How to Conduct a Market Analysis in a Crisis

Clearly, doing market analysis in a crisis involves some serious challenges. Suddenly all of our steady assumptions have changed. Businesses are closed. Unemployment has skyrocketed. And nobody knows for sure how long the crisis will last. 

In the meantime, as business owners, we are still making business decisions. Some of them are critical to remain operational and must be made immediately. Others depend on market analysis. 

So we can’t just throw our arms up and shrug saying it’s impossible. We still need to understand and adapt to the circumstances of our markets. Even more so during a crisis, when so much has changed.

Start with the fundamentals of market analysis

It’s still market analysis, so the fundamentals still apply. You want to develop workable estimates of total potential market, potential market value, reachable market, most important market segments, and the target market segments and distribution channels you go after specifically. If you need to brush up on the fundamentals, you can start with a little background reading:

• How to Develop a Market Analysis for Your Business Plan 
• How to Write a Market Analysis. This article lists standard sources of information, such as US government resources. 
• TAM, SAM, and SOM explained. Read this for a good review of standard market analysis definitions.

However, in a crisis, we are reminded that almost all of the information we gather in a standard market analysis is about the recent past. We collect census information and economic database information, plus publicly available financial information, and information from published research published interviews and market and industry reports. And in some cases, we add in our own experience or primary research such as interviews and questionnaires.

In all of this, it’s mainly about what has been true in the recent past. Sometimes we add in what has been true for a long time, to conduct a comparative analysis between the short and long-term. And sometimes we add in guesses about the future, but the unfortunate thing is that these are most relevant only if they are guesses made during or after the crisis. Overall the goal is to establish a picture of the current market landscape and arm yourself with as much useful information as possible.

Crisis market analysis

A crisis hits and suddenly everything changes. For example, as I write this in early May of 2020, so many types of business are suddenly knocked out of whack. Restaurants? Taxis? Retail stores? 

At first glance, nothing from the past matters, and market research seems impossible. The very phrase “crisis market research” seems oxymoronic. I assume stores are closed, restaurants almost closed, gyms and hair salons closed, but delivery is way up, health care is booming, and online meeting platforms booming. So what do we do to look past the obvious?

We look for a combination of past data and reasonable assumptions. For example, if I were going to try to analyze restaurants right now, I might start with existing demographics of how many there were in my county as of the last economic census. Then I’d assume a percentage of them closed down completely, and a percentage are doing just takeout and delivery. And I’d assume some percentage of normal revenues for just the takeout and delivery portions. 

If I had time and/or a budget to pay somebody, I’d call restaurant owners from some randomized list and get better inputs to educate my guesses on these percentage assumptions. That’s a difficult task, or expensive if I pay for it; in the real world, I might just live with estimates if I had to.

In general, we’re looking for what the market would have been, or ought to have been, as a starting point. And from there we use specific research (if we have the luxury) or assumptions to make an educated guess about what it is now and how the market has adjusted and will recover over time.

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Has your total addressable market (TAM) changed?

Does the crisis affect the long-term total market for goods or services? Maybe. For example, does the total market for restaurants change in the long term? Well in the short-term as we said before, some have closed, some have pivoted and some are on hiatus waiting to reopen. So right now there is potentially less competition, but will that remain consistent?

We’re all guessing together on this one and others like it. For some things, economists are guessing that suppressed demand will surge again after the crisis ends. But will things change over the long term as behaviors change during the crisis? You have to guess that for your business — or do very expensive and time-consuming primary research to educate your guess.

For example, maybe we all flock back to restaurants more than ever after the crisis is over. And maybe we get used to cooking on our own, so we end up doing less. Or, maybe restaurants open, but they can’t serve as many people because of social distancing. Or consumers are more hesitant to gather in public places until a vaccine is readily available. What do you guess?

One intriguing long-term change we might see — this is just my guess — is more people working remotely, and more remote meetings for business and even family, after the crisis. Because we’ve all had an opportunity to see how an online meeting can work and the benefits that remote tools can provide.

Another long-term change we might see — and this one is disturbing — is a lower market for consumer goods because of the economic impact of unemployment. Let’s keep our fingers crossed on that one. Let’s hope that those who’ve lost jobs are employed again as soon as possible.

But as you can see it’s really an educated guessing game. Yes, we can observe and make assumptions based on the current market, but how that impacts any long-term changes depends on numerous variables. The best we can do is keep track of active changes, make assumptions about the future, establish plans for each scenario, and test them over time. It’s an ongoing process that will become more and more certain.

Has your serviceable available market (SAM) changed?

SAM is the portion of the market that you can acquire and will take business-by-business analysis. Lots of businesses are suddenly unable to serve large portions of their market because of constraints of being open for shoppers or diners. You’ll have to look at how the crisis affects your specific SAM. I assume some businesses that manage to jump from brick and mortar business to online business will increase their SAM because of the great reach of online marketing.

Less certainty, more educated guessing

As I said above, business goes on, business decisions go on, business plans need revisions, so we can’t just shrug and give up. We make do. Don’t make decisions blind. Don’t hide your head in the sand like the ostrich, telling yourself that because information is suddenly difficult you don’t want it. Use your head and common sense, make reasonable assumptions, and go on with your business.

And then, track results. This is a reminder that all business planning and budgeting requires guessing the future. Times of crisis mean much higher uncertainty. But we don’t just guess — we guess, then track results, and then revise. Our guesses get better over time.

For more on tracking your results, learn how to run an effective plan review meeting.