Understanding the situation you are in with a background analysis.

How to write a background analysis

Understanding the market you are in is vital to the success of your business, so it surprises me when some small business owners can’t quickly or concisely answer relatively simple quetions about their market. That’s where conducting a thorough background analysis comes into play.

The background analysis is also referred to as a situation analysis, and is the nuts and bolts of the marketing plan. This analysis sets the scene for petty much everything that follows it and, if done well, will provide your marketing plan, and business for that matter, with a solid foundation.

This section allows you to articulate WHAT is happening in your market right now, at a micro and macro level and can be quite heavy in information, so a great tip is to be thorough but succinct. Only include information that is relevant to your product or service, and to make the information  easier to present (and read), break it down into its 2 key areas – the current market situation and the PESTLE.

This post we cover tackling the current market situation, for more on how to nail the PESTLE, click here.

Current market situation:

This section will articulate the current state of the market within which you compete. For example if you are a financial services, pet food, building supplies, confectionary or accounting software business, the information here will be relevant to those industries and markets. The current marketing situation information must outline, to the best of your knowledge, any factors that could aide or impede the success of your marketing activity.

Key information in this section will include:

  • Where the market is heading, is it in growth, decline or holding?
  • Is there potential for innovation or new products and services?

Where possible, present business and industry data from a number of previous years, this will give the insights depth and identify possible trends, seasonality or other factors that may presenta as opportunities or threats.

Target market:

The information contained here is a vital piece of your plan. Why? Well, without a viable target market to sell your goods & services to you have no business. Simple.

It is advisable to spend time getting this content right, as it will help you understand where exactly you anticipate future business coming from. So, if you don’t have a clear picture of your target market, now is the time to get it. Start by assessing any information you have on hand with regards to who is currently buying from you and how they behave, you should be able to get this from existing sales data. However, if you identify any gaps in your data, it’s a good idea to conduct some research to give you a deeper understanding.

Once armed with these insights, summarise and present the following information about your target market:

  • Demographics
  • Psychographics
  • Market size & scope
  • Buyer behaviour and identifiable needs.

Once you have done this, step back and ask yourself if you can segment the target market.

For more detailed information on nailing your target market read this post.

Competitor overview:

As the saying goes, ‘keep your friends close, keep your enemies closer’. Know your competition intimately, and importantly understand who your target market considers to be your competition – it may surprise you.

To have a thorough understanding of your competitor make sure you know:

  • How they position themselves in the market – for example, premium, luxury, mass or niche
  • How they have performed in the market over the last number of years – growing, declining, plodding along
  • What are their identifiable strengths and weaknesses (which can influence opportunities or threats in your SWOT)?
  • Their size, market share, product offering
  • Marketing communication activities – are they advertising online, social media, sponsorship, PR, radio
  • Their distribution model – online, high street shopfront, supermarket, indirect

You can gather most of this information through industry data, tracking their activity or even by doing some mystery shopping.

Once you have it, see if you can you identify any differences between the way you and your competition behaves? If so, is it giving them an advantage and what can you do about it?

Distribution:

Second in importance to the target market, this information outlines the size, value, trends, and potential of each of your distribution channels – both direct and indirect. To be really successful in your marketing plans you need to align how you distribute your product with how your consumer purchases it or wants to purchase it. Sounds simple right, but so many businesses stick to an old distribution model long after their consumers have moved elsewhere, like online. There really is absolutely no point selling through newsagents if your consumer shops at supermarkets, therefore this is the section where you need to address any shifts in consumer behaviour that may impact existing or planned distribution models. As a marketer you need to understand what impact this could have on you achieving your marketing objectives and the overall business goals.

Once you have completed this component of the background analysis it’s time to tackle the PESTLE. The PESTLE will give you a more macro view of your market, together with much better insight into how the market is performing, enabling you you to be more proactive and nimble in your business and less exposed to shifts that could negatively impact your business across all facets of the market you are in.

About Zena Churchill

Zena Churchill is a Director at Max & Buddy Consulting. She has worked in senior level business roles across national and multinational corporations, as well as being a small business owner. Zena is a strategic thinker and brings a practical, straight-forward approach to marketing and social media. She has a passion for training & development running practical business workshops for small business. Zena is a Certified Practising Marketer (AMI), sometimes tutors in Marketing at the University of Wollongong and is a Senior Consultant with Trinity P3.

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