There are three certainties in life; death, taxes and the evolution of markets. As we are business specialists, let's look at the latter. Just imagine a business, with a product that is adored by its customer base, has well-trained and enthusiastic employees, and is currently operating in a thriving economy. This sounds like the best-case scenario, no? Yet, the business is not running at its maximum potential as there are not enough customers in the market to support its growth. Unfortunately, this is becoming a very common reality for many businesses. To avoid this type of issues, professional entrepreneurs and investors conduct a market sizing analysis before venturing into new business areas. You haven’t heard of market sizing yet? Just keep reading and we’ll let you in on how BrightWolves approaches market sizing and the best practices to secure market entry into an increasingly competitive world.
What is market sizing?
In short, market sizing is the process of estimating the potential of a market. Understanding that potential is imperative for companies looking to launch or expand new products or services. Essentially, your market size is the total number of potential buyers of a product or service within a given market, whose impact on a business is quantified by the total revenue.
In a market sizing analysis, it is important to use secondary market research sources and databases to assist in defining:
· the total size (or potential size) of a market
· the major competitors in the market
· the composition and profile of target customers
· the most significant trends in the market
Why market size?
Market sizing helps to define the attractivity of potential new markets. Moving forward, this analysis will also help to develop a go-to-market strategy that addresses the unique requirements of the potential market. This is a much more affordable and effective way of reaching potential clients and generating business. In terms of internal logistics, market sizing can also aid in estimating the resources that will be needed before launching the new product or service.
BrightWolves’ 5-step approach
At BrightWolves we have defined a 5-step approach to conduct market sizing analyses:
1. Familiarisation of the product or service to generate an understanding of its unique key features.
2. This leads directly into clearly outlining the total addressable market through applying a focused qualifying criterion.
3. This, then, allows for the creation of a quantitative framework, enabling a structured approach. Defining metrics will be used to assess and divide the market if needed in different categories (e.g. customer segments or regions).
4. Once the third step has been taken, the next step involves gathering data and filling in the framework. This is done through expert interviews as well as desk/field research. Note that here it is of utmost importance that data is properly tracked.
5. Finally, once all steps are completed you will be able to identify the most attractive priority market(s) by comparing all the screened markets on their market size and other predefined attractivity parameters such as pricing, competitiveness, etc.