Market sizing is a crucial part of your marketing research that helps you understand how big your market is and how much value it holds. It also gives you an idea of the potential market share you can grab and what kind of sales figures to expect over time.
In this article, we’ll look at some popular strategies for calculating market size and help you decide which one will work best for your business goals. So read on to know more about their pros and cons so that you can pick the right strategy for your needs!
In this section, we’ll take a look at some strategies that are commonly used in calculating market size:
- The Gap Analysis Framework
- Get access to publicly available databases
- Learn how to read comprehensive reports on major industries
- If a comprehensive setup is too expensive, opt for some of the basic services
- Use a market sizing calculator online
- Use the internet to conduct your research and calculations
- Consult third-party research companies for help in calculating the market size for your industry or product/service category
| Takeaways |
|---|
| Conducting market sizing on a budget is feasible and valuable. |
| Utilize cost-effective research methods to gather essential data. |
| Tap into free or low-cost online resources for market insights. |
| Combine qualitative and quantitative approaches for comprehensive results. |
| Leverage online communities and forums for valuable industry information. |
| Prioritize accurate data collection to make informed business decisions. |
What Is Market Sizing And Why Do You Need It?
Market sizing is the process of estimating the size of a market, and understanding its potential.
For example, if you wanted to know how many people are interested in purchasing a new car this year, you could conduct market research that would help provide some insight into this question.
If you’re thinking about entering into a new industry or expanding your current business, it makes sense to understand what kind of growth might be expected from that segment.
Market sizing will help you identify opportunities within an industry and also give you insights into how much capital investment may be required for entry into that particular market.
Building a solid foundation for your market research efforts is crucial. Discover effective ways to conduct market research for free to gain valuable insights without straining your budget.
Understanding Your Market
The first step in conducting a market sizing study is to understand your market. Understanding the size of your market will help you plan for the future, make decisions about your business and product/services, as well as gain insights into how to grow (or shrink) your company.
Strategies For Sizing Your Market
The first step in doing a market sizing study is to define your target audience and determine which products or services they are buying. You can think of this as the difference between ‘who’ and ‘what’, as shown below:
Who: The people who buy your product or service. In our example above, we might be selling organic produce at local farmers’ markets to health-conscious consumers.
What: The products that they buy from you (e.g., apples).
To get started, list all of the possible types of customers that might need your product or service by asking yourself questions such as:
Where do they shop? Do they prefer online shopping or physical stores? Is there a specific price point that appeals to them more than others?
For example, if we sell organic fruits & vegetables at farmers’ markets in Los Angeles County one of the most densely populated regions in all of America we might start with these questions around who buys from us:
Before embarking on a survey project, make sure you’re well-prepared. Learn about 14 essential tips that can help you navigate the survey process and gather accurate data.
How To Conduct A Market Sizing Study
Determine the scope of your study. Will it be a broad study of the US market, or will you focus on a specific geography or industry?
Determine the target market. Who is your target audience, and what are their needs and wants? What goals do they have, and what quantifiable results they can achieve with your product/service? Do they have budgets for this sort of thing?
Collect data. You’ll need to collect data for each step of your research process: determining market size, and identifying segments within the overall market that could be good targets for sales efforts.
Analyzing how well certain segments fit into those perceived needs and wants from step two above (and whether this fits their budgets), coming up with recommendations based on those findings all these need to be collected from multiple sources:
Surveys/questionnaires; interviews; focus groups; sales records; social media posts…you name it! Make sure all sources are credible.
So there isn’t any bias in what information comes out of them later down the line when we start analyzing things like key demographics (age range) or psychographics (personality traits).
The Gap Analysis Framework
A gap analysis framework is a tool for understanding the market size of a product or service. It can be applied to your product or service to understand the size of the market opportunity available to you.
This technique shows how much of the total market there is that is open to be captured by your company, how many people are already buying that type of product, and what percentage share it has within that segment.
Gap analysis works by measuring:
- Revenue growth compared with current performance (or projected sales) over time;
- Profitability compared with current performance (or projected profitability) over time;
Market share as measured against competitors’ performance (usually in terms of dollars spent).
