If you are about to entering a new market or expanding your current one, it is a pain point to find out what is the size of the market.
Why? Because estimating the market size answers crucial questions related to your investment decisions and to the revenue and opportunities available in the market.
On this page?
- What is marketing sizing? Definition and Importance.
- Crucial market sizing questions and how to find their answers.
- An infographic in PDF for free download.
As an entrepreneur or a marketer, you know that together with the team and product, the market is one of the key factors for each business success. So, you need to do the market research in the right way in order to receive the most accurate market size estimation.
What is Market Sizing?
Market sizing is an important part of the overall market research and a crucial element of strategic marketing planning.
Let’s see the definition:
Market Sizing is the process of estimating the current and the potential number of buyers and/or sellers in a given market.
It requires defining and understanding the potential value of a current market or a potential market opportunity.
Market sizing is a science. It involves a deep understanding of a specific product or service and the market characteristics. They are used to defining market segments and sub-segments that will make the estimates more manageable.
Marketing sizing, done in the right way, allows you to target and to fully assess the best market opportunities for your business. It is a vital point for evaluating and taking resource and investment decisions.
As we said above, estimating market size is a process and the post 5 steps to estimate the market size from Marketresearch.com, explain them in details.
During this process, there are market sizing questions which answers should be clear for you in order to estimate the size properly.
Key Market Sizing Questions and How to Find Their Answers
Take the time to evaluate the market size and you may discover answers and opportunities for business growth. Your marketing strategy will be much more clear and achievable.
1. What is your addressable and available market?
It is a key point to recognize the difference between the addressable and available markets because it gives you a realistic sight on your chances of business success.
Addressable market
In simple words, the addressable market is the revenue generation potential for your product or service. It includes the market outside the coverage of your company.
The addressable market represents your potential sales value over a specified time in a given market segment.
But it does not mean you are able to access all this addressable market. There might have many limitations such as geographic for example. This is where the available market comes.
Available market
The available market is the part of the addressable market for which you can realistically rival. It represents the number of people who are both willing and capable of buying your products.
Here is an example:
Let’s say you are starting a pasta business. Potentially, your addressable market would be the worldwide restaurants that offer pasta. Theoretically, if you were operating in every country you would have chances to generate revenues from the whole addressable market.
You know that is not realistic.
Let’s see the truth. You are starting your pasta restaurant chain in two cities. That is your available market: the demand for your type of products within your coverage.
You should concentrate your marketing and advertising efforts in the available market area. The right understanding of your available market and competition within it allows you to better identify your ideal customer.
2. Which are the best sources of information?
Once you are clear about the distinction between the addressable and available markets, you can begin to gather data to size the market.
Nowadays, there is a huge number of sources of information. Not to mention that many of them are accessible online.
All of these information makes it hard for you to find relevant and accurate data. Be critical in your valuation.
Possible sources of information could be:
- Secondary research or desk research – plenty of information is available here for free or on a tight budget. Among the best places to start are your local library and the internet. In addition, you can use your industry trade association, Government guidance, Colleges and Universities, articles from magazines, journals, and more.
- Primary research. It can take on many forms. The most popular of them are: interviews, surveys, internet communications via email, blogs, newsgroups and more.
3. What is your target customer profile?
A million dollar question. This question is the pain point for your business. You must know perfectly the answer of it.
Your customer profile — also known as a buyer persona — is generalized representations of your ideal customers. Creating a detailed profile of your target audience allows you to do the marketing in the right way.
It is not a hard job to create a customer profile. You simply need to ask the right questions to the right people.
Here are some important questions you can use to help you create your buyer persona:
- Describe your demographics – marriage status, gender, income and etc.
- What is your education? – what level, which school.
- What is your job role/ job title?
- What are your biggest challenges?- Explain the primary problems they are trying to solve that relate to your products and services.
- What you value the most when you make a purchase decision?
- What are your most common objections against our products?
- Where do you go for information?
- How do you prefer to interact with sellers?
4. Who are your key competitors?
To be able to offer better products or services than your competitors, you should know them perfectly. You should understand your competitors’ value propositions, their strengths, and weaknesses.
]Competitors are hungry for your customers. The truth is, if you want to beat them you should monitor constantly their behavior, changes, improvements, and achievements.
