Market trends are movements in the market that are new or different reactions, which eventually lead to change, either in a negative or positive way for business. Businesses can anticipate and analyze market trends to improve their practices, attract the right target audience, adjust budgets, focus their marketing efforts, and more.
An example of a trend is the music technology market. Many years ago, people started listening to music on the radio. Then boomboxes took center stage. Next, people bought iPods to listen to their favorite tunes. And more recently, people have been installing music streaming apps on their smartphones.
Market trends can easily make or break a business. Catching the trend early and analyzing it could keep you ahead of the competition and protect your market share.
What are market trends?
A market trend is a general direction a market is taking. The market can move up, down, or sideways.
By understanding market trends, businesses can preempt any disruption or loss of sales, change their operations and strategy, and meet and adjust to the new market direction. Companies can then stay competitive and viable.
Identifying a trend starts with having knowledge of your consumers' interests, needs, and pain points. As needs change, smart and proactive companies will rise to meet them. Besides the consumer, marketing experts study the environment (demographics, economy, politics, technology, and social factors) and how these macro concepts will affect customer needs in the future.
How many types of market trends are there?
When studying market trends, you can identify three primary types:
Uptrend
Uptrend usually means that financial markets are taking steps forward. In most cases, it could demonstrate economic growth and a growth in the number of jobs. An uptrend is a time when prices of assets are rising, so it's an opportunity to make a profit.
Upward trends often happen when the company is experiencing a positive change in sales or growth. It's time to take action because uptrends rarely last long.
Downtrend
A downtrend in the economy usually means a decrease in its size in sales or growth. The value of stocks could decline rapidly and affect the company's well-being. At this point, customers may be making fewer purchases, and businesses could be reevaluating their sales strategies.
During a downtrend, you must look for new ways to stay competitive and keep the customer's attention.
Sideways trend
A sideways trend (also called a horizontal trend) happens when prices don't move dramatically up or down, and the demand doesn’t either. A horizontal trend means consistency for the market. However, similar to other trends, it rarely lasts long.
Horizontal trends don't have a good influence on the economy. Accordingly, governments may take action to encourage an upward trend.
Market trends can also be:
Short-term. These trends can only occur over a few days or even hours. Examples are social media trends, holidays, and news. For example, a news story relevant to your business could drive you to adjust your offer or re-engage with a target audience segment.
Intermediate. These trends could last several weeks (usually between one or two months). Examples are elections, tax time, deadlines, and December holidays. You may need to adjust your offer to stay competitive until the trend subsides.
Long-term trends. These trends could take years. They might involve significant political changes (Democratic vs Republican government) or serious technological trends (iPod vs boombox). To accommodate these trends, you may need to adjust your entire sales and marketing strategy or change the approach to product development.
One of the major examples of a long-term trend is the COVID-19 pandemic. Many companies perished in just a few months, while others reinvented themselves to meet the new environment and made billions of dollars.
What is the importance of market trends?
Whatever market you are in, volatility is unavoidable. What may have been stable in the past can change drastically within hours. That's why it's vital to stay on top of the latest market trends and analyze them for your company's continued success.
The main benefits of market trend analytics include:
Staying ahead of the competition. Catching the trend early enough and adjusting to it could help you steal market share.
Financial profit. Market trend analysis can help you predict change in stock prices and allow you to adjust your investment strategy.
Understanding the market. Knowing exactly how your market works doesn't just help you make predictions and stay ahead of the competition—it can help you understand the target audience more deeply, improve your offer, and streamline your marketing strategies.
Reviewing your business tactics. Market trend analytics can show you which business strategies are successful and which require changes to suit the market dynamics better.
Market trends create new opportunities for businesses. Analyzing past trends by observing what business strategies they took and how successful they were can help you figure out how to manage disruption and become an industry leader.
How to identify market trends
Identifying market trends is a continuous process that requires a variety of tools. The most common steps in market trend analytics include:
PEST analysis
PEST (Political, Economic, Social, Technological) factors dictate market trends. Running a PEST analysis allows you to identify factors that may influence your business now and in the future. It's one of the most used long-term business planning tools.
Social media and influencers
Social media trends often shape the market. Tracking influencers and industry leaders can help you see the market’s direction. Photo-sharing websites and even Yelp can provide valuable insights into new preferences or perceptions.
Customer analysis
Listening to your customers is one of the simplest yet most effective ways to identify market trends. When you see customer needs changing, you’ll likely see a change in the market's direction.
Soliciting customer feedback can quickly provide meaningful data for short or long-term business planning and allow you to make changes to meet the market.
Competitive analysis
Always pay close attention to what your competitors are doing. They could be identifying trends faster than you are. A competitive analysis can help you react to the trends, keep your market share, and allow you to benchmark your business with competitors.
Identifying and analyzing market trends
Market trend analysis is an essential part of business operations. Regularly identifying and analyzing these trends helps the business stay efficient and competitive, focus on the direction it needs to go in and protect and improve its bottom line.
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