A common mistake businesses make when using gap analysis is focusing solely on sales volume rather than other metrics such as profit margins and market share.
Which may show signs of decline even though overall sales remain steady or increase slightly over periods such as quarter-to-quarter.
Online communities can be valuable sources of information for market research. Find out how to use Reddit for conducting market research and tap into the insights shared by active users.
Get Access To Publicly Available Databases
Publicly available databases are defined as any database that can be purchased by anyone with the funds to purchase it. These are generally large, industry-specific databases that contain information about consumers and businesses in a particular industry or market.
You can get access to these databases through your client’s account with the database provider, or you can use your account if you’re working for yourself. Some companies even offer free trials of their products so that you can test them out before making purchases.
Publicly available data may include demographics (age, gender), income level range, education level range, geographic location (zip code), and more! That being said…
It’s important to note that most publicly available data doesn’t provide detailed information on each consumer within a given company’s customer base;
Rather it groups all consumers into general categories based on factors like age brackets/cohorts (baby boomers vs millennials).
So while this type of information is useful when determining overall market sizes within specific industries it won’t necessarily help you understand who your target audience is!
Learn How To Read Comprehensive Reports On Major Industries
First, you need to find these reports. You can usually access them on the websites of major industry organizations like the American National Standards Institute (ANSI) and the International Society for Automation (ISA).
Once they’re in your hands, take a look at the table of contents. These provide an overview of what’s inside each chapter, which should give you a good idea of where your research fits into the big picture.
Next, turn to Chapter 1: Introduction and Scope. This section will describe how the report was written and why it was commissioned in the first place and here is where some of your most important information lies.
It will contain details about who funded or commissioned this particular study as well as any biases or limitations that might be present. Make sure to read through this section carefully before deciding whether or not to use this source for reference purposes!
Market research comes in various forms, each serving a specific purpose. Explore the significance of 16 types of marketing research and how they can contribute to a comprehensive understanding of your target audience.
If A Comprehensive Setup Is Too Expensive, Opt For Some Of The Basic Services
You can get basic market size information for free by looking at the number of people who have already used your product or service.
You can get more detailed information for a small fee by gathering data from your customers and potential customers. For example, you might run surveys and focus groups to ask them how many people in their networks would be interested in using your product or service.
You can also conduct interviews with industry experts to learn about their thoughts on the size of the market for your company’s offerings.
If you want even more detailed information, it will cost you more money to get it from third-party market research companies like Nielsen or Ipsos (formerly GfK).
These companies will do extensive surveys (either online or via phone) that include questions about demographics such as age range and income level information that can help provide valuable insight into how large a given segment is compared with its competitors.
Use A Market Sizing Calculator
A market sizing calculator is a tool that estimates the size of a market, given certain assumptions. Market size calculators can be found online and are relatively easy to use, so they’re a good first step if you don’t have the resources to conduct your research.
For example, say you want to know how many people in the U.S. have dogs as pets. In this case, “pet owner” is the concept being measured, and “dog owner” would be one of several attributes (or variables) associated with each person who owns a dog.
You could find out how many dogs there are in America by counting them all yourself but this would take forever! Instead.
Let’s assume that we already know how many households there are in America (about 125 million), but we want to estimate how many households have at least one dog living inside them.* To do this calculation yourself:
- Take the total number of households (125 million)
- Divide by the number of households who own dogs (50%)
Use A Market Sizing Calculator Online
Market sizing calculators are a quick way to get an idea of the market size. They’re ideal for getting a general idea of the size of your market and how many people you can expect to reach with your advertising.
You can use them to get a general idea of the market size and they’re easy to use, so they’re also a good starting point if you don’t have much experience with research or marketing.
They’re also free, so there’s no excuse not to give them a try!
Use The Internet To Conduct Your Research And Calculations
If you’re not sure how to do this, then the internet is a great place to start. Many websites offer market size data for products and industries.
For example, if you were interested in finding out the size of your industry (say, agriculture), all you’d have to do is enter “market size agriculture” into Google or Bing and click on one of the relevant links.
You can also use these sites for more specific information about your product or service category, such as “market size home cleaning services.”
Once you’ve found some useful information online, make sure that it’s reliable there are plenty of shady sources out there! Once again: check with multiple sources before deciding which numbers to use.