Here are some tips on how you can start collecting information on your competitors:
- Google search – just for a start. Search for latest news, the past and upcoming events and other important information related to your competitor’s activities.
- Examine their websites. Look at their style of presenting information, how the competitors describe their products, what is their message. Look at the team section to see the employees’ qualifications and backgrounds. Take a look at the “About us page” to understand their mission and etc.
- Use tools to research your competition’s keywords, traffic metrics, linking strategies, and overall online marketing presence. Examples of that tools are Alexa.com, Google Trends for Websites, SEO Toolbar, SEMRush, SpyFu, and many many others.
- Use Google Alerts to keep alerts for all of your competitors to know what they are doing.
- Investigate their social media profiles to see how your competitor use social networking sites like Facebook, LinkedIn, and Twitter as marketing opportunities.
- Ask your customers to gather a real information about the competitors. Find out what they prefer about your competitor.
- Ask your suppliers to find out what your competition might have ordered.
5. What is the level of growth in the market?
This question relates to market demand and of course to the future market opportunities.
What is market growth?
Market growth is an increase in the demand for a product/service over time. Market growth is rapid when consumers find the product beneficial for the price level.
A great example here is a new high-tech mobile phone. At the beginning, it might only be sold to a small segment of consumers, but as the price of the mobile phone decreases and its usefulness in daily life increases, more consumers start buying it.
So, consumer demand is lead by a business’s skill to increase the product value, provide optimum price, develop product features and benefits and more.
Here are some proven tips to keep an eye on the market growth and its level:
- Use Google Trends. It is a great tool to see if a particular product group is trending upwards, how big that trend is and when it began.
- Keyword evaluation. There are many tools for keyword evaluation but the Google’s Keyword Planner Tool is the most popular and free to use. It allows you to find out how many searches per month are being made for a particular product, how much competition there is. The paid tools such as Semrush or Serpstat go much further and you can see a full picture thanks to them.
- Social Media validation. It is the era of social media. And we can use social media channels such as Facebook, Instagram and etc. to get a better understanding of the market demand. It is a real and efficient source for looking at the market opportunities and product interest.
- Look at the previous months to analyze the key patterns behind the demand. The examination of the previous years’ sales will give you a sight on the monthly or seasonal trends.
- Read industry statistics, news, magazines, journals, government stats and etc.
- Display and discuss the demand. Show your observation to the appropriate colleagues in your organization and discuss it with them. Collect information from sales, marketing, finance, production, and etc.
6. What is the most interesting segment of the market?
Marketing segmentation is a whole science with a key role in the overall marketing strategy. Your business can not serve the whole mass market with all its segments.
You need to choose the most potential segment that you can serve the best.
Why? Because this segment will help you to increase your company’s focus, your competitiveness, customer retention, to achieve better communication, and of course to increase profitability.
The major advantages of targeting the right segment lie in the fact that you will do business within a better company and a higher profitability.
If you need help with marketing segmentation and choosing the best ones for your company, our post 51 marketing segments examples can give you ideas.
7. What geographic regions can your business cover?
As you are a marketer or a businessman/women, it is important to know where your customers come from. You need to research where your potential and current customers live to run your business in the right and best location.
If you are a small business owner, the answer of the geographical question might be obvious. However, if you run a multinational business or you are growing now, it might be quite a difficult question.
The following tips will help you identify the geographic location for your business:
- Addresses your existing customers. The concentration of existing customers means you also have a concentration of potential customers.
- Where do your inquiries come from? The addresses of your inquiries can give you a targeted geographic area.
- Where do your non-customers come from? They are important too. They are your potential customers. Identify where your non-customers live.
- Read information from publications that serve your market.
Conclusion
Your market research should include market size.
Without a proper knowledge of your market size, you risk running a business in a market, where it is next to impossible to take the whole potential and opportunities.
The key market sizing questions unlock the door for the strategic marketing plans done in the right way.
Market sizing is crucial for both expanding your current market or entering a new one. Especially entering a new one. New markets (no matter if they are new segments or new countries) come with a plenty of risks. Market research and sizing is a must for making the best decisions.
Download the following infographic in PDF: Market Sizing Questions Every Marketer Should Know The Answers.
