There are ways to identify market size without making a formula. Identifying the size of a market is a basic requirement for all marketing plans and it could be done in different ways.
The market size is a measure of the potential available to a company or a business venture. It is the starting point for developing a marketing strategy. This article will discuss how market size can be assessed.
How to identify the market size
For marketing professionals, there are two main aspects in order to strategize properly in preparing any product or division within the corporate office – where the product is going and how it will get there.
There is no actual formula to determine market size, but the question on how to identify the market size determines the extent of the market. By answering this question and other supplementary cues, strategic planning will help in expanding the business and cover the targeted market.
Since market size calculation alone will not give a ‘go’ signal on an investment decision, other research inputs are needed to identify strengths and weaknesses, competition anticipated profit margins, return on capitals and the like. Qualitative research is needed to really scour the prospected market; ask why products are chosen and rejected, how distribution can be intercepted and which consumers can be won and how.
In short, an accurate and fast assessment of the target market should be done before making any investment.
Speed v/s accuracy
While speed is relatively self-evident (deadlines, funding and feasibility), it should not be taken lightly. On a preliminary scan of the market, when the investment is small within the total market, a wide tolerance on market size can be permitted. When large investments are to be made, high levels of accuracy are needed for the market size to be easily identified.
Market size formula
- Top-Down approach – search all government and trade association figures. Search for government publications which contain the market size data.
- Look at the supplies – add together the sales of the companies who sell within the supplies. Find someone with an overview of the entire market, never rely on assumptions.
- Build from the Bottom-Up/Demand Side – assess the demand of the consumers of a specific product through interview programs. Obtain employment statistics for the people employed under the sector of interest.
Other tips and helpful aids
- Comprehensive market size requires primary and secondary research to build a clear picture across analysis of demand, supply and the government
- Communicate with different audiences – talk to end-users, suppliers, distributors and manufacturers to understand the principle of the supply chain
- Be confident to make useful assumptions
- Keep things simple by documenting data and analytics
- Seek client input – work with them so that they can see the logic of an independent approach