MAY 2022
Market Evaluation: Your Solution to Missed Growth Opportunities

Why didn’t Starbucks succeed when first launched in Australia?

Despite Australia’s booming coffee industry, the chain didn’t succeed as it did in other countries. Starbucks believed that the strategy used in the Middle East could also work in the Australian market. However, it has led to failure and the loss of millions of dollars. The reason behind this is that they didn’t evaluate the market they were penetrating, didn’t understand the consumer behavior, or the clientele’s purchasing power, and therefore didn’t meet their needs. On the other hand, the chain didn’t assess their competition and as such their prices were very high compared to the competitors in the market.
Market Evaluation empowers you to test the waters before taking the plunge. It helps you understand your target market and competition, determine your brand positioning, and estimate sales accordingly.

When should you conduct a market evaluation?

1. When Setting Goals

In order to set organizational goals, specifically the ones related to the sales department, one must understand the targeted market. In other terms, in order to estimate the size of the market (the number of people or organizations that could be interested in buying the product or service you’re offering), conducting a market evaluation is necessary. Therefore, realistic sales goals should be defined.

2. When Problem Solving

Are sales low? Ever wonder why? Why are people not acquiring the products and services offered? Maybe one’s looking for answers in the wrong direction. The issue might be coming from an operational level, in terms of bad quality or performance, or just because the business ignored or mismanaged the market evaluation phase. Perhaps the problem lies in the product itself, as it doesn’t meet the client’s preferences. Perhaps the product is out of reach and the wrong distribution channels are being used. Businesses could waste time looking in the wrong direction, searching for the issue on the operational level when it actually lies in the market evaluation phase.

3. When Extending Company Growth

Market evaluation is a crucial step when a company wants to expand its scope of services or market share. Same things applies when wanting to launch a new product in a market that’s already established or maybe export products to other countries. Choosing the product, service or country is the result of the market evaluation.

What questions should be asked when conducting a Market Evaluation? These are 5 basic questions:

  • Who are the customers? What do they like or dislike?
  • Is the product in demand? How can it be enhanced?
  • What are the current trends in the industry?
  • Who are the competitors? How are they performing?
  • What sets it apart from its competition?

In short, going back to the previous case, Starbucks failed in Australia because it expanded too rapidly, didn’t understand the existing Australian coffee culture, and underestimated the local competition. A successful pricing and market penetration strategy could have been developed if they had conducted a market evaluation to prevent the international company from failure and money loss.

After evaluating the market, one must start analyzing the technical means that are needed in terms of machinery, suppliers, raw materials, employees, legal requirements, etc. Therefore, understanding the market and technical phases of the business will help establish a financial assessment to project your sales and expenses, and eventually evaluate the profitability of the project at hand.

Written by
Maria Freiha
Business Analyst, PFC International