It’s human nature to act as though we command our own destiny, but the truth is that our lives can be influenced by circumstances outside our control. The same might be said about building a business. Despite our best efforts, external market conditions could steer us in new directions – sometimes for the better and sometimes not. The good news is that businesses don’t have to leave themselves open to the mercy of ever-shifting market winds. By understanding the various market factors that can impact business strategy, companies can make smart decisions that allow them to get ahead of market trends and adapt to an ever-changing business landscape.
What Are Market Factors?
Market factors, sometimes referred to as market conditions, refer to a combination of changing business elements that can affect a company’s sales positively or negatively. At a high level, market factors include economic circumstances, such as the cost of raw materials or changing interest rates, and consumer behaviors, such as those caused by shifting demographics or sociopolitical events.
More specifically, common market factors may reflect the availability of resources and skill sets, consumer confidence, consumer needs and preferences, costs, demographics, direct and indirect competition, interest rates, price competition, regulations, and technological changes. Since market factors can vary by region and can change over time, this article will focus on four broad areas – geographical market, demographic market, competitive market, and industry trends.
Why Are Market Factors Important?
Monitoring market factors can be vital for the continued success of a business. If a company fails to keep abreast of market shifts, it may risk falling behind its competition as target markets pursue new trends in place of outdated prices or offerings. By monitoring market factors, a business can recognize when to:
- Adjust prices to meet what the market can afford or what competitors are charging.
- Modify products and services to meet the market’s changing needs.
- Target new demographic or geographic markets.
By understanding the various market factors that can impact business strategy, companies can make smart decisions that allow them to get ahead of market trends and adapt to an ever-changing business landscape.
4 Market Factors to Monitor
Carefully monitoring the following four broad market factors may help businesses anticipate shifts in economic conditions and consumer behavior. Let’s look at each market factor, as well as how to track them.
Geographic Market
A good place to start when monitoring market factors is by keeping track of developments in the geographic regions you sell to, from retail and real estate trends to unemployment rates and other economic factors. For a business that sells luxury goods, for instance, high unemployment rates in its geographic market could portend a potential decrease in demand.
If you own a local restaurant or shop, your geographic market could expand beyond your town to surrounding communities within driving distance. If you sell online throughout the U.S., you’ll may want to keep an eye on national trends. If you sell to customers internationally, you may want to follow the market conditions in all of the primary nations in which you do business.
How to monitor the geographic market:
The U.S. Census Bureau is a repository for all kinds of data about American consumers and businesses. Its Economic Indicators page, for example, offers a plethora of information on everything from how many rental vacancies exist in your area to average retail sales, while the Bureau’s Business and Economy webpage has links to facts on census data, employment rates, local economies, and more. Similarly, the U.S. Bureau of Economic Analysis offers a variety of reports on domestic and global gross domestic product (GDP) trends, as well as consumer spending figures, state economies, industry trends, among others.
On a local level, reading hometown newspapers and business journals, and attending meetings for nearby business organizations, such as your Chamber of Commerce, could help you keep on top of what’s going on in your market.
Demographic Market
Whether you are a business-to-business company or sell to consumers, it can be a good idea to develop a profile of your target customer so that you can use it to stay current on what’s influencing them. For example, if your target audience is middle-class suburban parents, you may want to pay attention to trends affecting them, such as increased options to work from home and online shopping preferences. If your target customers are buyers at a regional clothing retailer, you may want to track what’s going on with retail businesses of this type and size – for example, are they offering mobile shopping apps and quick shipping options? If so, that may be your cue that it’s time to present a competitive alternative that appeals to busy parents.
How to monitor the demographic market:
Some of the demographic information you’ll need can be found in the same resources mentioned in the previous section. For example, census data might suggest that more young families are moving into your city, while seniors have started moving out. The loss of residents living on fixed incomes could lead to increased discretionary spending among the newcomers.
In addition, you can learn about your target demographic by following the media they follow. For example, businesses targeting moms might want to be active on social media sites. You might also benefit from reading magazines and blogs geared toward suburban moms, paying attention to anything causing a buzz. You may discover a growing trend of moms going back to work, for example, instead of staying at home, which could affect your target market’s needs and budget.
Market research companies, which specialize in gathering and analyzing details about target markets and consumers, can also compile information on a wide range of demographic targets, from women over 50 to millennial dads and Latino families. This research can often come at a price, but you may be able to tap into free online tips by looking up press releases, blog posts, or interviews concerning the market research organization you’re interested in.
Finally, you may want to monitor your target demographic yourself by conducting focus groups or frequent surveys to determine your customers’ needs, interests, and pain points.
Competitive Market
Keeping up with competitors can be vital because it can alert you to new threats and opportunities. Are your competitors launching new products, opening new divisions, or expanding into new markets? Have they redesigned their websites or launched new ad campaigns? Are they hiring employees or laying people off? You may want to evaluate the answers to these questions, then conduct a regular competitive landscape analysis to stay ahead of the competition, identify gaps in the market, and plan for future growth.
How to monitor the competitive market:
Consider identifying your key competitors, analyze their products, sales, and marketing strategies, and try to compare them to your own. Social media may be a big help here. You may want to follow competitors on various social media platforms to see what they’re doing, including how they engage with customers. It can also help to set alerts that notify you whenever competitors are mentioned in the press. If they’re public companies, you can get annual reports from their websites or use resources like D&B Hoovers to find out the company’s size, revenue, key offerings, and more.
Industry Trends
Are new technology tools available to help businesses like yours increase productivity? Is overseas competition squeezing your profit margins? Is there a shakeout on the horizon that could lead to consolidation among smaller companies? Could proposed government regulations or upcoming elections affect businesses like yours? Industries can witness trends that might be quite different from overall business trends, so it can be wise to keep an eye on anything that might have an impact on your particular market segment.
How to monitor industry trends:
One simple way to stay on top of the latest trends is to try to become active in industry associations. By attending events, conferences, and seminars, you could learn a lot about emerging ideas, advancements, and challenges within your industry. You can also use these events to make connections and stay in touch with industry leaders and peers. Regularly reading industry-related publications, subscribing to newsletters, and following influential bloggers and journalists could help you keep current on market trends.
The Bottom Line
In the business world, knowledge can be power. The more you understand how market factors influence your company, the more informed your decisions may be when adjusting your competitive strategy. For example, tracking market trends may help you capitalize on emergent opportunities by identifying previously untapped markets or reveal a need to revamp product pricing to appease a shrinking demographic market. Understanding market factors may allow you to spot and take advantage of trends before they sneak up and potentially take advantage of you.
A version of this article was originally published on June 17, 2015.
Photo: Getty Images
