a month, which prices, which sellers, which reviews. It is patient work, and a machine does it better than a person.

Analysing is deciding what all of it means. No machine will do that for you, because the answer depends on what you are able to do.

If you have not collected anything yet, start with the six-step method: it will give you the figures this article teaches you to read.

The four numbers, and what each one hides

Demand

Monthly search volume is the first number, and the only one that can stop a project on its own. If nobody is searching, there is nothing to sell: no amount of product quality makes up for absent demand.

But a big number is not good news by itself. It attracts people. A heavily searched market is one where you are already expected, and where your place has to be paid for.

Mind what the number covers, too. “Shoes” gets searched hundreds of thousands of times a month and means nothing: those are people looking for different things. A smaller number on a precise phrase is usually worth more than a big one on a vague word.

Trend

Twelve months of history beats a single reading. It shows whether the market is rising, falling, or coming back every year at the same season.

One detail worth knowing, because it fools a lot of people: the volumes published by advertising platforms are rounded into bands. You will often see the same figure repeated several months running. That does not mean the market stood still: it means the rounding swallowed the movement.

On our side, when fewer than 40% of a curve's points are distinct values, the tool labels it “volumes given in bands” rather than letting you believe in a flat market. That is our threshold, and it exists to prevent exactly that reading.

Pricing

Three numbers are enough: the lowest, the middle, the highest. Then something almost nobody looks at: how the products spread out between them.

That is where the gaps show. Plenty of cheap products, then nothing, then a few very expensive ones. That empty middle is either a place to take or a place where others already tried and left. To find out which, look for someone who occupied it and then walked away.

Competition

The number of sellers tells you nothing. What matters is the share held by the largest one.

When one seller dominates, they set the reference price, and you will always be positioning yourself against them. When nobody dominates, getting in is easy: staying is much less so, because whatever let you in will let the next one in too.

The detail of that reading is in the article on analysing the competition.

What the numbers say side by side

Taken separately, each of these four can mislead you. Together they describe a situation. Here are the combinations you meet most often.

• Solid demand, rising trend, spread-out prices, nobody dominant. The best configuration there is. It is rare, and if you find it, check your figures twice before celebrating.
• Solid demand, but one seller crushing everything. The market exists and the seat is taken. You will not get in doing the same thing: you need an angle the leader cannot occupy.
• Weak demand, but high prices. Few customers paying well. This can work perfectly: as long as you accept it will be a small market, and do not build for a thousand customers.
• Falling demand, falling prices. The market is emptying. The businesses still in it are fighting on price, which is the sign they have no argument left. Walk away.
• Everything looks average, everywhere. The most common case, and the least comfortable. It is not a no; it says the decision will not turn on the numbers, but on what you can do better than the others.

The three mistakes that keep coming back

Mistaking cheap advertising for weak competition

A cheap click does not mean the space is free. It says what a visitor is worth, not who is standing there. A market can be saturated and cheap to advertise in: that happens when nobody is making money in it any more.

Comparing a measured market with an imagined one

This is the most expensive mistake, and the quietest. You have figures on your idea and none on the other, so you are comparing facts with an impression. The comparison always leans the same way, and not the way you think.

If you want to compare two markets, measure both. Otherwise, do not compare.

Searching until a pleasing number turns up

This one is very human. You try a phrase, the result disappoints, you try another, and another, until one produces a nice figure, and that is the one you keep.

The cure is simple: write down before you look what you expect, and the threshold below which you give up. A number found afterwards always bends to whatever you wanted it to say.

The decision, and it is not in the numbers

Market analysis does not return a verdict. It returns a situation, and you decide whether it suits you.

The same market can be excellent for someone who can manufacture and impossible for someone who will have to buy everything in. The figures are identical; the answer is not.

What the analysis does guarantee is that you stop deciding blind. And if you keep only one thing: the only number that can say no on its own is demand. Everything else is a conversation.