FEASIBILITY STUDIES

Market & Demand Analysis

Assessing Market Viability for Project Success

Introduction to Market & Demand Analysis

Market and demand analysis is a critical component of feasibility studies that examines the commercial viability of a proposed project by assessing the characteristics of the target market and estimating potential demand for the product or service.

Learning Outcomes

LO1: Understand the purpose and components of market and demand analysis
LO2: Conduct comprehensive market research and data collection
LO3: Analyze market characteristics and segmentation
LO4: Apply demand forecasting techniques
LO5: Evaluate market competition and positioning

Why This Matters

A thorough market and demand analysis reduces investment risk by verifying that sufficient market demand exists to support a project's viability. Without this critical step, projects may be developed based on assumptions rather than evidence, leading to potential failure in the marketplace.

The Market Analysis Process

1

Define Market Boundaries

Identify the geographic area, customer segments, and product/service scope for the analysis.

2

Collect Market Data

Gather information through primary research (surveys, interviews) and secondary research (reports, publications).

3

Analyze Market Characteristics

Examine market size, growth trends, segmentation, purchasing patterns, and seasonality.

4

Assess Competition

Identify competitors, analyze their market share, strengths, weaknesses, and positioning.

5

Forecast Demand

Estimate current and future demand using appropriate forecasting methods.

6

Evaluate Pricing

Analyze price sensitivity, competitive pricing, and potential pricing strategies.

Market and Demand Analysis Framework PROJECT VIABILITY MARKET SIZE MARKET SEGMENTATION DEMAND FORECASTING COMPETITIVE ANALYSIS Economic Factors Social Factors Technological Factors Regulatory Factors

Framework for market and demand analysis

Key Components of Market Analysis

📊

Market Size Assessment

Determining the total volume or value of the market for your product/service.

Methods

Top-down (industry reports), bottom-up (building from customer data), and value chain analysis approaches.

👥

Market Segmentation

Dividing the market into distinct groups with common characteristics.

Segmentation Bases

Demographic, geographic, psychographic, and behavioral segmentation criteria.

📈

Demand Forecasting

Estimating future demand for the product/service under various conditions.

Techniques

Time series analysis, market testing, expert opinion, and econometric modeling.

🥊

Competitive Analysis

Evaluating competitors' strengths, weaknesses, and market positions.

Tools

SWOT analysis, Porter's Five Forces, and competitive benchmarking.

Demand Analysis Techniques

Technique Description When to Use Data Requirements
Trend Analysis Projecting historical growth patterns into the future Stable markets with historical data Time series data (3-5 years minimum)
Market Testing Small-scale product launches to gauge demand New products with uncertain demand Test market results
Consumer Surveys Direct questioning of potential customers When customer preferences are key Survey responses (200+ recommended)
Expert Opinion Consulting industry specialists Emerging markets with little data Expert interviews
Leading Indicators Using related variables to predict demand When causal relationships exist Indicator data series

Interactive Demand Forecast

Adjust Parameters to See Impact on Demand Forecast

Initial Adoption Rate:
5%
Market Growth Rate:
15%
Competitive Intensity:
5

About this model: Adjust sliders to see how different market conditions affect product adoption. The model shows expected scenario (blue) along with optimistic (green) and pessimistic (red) projections based on your inputs.

Parameter Impact on Forecast:

  • Higher Adoption Rate: Faster initial market penetration
  • Higher Growth Rate: Steeper adoption curve in mid-years
  • Higher Competitive Intensity: Lower overall market capture

Interactive demand forecast model for a new software product

Real-World Application: Electric Vehicle Market

Market Analysis: Automaker conducted extensive research on EV adoption trends, including:

Outcome: Projected 22% annual market growth, leading to $2B investment in new production facilities.

Key Concepts and Terminology

Market Analysis: Study of market characteristics, size, and trends

Demand Analysis: Assessment of current and future demand for a product/service

Market Segmentation: Dividing a market into distinct customer groups

Demand Forecasting: Process of estimating future demand

Market Share: Percentage of total sales in a market captured by a company

Elasticity of Demand: Sensitivity of demand to price changes

Competitive Advantage: Factors that allow a company to outperform rivals

SWOT Analysis: Evaluation of Strengths, Weaknesses, Opportunities, Threats

Study Flashcards

Click on each card to reveal the definition!

Market Positioning
The way a product is perceived in the minds of customers relative to competing products, based on key attributes that are important to customers.
Price Elasticity of Demand
A measure of how sensitive demand for a product is to changes in price. Calculated as the percentage change in quantity demanded divided by the percentage change in price.
Market Penetration Rate
The percentage of the total addressable market that has been captured by a product or service at a given point in time. It shows how much of the potential market has been reached.

Interactive Learning

Knowledge Check

1. Which of these is NOT typically a component of market analysis?




Incorrect. Market size assessment is a key component of market analysis that helps determine the total volume or value of the market.
Incorrect. Demand forecasting is an essential component of market analysis used to estimate future customer demand.
Correct! Project scheduling is part of project management, not market analysis.
Incorrect. Competitive analysis is a crucial component of market analysis that evaluates competitors' positions in the market.
2. What is the primary purpose of market segmentation?




Correct! Market segmentation divides the market into distinct groups with common characteristics to better target marketing efforts.
Incorrect. While segmentation might indirectly affect costs, its primary purpose is not cost reduction.
Incorrect. Market segmentation does not aim to eliminate competition but to identify specific customer groups.
Incorrect. Adding product features is related to product development, not market segmentation.
3. Which demand forecasting technique would be most appropriate for a completely new product with no historical data?




Incorrect. Trend analysis requires historical data, which is not available for a completely new product.
Correct! Market testing allows you to gauge demand through small-scale product launches when no historical data exists.
Incorrect. Time series analysis also requires historical data points to identify patterns over time.
Incorrect. While leading indicators can be useful, they typically require established relationships between indicators and demand.
4. What does the elasticity of demand measure?




Incorrect. Production speed is not related to elasticity of demand.
Incorrect. Production flexibility is a manufacturing concept, not a demand concept.
Correct! Elasticity of demand measures how sensitive customer demand is to changes in price.
Incorrect. Market growth rate is a separate measure from elasticity of demand.
5. Which of these external factors would be LEAST relevant in a market analysis for a luxury watch brand?




Incorrect. Global economic conditions directly impact spending on luxury goods.
Correct! Agricultural commodity prices would have minimal impact on the luxury watch market.
Incorrect. Rising disposable income in emerging markets creates new customers for luxury watches.
Incorrect. Consumer attitudes toward status symbols directly affect purchasing decisions for luxury watches.

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Additional Resources

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