PMSD Toolkit

What makes PMSD market analysis different?

Any market development or value chain programme will undertake market analysis, and increasingly, a systems thinking perspective is becoming the norm. So what does PMSD offer to this process? Probably the key differentiator is the emphasis on how market actors themselves – at all levels of the system – analyse their own patterns of behaviour. This strongly reflects the principle of participation – that systems change through people who are part of those systems, making decisions to change their circumstances, therefore their perception of the systemic issues matters!

There are two distinct scenarios for market analysis that are worth separating:

  1. Market analysis as a standalone activity – for example, a consulting assignment for another project or organisation; and
  2. Market analysis leading into interventions and facilitating change within a project. Both can follow the principles of PMSD, but their emphasis and tactics may differ slightly. A few key differences are listed in the boxes below.

This guidance for Market Analysis is structured around the use of five market system level tools and one market actor level tool, all of which can be found in the Tools Directory. Not every Market Analysis needs to use every tool, but each adds something unique to the process.

Who is this guidance for? 

Technical staff delivering field-level work to analyze markets:

  • Consultants
  • Team leaders
  • Project staff
  • Senior PMSD experts

Market analysis as standalone activity (consulting use case)

  • Shorter timeframe with defined outputs and deadlines;
  • High importance on explicitly capturing knowledge and documenting decisions, assumptions and sources;
  • Greater emphasis on quantifying the economic dimensions (i.e. market size, profit margins, business cases for actors);
  • Division of labour between those doing the analysis (consultants) and those who will act on the findings (client/project).

Market analysis leading to interventions (project use case)

  • More flexible timeframe with more possibility for iteration and revision;
  • Balance of importance between explicitly documenting analysis (to track learning, bring donor along, influence stakeholders) and tacit learning about individual personalities, nuances of relationships and perceptions;
  • Greater emphasis on specific relationships with influential and relevant market actors – as analysis may flow directly into intervention;
  • Continuity of work between analysis and acting on the findings (in cases where the project team does the analysis).

Market analysis is one of the most common use cases; it can occur as a standalone activity or as an early stage in a longer participatory process. It provides a deeper understanding of how market systems function. This use case is about providing clear insights on the current state of a market system, the underlying systemic constraints and problems, and some sense of the possible future directions the system could move in.

Market Analysis tools


Types of questions the tool can answer

Preliminary Market Mapping: How is the market system structured? Who are the key market actors, and what are their relationships to each other? What are some of the systemic blockages and constraints?
Marginalisation Analysis: How are marginalised groups (women, minorities, people with disabilities) positioned within the market system? What roles can they play and are they blocked from playing? ​
Economic Analysis: What is the overall size of the market system? How much product/money flows through different channels? How is value distributed across the core chain?
Root Cause Analysis: What is the deeper systemic structure that leads to the market system behaving as it does? What are the links between which market actors have power, the marginalisation of groups, and the systemic blockages?
Who does? Who pays?: What is the current distribution of roles and who pays for key services? What might a future picture look like?
Influence-Relevance Matrix: Which market actors have the most power/influence to effect change? Which are most relevant to the market system?

Each of these tools are explained in more detail below.

Preliminary Market Mapping

The Market Map is the central way of representing and visualising a market system. It is a tool that captures our assumptions about the relevant actors, the roles they play, and their relationships with one another. Preliminary Market Mapping explains how to generate a first draft of a market map, and a list of individual market actors in the core chain, the inputs and supporting services, and the enabling environment.

Where there is time and information available, it is useful to map out the relationships and interactions between individual market actors. Through directly meeting and interviewing actors, you should start to build a picture of the particular issues affecting only certain individuals, and the more widespread problems that affect multiple actors. This is also a chance to quantify the volumes and prices at different points along the market chain – which can feed into the Economic Analysis tool.

Another important use for the market map is to clarify where men and women are playing different roles in the market system and to highlight systemic blockages that particularly affect women or other groups (e.g. youth). A simple technique is to keep track of the gender of market actors, and then use different colours when drawing them in the market map – to get a quick visual of which functions and roles are dominated by one gender or the other. You can also map the differences in access to services experienced by men and women.

More advanced analyses will take the initial market map, and then follow the biggest challenges and systemic problems by developing secondary market maps for those particular supporting functions (e.g. finance) and input services (e.g. access to equipment). This widens the scope of the analysis, but is more likely to lead to an underlying root cause – and therefore to unlock the market system.

