You might be approaching your market research campaign with a specific question already in mind. Or maybe you have a few areas you want to research, but aren’t sure which to prioritize or even where to begin. Whether you’re certain of the questions you want answers to, or have no idea where to begin, one of the best ways to determine your direction is to take an honest look at where your business is right now to get a sense of where you stand. This is where the SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis comes in.
There are many ways to conduct a situation analysis and we’ll talk more in depth about different kinds of analyses in later pages. We’ll also discuss using these tools to help you position yourself competitively. The purpose of this initial SWOT analysis, however, is to prompt you to look at your business with fresh eyes, and take honest stock of what you have and don’t have. The best organizations out there, after all, are the most self-reflective ones. If you haven’t started your business yet, you don’t quite have a situation to analyze, but we still recommend you read this section, as it might guide you in looking for the business opportunities and threats out there. Otherwise, we suggest you jump right into competitor analysis to figure out what gaps in the market you have the resources to fill.)
The great thing about a SWOT analysis—unlike other situation analyses—is that it can be done without much research. Indeed, it can be conducted over the course of an afternoon, and be based solely on the memories, experiences, and impressions of your employees (and your customers, should you choose to include them).
A SWOT analysis will simultaneously ask you to step back and take a broad, bird’s-eye view of your company and the position it occupies in your market, and narrow down your focus on the key issues that affect your bottom line. And because it asks you to look internally, it provides you with an immediately actionable roadmap for your business.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The tool originated in the 1960s, and has endured because of its business value. SWOT analyses are typically used to help businesses identify a niche in their market, or develop their unique selling proposition (USP) and their messaging. Businesses also often conduct SWOT analyses for specific scenarios or projects: to determine the strengths and weaknesses of an upcoming ad campaign, for example, or decide whether to embark on a business venture by visualizing the pros and cons of doing so.
But SWOT analyses are also useful for kicking off internal discussions and providing your team with a general business overview. Here’s what each component entails:
Strengths are the areas in which your business excels—the factors that give you an edge over your competitors. (Like every other category in a SWOT analysis, your strengths should be comparative. A 19% profit margin might be excellent… but not if your competitors’ average profit margin is 22%). Your strengths can include both intangibles (your brand perception, for instance) and tangibles (your outstanding product features).
Strengths might include your USP, your exceptional service, or the customer benefits of your newest offering. It might include your human resources: specialist knowledge, for example. It might be your business location, your substantial online platform, or your marketing budget. Maybe you can offer great value to customers because your overhead is low. Maybe you have no red tape and can move rapidly on decisions, or your marketing team can quickly change direction if a campaign isn’t working. You get the point: Think tangible assets, people, and processes. Think broadly.
These are the factors that put you at a disadvantage in relation to your business’ competition—indeed, the factors that could be harmful if your competitors decided to wield them against you. So while it’s never exactly a walk in the park to dwell on your weaknesses, it’s crucial to be brutally honest enough with yourself to get them down. (After all, you can’t improve upon them if you’re not willing to acknowledge them.) Think about your company’s shortcomings and limitations, as well as the things your competitors do better than you do.
Maybe you don’t have an established brand reputation, or your staff has rather thin skill sets. Maybe you don’t have a presence on social media, your accounting systems are outdated, or you’ve got unreliable cashflow. Maybe you exist in a crowded market and don’t have a clearly-defined USP. Or you have limited time to work on content marketing, but you know you need a blog. Or no one in your organization is a strong public speaker, but you know you need to get out on the speaking circuit. (Notice how these last two examples recognize a weakness in light of a need?)
Items in this category cover all the avenues open to you to grow your business, generate new revenue, improve products and processes, and advance your company’s mission and brand image. They’re the favorable conditions that—if acted upon—can lend you a competitive advantage. If not taken for granted, they can become your strengths.
Opportunities might include increased demand for your product or service; new technologies on the market that will allow you to improve product quality, production, or communication; or the realization that there’s a gap in the market that a tweak to your existing product could fill. Perhaps a possible partnership is on the horizon; or your local government has a new initiative to encourage local business; or there are shifts in social patterns and population profiles that bode well for your organization.
