B2B manufacturers who enter a market without first researching that market encounter (or create for themselves) multiple challenges.

For one thing, they fail to understand the size, potential and dynamics of the market, which means they struggle to determine the appropriate level of investment required to penetrate the market. Then there’s the challenge of competing against established players who have a better understanding of the market’s needs, preferences, and pain points. This generally results in lost sales and revenue, ultimately leading to inefficiencies for the new arrival.

Another consequence of entering a market without a proper analysis of its potential is unnecessarily high costs. Without a clear understanding of a market’s size and potential, B2B manufacturers often over-invest in marketing and advertising, resulting in high costs and low returns on investment.

These multiple challenges hinder a company’s ability to compete and grow, ultimately resulting in missed opportunities and poor customer satisfaction. The remedy of course, is to perform a market potential analysis before entering any market.

Looking Before You Leap

A market potential analysis is a strategic tool that B2B manufacturers use to assess the size and potential of a market before entering it. It involves an in-depth evaluation of market trends, buyer behavior, competitive landscape, and other factors that impact the success of a company’s products or services in a particular market.

The goal of a market potential analysis is to give manufacturers a comprehensive understanding of the market’s potential and dynamics, allowing them to develop effective strategies to penetrate the market, gain market share, and achieve their business objectives.

B2B manufacturers should conduct a market potential analysis either when considering entering a new market, or when expanding their presence in an existing market. Manufacturers should conduct this analysis before making any significant investments in the market to ensure that the potential benefits outweigh the risks and costs associated with entering the market.

The benefits of conducting a market potential analysis are numerous. Manufacturers use the insights gained from the analysis to:

• develop targeted marketing strategies
• identify new product opportunities
• make informed investment decisions
• avoid costly mistakes (such as investing in a market that has limited potential)

Challenges with Doing Market Potential Analysis in B2B Manufacturing

The rationale for performing a market potential analysis is straightforward and compelling, but that doesn’t make the exercise any easier. This is hard work, and B2B manufacturers face at least four unique challenges when researching potential markets.

1. Niche markets: There may be limited data available to analyze, making it difficult to accurately assess the market’s potential.
2. Unique applications: When a product or service has unique applications, it may be challenging to identify potential customers and estimate market demand.
3. Long sales cycles: In B2B manufacturing, sales cycles are often long, which can make it challenging to accurately forecast demand and market potential.
4. Not all offerings have direct competitors: When there are no direct competitors for a product or service, manufacturers are challenged to estimate market demand and assess the potential size of the market.

For these reasons and a few more, B2B manufacturers must be strategic in how they analyze potential markets. Here’s how to go about this vital process.

Seven Steps to Performing a Market Potential Analysis

As a B2B marketing agency that specializes in helping manufacturers enter new markets, we know that the key to conducting a successful (which is to say, valid) market potential analysis is to deploy a mix of primary and secondary research. This includes surveys, interviews, and analysis of industry reports and publications. By following the seven steps outlined below, you gain a comprehensive understanding of the market’s potential and dynamics, identify the most attractive segments, and develop an effective market-entry strategy.

1. Define the Market

Your first step in performing a market potential analysis is to define the market you are considering entering. This includes defining the geographic region, size, and industry sectors that make up the market. For example, if you are a manufacturer of industrial robots, and if you are considering entering the European market for metals, you define the geographic region as Europe, the industry sector as metals manufacturers, and the size of the market as 500 production sites spread across 22 EU Member States.

2. Gather Data on the Market

The next step is to gather data on the market. This includes information on the market’s growth rate, trends, and other factors that impact demand—both short-term and long-term. Gather this data from a variety of sources, including industry reports, trade associations, government statistics, and customer surveys.

3. Segment the Market

Once you have gathered data on the market, your next step is to segment the market. This involves dividing the market into groups of customers with similar needs, preferences, and buying behavior. You can segment the market based on factors such as customer size, industry, geographic location, and other factors that impact demand. In keeping with our example (above), you might segment your market into primary metals, hot rolling, cold rolling, and processing lines.

When segmenting the market, consider the most attractive segments for your product or service based on size, growth potential, and profitability. For example, if you are a manufacturer of industrial robots, you may find that the hot annealing and pickling market is a particularly attractive segment due to its high demand for automation technology.

4. Estimate Market Demand

The next step is to estimate market demand. This involves using forecasting techniques and industry benchmarks to estimate the size of the potential market and predict the share of the market you are likely to capture. Use a variety of methods to estimate market demand, including market research surveys, historical sales data, and statistical analysis.

5. Assess the Competition

Once you have estimated market demand, your next task is to assess your competition. This involves identifying existing and potential competitors, then assessing their strengths and weaknesses. You should also assess their market share and consider other competitive factors such as pricing, quality, distribution channels, and marketing strategies.

6. Evaluate Your Capacity

After assessing the competition, the next step is to turn your eyes inward to evaluate your own capacity. This involves comparing estimated demand for your products and services to your manufacturing capacity, distribution capabilities, and other factors that impact your ability to serve the market. Identify gaps and constraints that limit your ability to enter or compete in the market. Just because a market has potential doesn’t mean your firm has the capacity to meet that demand.

7. Develop a Market-Entry Strategy

Finally, develop a market-entry strategy. Align your strategy with your business objectives and resources, considering such factors as pricing, distribution channels, marketing and sales strategies, and partnerships and collaborations.

When developing your market-entry strategy, consider the competitive landscape and the needs of your target customers. You should also develop a plan to test your strategy and adjust it as needed based on customer feedback and market conditions.

Conclusion

Performing a market potential analysis is an essential step for B2B manufacturers looking to enter a new market or to expand their presence in an existing market. By following these steps, you gain a comprehensive understanding of the market’s potential and dynamics, identify the most attractive segments, and develop an effective market-entry strategy. With the right strategy in place, you can successfully enter and compete in any market. And you can avoid unsuitable markets, too.

Leading B2B manufacturers or firms that sell to B2B manufacturers hire RH Blake because of our extensive expertise and proprietary research methodology. We understand industrial applications. We understand industrial buyers and their buying journey. And we are adept at uncovering the answers beneath their answers. Traditional marketing agencies ask surface-level questions only, and are satisfied with surface answers.

But our experience tells us that there are things that B2B buyers freely divulge—and things that they rarely reveal, unless prodded. Getting to the truth requires follow-up questions, and going a few layers beneath the surface. Getting to the bottom of underlying risks and issues, and unspoken assumptions and bias, requires a unique approach.

If you need expert help analyzing a potential market, let’s talk.