Marginalisation Analysis

Once you have a market map first draft, a natural next step is to perform a marginalisation analysis. This set of questions and interactions with marginalised communities goes deeper than who is marginalised to understand why and how this process continues. The three dimensions of analysis are:

  • Livelihoods: assets, resources and livelihood options. What roles could they play?
  • Power and Networks: who do they interact with, and who controls or influences how they live, organise themselves and invest?
  • Risks: what are the perceived risks? How can these perceptions and realities of risk be reduced during engagement?

Answering these questions through in-depth interactions with communities will help to understand what mechanisms are being used to keep groups marginalised, and their own perceptions of what is possible and worthwhile trying to change. The perception of risks in different livelihood activities is particularly important – spending time here can help shape a deeper understanding of why certain behaviours exist, and what might be possible to change.

The insights from this analysis can be used to add additional detail and complexity to the market map – for example, going beyond a colour-coded male/female map, to add symbols reflecting degrees of wealth, and relationships between wealthier (and more powerful actors) and poorer (and more vulnerable) counterparts. This may reveal entrenched ‘supporting functions’ such as local finance or money lending which may be a necessary lifeline that could be influenced or leveraged later in the PMSD process to be repurposed towards empowerment.

Economic Analyses

Note: Much of the guidance is drawn from this USAID document on quantitative analysis.

While the market map is a helpful conceptual tool for understanding who is involved in a market system and how they interact, it is often necessary to develop a more precise and quantified picture of the economics of a market system.

Why is this important? In consulting assignments, it may be the key deliverable demanded by the client. But even in a PMSD project where there isn’t an external audience asking for detailed economic analyses, it can be a powerful tool to ground project strategies, and to build credibility with market actors themselves – who may only have a partial picture.

End Market analyses help build a clearer picture of the people who are ultimately buying the products or services from a market chain, including the importance of price, quality, quantity and timing. Data can be gathered through secondary or primary research, and then analysed to build a clearer quantitative picture of a market system. A list of the different analysis below can be explored in the Economic Analysis tool:

  • Quantified market chain analysis: how much product flows through each actor?
  • Value chain waterfall: how much of price gain is captured by each actor in the value chain?
  • Value-added distribution: how much does each actor invest relative to the price gain?
  • Seasonality analysis: how do commodity prices and production conditions change over the course of a year?

Root Cause Analysis – Causal Loop Diagrams

Root cause analysis offers a powerful way to integrate the insights from the prior three market analysis tools: the market map; the marginalisation analysis; and the economic analysis. These individual tools each have particular biases and emphases, and each analysis should have yielded problems, blockages and issues within the market system. So how can we connect up these disparate analyses into a coherent view of the whole system? One that spans the commercial concerns of which businesses are adding more value, to how poor women and men are controlled and marginalized by their position in society?

Causal Loop Diagrams are flexible visual tools for connecting up a wide range of issues into a single model of a system. The most influential insight from a Causal Loop Diagram is a small number of influential variables that are interacting with each other to produce a stable pattern of behaviour. This shows up in the form of a “loop” – either a balancing loop that stabilises behaviour or a reinforcing loop that exacerbates behaviour in a vicious cycle. These loops then become leverage points for changing the overall dynamics of the market system – if we can shift behaviours X and Y, then we might see a new pattern of behaviour emerge – that is more inclusive of marginalised groups and more sustainable – economically, socially and environmentally.

In summary, Causal Loop Diagrams help integrate the other forms of analysis, and focus our attention on the underlying root causes of underperformance in a market system. They do this by pointing out key patterns of behaviour – and the structural links between them – to offer places to focus our interventions.

Who Does, Who Pays – Sustainability Matrix

When the underlying causes start to become clear, it’s important to start shifting our thinking towards a vision of what could be. The who does, who pays matrix” is a very simple way of structuring that visioning. By contrasting who currently performs at all three levels of the market map (core chain, supporting services and enabling environment) with who we envision playing those roles in the future, we get a clear picture of desired future behaviour. The key to a sustainable vision is that there is a realistic picture of who pays for each of the functions. Working through this tool/matrix is thus an excellent way to summarise a market analysis, and lead into the next use case for PMSD, which is Facilitating Interventions.

Influence-Relevance Matrix

A final dimension of moving from analysis into intervention is to get more specific about the actual individuals and organizations you want to work with. Whereas the Who Does, Who Pays matrix deals with groups of market actors (e.g. traders provide transportation services for getting goods to market; and supermarkets are the key market channel for accessing end markets that offer higher prices for higher quality). The Influence-Relevance matrix can help differentiate between trader A, B or C in terms of their importance for partnerships. This matters because the likelihood of a market system changing is a direct function of the likelihood of individual actors changing.