On the flip-side of opportunity are the potential threats your business faces. These are unfavorable factors that pose a risk to your business itself, or that jeopardize its chances of growth, success, or profit.
Emerging competitors, strategic shifts by your current competitors, and less expensive and more appealing versions of your product or service appearing on the market would all fall into this category. So would a downturn in the economy that reduced overall consumer demand. So would technological developments that might transform the market beyond your organization’s ability to adapt. So would changes in regulatory law, or new legislation that forces you to increase your price point.
Internal Business Factors v. External Market Factors
If you’ve been paying attention to what these categories include, it won’t surprise you to hear that SWOT analyses are often called Internal-External Analyses. That’s because the first two categories—strengths and weaknesses—are typically internal to your organization, while the latter two—opportunities and threats—are typically external market factors. In other words, you can control strengths and weaknesses over time through organizational decisions and actions; but you can’t control opportunities and threats: The best you can do is anticipate them, take advantage of them, or put contingency plans in place in case they occur. What’s more, strengths and weaknesses tend to focus on the present, while opportunities and threats are future-looking.
For these reasons, identifying your organization’s strengths and weaknesses will likely be both easier and less time-consuming than determining the opportunities and threats you face. Because the external factors are often outside your immediate sphere of influence, they may require more research (such as in-depth competitive intelligence, or investigations of the economic trends that may impact your business).
For now—in this initial stage—our suggestion for your first SWOT analysis is simply to start with what you know now: based on daily experience, observation, and recall.
How to Conduct a SWOT Analysis
SWOT analyses are typically represented in a matrix—a square divided into four quadrants, each of which contains one of the four categories:
Our recommendation is to get as many people in your organization involved in this process as possible. The more minds you’ve got in the room offering ideas and input, the more thorough your analysis will ultimately be.
This includes your employees, who’ll have some of the most valuable insights from your customers’ perspectives. Your marketing, sales, and customer service teams will be able to speak to the frustrations and satisfactions of your target market, and can help you fill in strengths and weaknesses from their point of view. Your sales team, for instance, might know that customers are looking for a more extensive product line; while your customer service team will know that they’re unhappy about your shipping costs.
Include employees from non-customer-facing teams as well (product development, for example). Doing so means you’ll get better buy-in on the decisions that ensue from the analysis.
Finally, consider looking beyond your own ranks and asking for input directly from your customers. Of course, you’ll be gathering “input” from them in secondary ways—through employee anecdotes, or recollecting what they’ve written to you in emails. But innovative companies will invite their longstanding customers into the room for an outside perspective. What’s more, it helps keep everyone honest.
It’ll be up to you whether to simply open up a roundtable discussion, or allow everyone to first fill out a separate SWOT matrix as an individual exercise, and then gather them and open up the discussion. Doing the latter ensures that none of the voices in the room are drowned out, and even the quieter team members have their say. Here are some questions you might pose for each of the four categories, to get the wheels spinning:
- What do our customers most love about our business? What do they most often rave about in terms of our product or service?
- What are our most positive brand attributes? What do others in the market see as our competitive advantage?
- What do we do that no other organization does? Or: What do we do better than other businesses in our industry?
- What are the most invaluable resources or assets that we have at our disposal?
- What unique talents do our employees or teams possess (specialized knowledge / skill sets / experience / reputation)?
- What are our most successful or efficient internal processes?
- Where are we most profitable?
- What factors contribute to us getting the sale, every time?
- What adjectives do our most loyal customers and brand champions use to describe us? What role does our business or brand play in their lives?
- What do our competitors do better than we do?
- What are our prospects’ and customers’ biggest complaints? What terms most often come up in negative reviews about our business?
- What resources or assets do we lack? What resources does our competition have that we don’t?
- What would people in our market say are our negative brand attributes? Our biggest weaknesses?
- What are the factors that ultimately keep us from making sales? What are the biggest bottlenecks in our current sales funnel? What causes customer churn or cancellation?