Conducting thorough market research without breaking the bank is achievable. Discover the journey of someone who spent an entire year conducting market research for free and the valuable lessons learned along the way.
With Enough Thorough Effort And Time, You Can Come Up With Your Calculation Of The Global Market Size For Any Industry You Need
In this section, we’ve reviewed the different methods used to calculate the market size and explained how they work. We also explored some of the challenges that you might face when trying to find data points for your specific market research project.
Finally, I suggested some ways to overcome these barriers and come up with a calculation that works for you.
You can use this information as a quick reference guide when doing market sizing studies on your projects in the future. If you want more detail about any of the topics covered here, please refer back to their respective sections in this book (Chapters 1-4).
Consult Third-Party Research Companies For Help In Calculating Market Size For Your Industry Or Product/Service Category
You can also consult third-party research companies for help in calculating the market size for your industry or the product/service category.
Many of these companies offer this service, but it’s important to find one that is right for you. Here are some questions to ask when choosing a company:
What Is Their Experience With Market Sizing Studies?
What type of clients do they have? Are they similar to my client base? Are those companies successful with their clients? How did those clients find out about the company and what services did they use?
How long has the company been in business (and what kind of work have they done)? Do they have a good track record of success stories that I can learn from before I decide if they’re right for me?
Talk To Most Marketing Agencies, And They Will Tell You That You Should Go With This Option If You Want A Credible Market Size Calculation Without Compromising Accuracy Or Time!
If you want a credible market size calculation without compromising accuracy or time, talk to most marketing agencies. They will tell you that you should go with this option if you want a quick estimate.
This method is best for companies that want to get a quick estimate of the market size, but do not have the resources to conduct an in-depth study themselves.
Calculating Market Size Can Seem Overwhelming But Using An Existing Framework And Following Our Tips Can Make It Easier
Market size is an important metric for your business because it helps you to understand how many customers there are and where they are located.
This data can be used in several ways, but one of the most common is to compare your product with other similar products on the market.
For example, if you are looking at making a new kind of toothpaste then knowing what percentage of people use toothpaste would give you an idea of whether or not there’s room in the market for another brand.
To calculate the market size, first, identify what type of product or service you have and then determine who will buy it.
For example, if someone wanted to start selling books online then they could use existing data about book readership (like “more than 50%” or “nearly 80%”) as a way to estimate how many potential customers there might be out there who want their services/products
Conclusion
At the end of the day, it’s important to realize that this is a process. Doing market sizing right takes time and effort. But it doesn’t have to be formal or expensive.
Prioritize learning over perfecting your calculations and start with what you know before investing in a comprehensive market sizing study. With enough passionate effort, you can do it yourself!
Further Reading
Explore more resources on market sizing studies:
A Step-by-Step Guide on Accurately Calculating Market Size Learn the intricacies of precise market size calculation with this comprehensive guide.
Market Sizing Questions: Techniques for Accurate Estimations Discover effective techniques and questions to help you estimate market size accurately.
Mastering Market Sizing: Tips and Techniques Get insights into mastering market sizing with practical tips and techniques.
FAQs
How do I calculate market size accurately?
Calculating market size accurately involves analyzing various data points, including customer demographics, market trends, and industry reports. Ensure you have reliable data sources and apply appropriate formulas for a precise estimation.
What are some common challenges in market sizing?
Market sizing can be challenging due to limited data availability, varying methodologies, and potential biases. Overcoming these challenges requires a combination of research, expert opinions, and data triangulation.
How can I estimate market potential?
Estimating market potential involves assessing factors like customer demand, competitor analysis, and growth projections. By analyzing these elements, you can gauge the maximum achievable market size.
What techniques can I use to refine my market sizing estimates?
To refine market sizing estimates, consider using bottom-up and top-down approaches. Bottom-up involves analyzing individual segments, while top-down starts with the total market and segments it accordingly.
How important is accurate market sizing for business strategies?
Accurate market sizing is crucial for making informed business decisions, setting realistic goals, allocating resources effectively, and identifying growth opportunities. It forms the foundation for strategic planning and successful market entry.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.
