steps to determining market size

8/8/2019 Steps to Determining Market Size

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Steps to Determining Market Size

Step 1: Define your target market

Step 2: Determine the needs of your target market and how they create demand for your

product/service

Step 3: Identify the information you need to estimate the size of your market

Step 4: Identify the sources you need to obtain that information

Step 5: Collect the data

Step 6: Analyze the data

Step 7: Derive your market estimate

Step 8: Apply your estimate

Market size estimation: current sales

Relatively simple analysis which builds on data which should be readily available in most companies.Indicates where there are holes in knowledge, based on existing markets and sales data. Note - not to beconfused with market potential.

DescriptionEstimating market size and share is notoriously difficult, especially in markets where a company has noprior experience. However, in existing markets, it is possible to use knowledge of current sales andcompetitors to build a picture of the market. When addressing a total market, it can be difficult to knowwhere to start, so it is useful to break it down into manageable chunks and take a territory at a time. Thisanalysis will not however identify a potential market not already being serviced by existing products andcompetitors.

Method

1. Carefully define the total market This needs to be considered carefully, to ensure that the right competitive products areconsidered. Is it the market for razors, electric razors or premium electric razors. It is often better to start with a tight definition, as it is then easier to establish the competitive offerings



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Establish the main geogr aphic territories (globally or regionally) It is easier to make estimations for a smaller territory. It is also easier to sense check thoseestimations with sales representatives working in those territories. It should also be relativelysimple to complete the data for your existing product(s). Taking each territory in turn enables theteam to establish which specific pieces of information are not currently know - for example, thesales volume of competitive product X in Territory Y).

3. Identify the significant competitive products in each territory Identify the key competitive products - aim to account for at least 80% of the market with namedproducts. The rest can be identified as 'others'. This restricts the need for endless data on all

niche players 4. Estimate selling price and number sold for each competitor

Typically, the sales force will be aware if their competitors products are more or less expensiveand how many orders have been lost to them. It should be possible to make some estimation of the prices and volume of sales for each main competitor.

5. Total the values - for each territory and globally Sum the values and calculate the overall market size and relative market shares of the maincompetitive products

6. Re-calculate with 'low' and 'high' estimates It is often worth doing the exercise again, with both high and low estimates for sales price andvolumes of competitive products. This will produce a range of possible values for market size andshares. If the range is large, then specific influencers should be identified

7. Extr apolate Based on historic sales trends, it may be possible to extrapolate future sales trends and establishthe market growth rate and changes in your relative market share

8. Keep up to date

Revise the values frequently, as new data becomes available and to identify any trends

Notes

y For reliable estimations, involvement from all sales territories is essential. y It helps to be familiar with spreadsheet software. y Can be dangerous to treat the answer as 'absolute' and is best used to highlight uncertainties and

focus further research. y If kept up to date, the values become increasingly accurate and trend graphs can be plotted

Case Studies Back

Market Size and Demand Estimation Study.

How can I estimate the market size & future demand for my products in the market?



Our client, a leading manufacturer of toiletries supplying to the hospitality

industry in India and abroad wished to increase their presence in the hotel

and hospitality segment in India and explore collateral opportunities in this

segment with their product range.

Followings were the questions to be answered«

y What is the target market?

y What are the categories / segments?y What are the consumption / usage norms per segments?

y What is the requirement of various sub-segments?y What is the current market size?

y What is the likely demand in the near future?

They commissioned Market Search India to conduct a research study on the Indianhospitality sector market for toiletries.

We adopted following approach ±

Classifying the segments ±

All the cities were classified into 3 major segments viz.

Metro

Mini-Metro and

Other Cities.

Hotels were classified as per the following Star Ratings«

Non rated / 1 star 2 star

3 star 4 star

5 star 5 star Deluxe

Combinations of City type Vs. Star Category were defined as the segments and 4 segments wereidentified.

Economy > 2 star and below across all cities + 3 star in non Metro cities

Business/Value > 3/4 star in Metros and Mini Metos + 4 star in Non Metro cities

Luxury > 5 star and above across all cities



Assessing the market size for the toiletries ±

For each hotel the following information was collected across India

A - Avg. No. of rooms per segment

B

± number of items given per room C ± replenishment per day O ± Occupancy Ratio

S ± Avg. size of the pack (toiletry item) P ± Avg. price of the pack (toiletry item)

Z ± No. Of Hotels per Segment

Face to face structured interviews were conducted among the sample representation in each

segment & cities to gather the data on the above stated parameters.

An integrative model was created for estimating the overall market size

n § (s*r*z*e*a*b*c)*Z*365

i=1

Future demand was estimated on the basis of expected growth in hotel rooms in the coming

years.

Besides assessing the market size & expected demand other information areas like hotel preference, buying behavior, brands supplied etc. were assessed so as to help our client in

targeting different customer segments.

steps to determining market size

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