- What are the least profitable aspects of our business? What costs us the most time and/or money?
- Which of our business processes needs the most improvement?
- Where do our teams need further education or experience?
- How could we improve our current business processes (customer support, onboarding, sales, etc)?
- Where is the market growing and changing; and how can we position ourselves to exploit that growth? Are there current trends we can take advantage of? New products or services on the market that would provide an opportunity for us to partner or collaborate?
- What kind of messaging has best resonated with our target market so far? What marketing or advertising channels have exceeded our expectations? How can we offer more of the same?
- Who are our most vocal brand advocates, and how can we further engage them?
- What more can we do with our current customers or clients?
- What business goals are we currently working toward? Which ones feel the most exciting… and why?
- Are we allocating our resources in the best possible way? Can we imagine a more efficient reallocation?
- Are there tools, technologies, or other resources out there that we aren’t currently leveraging (to full capacity, or at all)?
- Are there any new target audiences out there that our company has the potential to reach?
- Are there upcoming industry or social events that our organization might be able to take advantage of?
- Are there imminent changes in regulations that might positively impact us?
- Can you imagine how our “strengths” could open up opportunities for our company? What about eliminating the “weaknesses” you listed? What opportunities would this make available?
- Who are the potential competitors infringing on our market? How might these competitors negatively impact our business?
- What are the biggest obstacles our organization faces right now?
- What are our competitors doing very well? What are they doing that we’re not? What aspects of their business are seeing the most success?
- Is our industry trending in ways right now that might negatively impact our organization? Market trends? Consumer behavior? The economy? Are costs increasing? If so, how do we prepare for these shifts?
- Are regulations changing in ways that could negatively impact our business?
- Is technology changing or advancing in ways that might threaten the position we hold in the market, or how we do business?
- Are any of our resources on the verge of becoming scarce?
- Can you imagine how any of the “weaknesses” you listed could ultimately pose a threat to our business?
What Makes a Strong SWOT Analysis
We’ve already discussed how important radical honesty is to this process. Here are a few other suggestions to help make your SWOT analysis as strong as possible:
- The items you list should be as specific and clearly-defined as possible. “Product features” is not a strength. “Product feature X that, when added, helped us see a 34% increase in sales in 2018” is a strength.
- The items you list should be based on verifiable fact, not opinion. (Abiding by bullet point #1—getting specific—should help with this.)
- As often as you can, identify each of your factors relative to your competitors. You don’t do business in a vacuum, and your prospects and customers don’t make decisions in a vacuum. Scan the horizon; observe where you’re positioned.
- The strongest SWOT analyses will ultimately be distilled down to the most important items in each category. Once you’ve amassed your lists, prune them down by prioritizing: How powerful is each factor? How likely is it to happen? Aim for 3-5 items per category.
Initial Resources for Your SWOT
As we mentioned, the employees (and possibly the customers) involved in your SWOT analysis will bring their own experiences and observations to the table—they won’t have to do much digging for these, except maybe in the deep recesses of their memories. But there are some places they might go to do some “surface research,” if they’re so compelled:
- Customer reviews. What are people complaining about? What are they stoked on? (What’s more, what are people saying about your competitors in their reviews?) Can you find opportunities in the patterns you observe?
- Social listening. Tools like Zoho Social, Hootsuite, Mention, and Google Alerts allow you to track all unsolicited mentions of your business on social media sites. Set up alerts and find out what people are saying about you online.
- Existing company data. Receipts, sales invoices, and formal complaints logged into your CRM or received in your email inbox are all valuable resources. Receipts will alert you to trends in demand; the customer addresses on sales receipts will help you determine the geographical effectiveness of your advertising; complaints will alert you to areas for improvement.
Now we’re passing you the baton, so you can get running with your own situation analysis. Gather your team and start doing the deep work of internal (and external) evaluation.
In the next section, we’ll explain how the results from your SWOT analysis can help you articulate the goal of your market research. We’ll also give you an example of a fictitious business who conducted a SWOT analysis for market research, to show you how to make that transition from analysis to action.