Determining new markets, understanding new audiences in new international locations, and stress testing whether or not a brand new product thought has potential to succeed generally is a difficult enterprise. And you may’t do any of it with out reliable shopper analysis knowledge to again up your subsequent transfer. So the place to start out?
Calculating market dimension is pure gold for manufacturers seeking to broaden their world attain, take that subsequent leap of development, or swap up what they’re doing of their present house.
What’s market sizing?
Market sizing is strictly what it appears like: sizing up the potential of a specific market. Wanting on the quantity of people that would possibly purchase your services or products, and the entire income these gross sales may generate.
The way to measure market dimension
To calculate market dimension you want knowledge on the variety of potential prospects, or transactions you possibly can obtain annually. In the event you’re promoting toothbrushes, you’ll be able to say just about everybody on this planet wants one. However what when you’re promoting a health watch? Or a low-alcohol spirit?
That is the half the place you’ll want to cease guessing, and begin understanding by diving into the info.
First, you’ll want to work out your audience – get an image of who they’re, what they like, and the place they hang around.
Then, you’ll want to work out what number of potential prospects there are out there you’re seeking to goal. Utilizing GWI you’ll be able to create an viewers and immediately see how many individuals it represents in the true world, constructing dependable numbers into your planning.
Market sizing strategies
There are two predominant approaches to calculating market sizing: top-down (specializing in the provision aspect) and bottom-up (specializing in the demand aspect).
Backside up market sizing
Calculating your market dimension from the underside up means taking a look at reasonable demand. You begin along with your product, your pricing, and the typical variety of models you’ll be able to anticipate prospects to purchase over a set time period when you scale slowly. Utilizing these actual numbers, you’ll be able to then work out what your organization can realistically obtain in gross sales numbers.
Say for instance, you wished to grasp the potential market dimension for launching your chocolate model in France. Utilizing the bottom-up technique, you would want to uncover knowledge on:
- The typical price of candies in France
- What number of candies the typical shopper buys a yr
This could provide you with a sign of how a lot the typical chocolate-loving shopper in France spends on candies annually.
Subsequent you’ll want to perceive what number of customers your model can anticipate to succeed in in France. (This may largely rely in your advertising and marketing activation plans and who you’re planning to focus on). By multiplying these two collectively you’re going to get your market dimension.
Backside-up market sizing is mostly extra correct, perfect for brand spanking new markets, and provides an amazing monetary image of potential revenue.
High down market sizing
Adopting a top-down method is a helpful method to get a fast overview of the market however the outcomes are largely inaccurate. This technique includes trying on the dimension of the marketplace for your services or products, then utilizing easy arithmetic to see how a lot that market could possibly be value to you.
Let’s use the identical instance. With a prime down method, you’d merely multiply the entire variety of customers in France who purchase chocolate by the seemingly common dimension of sale. This could be your complete addressable market (TAM), trying on the market as an entire, as an alternative of the portion of the market you’re prone to penetrate.
Clearly that ignores competitors in your product and a bunch of potential objections; not each chocolate fan will need your product, and even those that do received’t essentially spend the typical quantity. Briefly, a top-down method that focuses on provide will virtually definitely result in wildly optimistic figures.
High down vs backside up market sizing
Whereas top-down is fast and easy, it’s additionally inaccurate, very generic and might result in false perceptions.
Notably in circumstances the place you’re seeking to enter a brand new market, or disrupt the established order with a brand new product, backside up is the one method to go.
High-down provides you an instantaneous snapshot, bottom-up provides you the main points for a extra commercially sturdy determination. However what about if you will get the snapshot immediately but additionally the element on the similar pace? That’s the place GWI is available in, instantaneous insights at breadth and depth globally.
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Quickfire definitions spherical:
Defining your market and viewers
Determining your potential market and forecasting potential future earnings is essential for any model, and it takes correct calculations rooted in knowledge you’ll be able to depend on.
Whole addressable market
The entire addressable market (TAM) is the entire out there market and helps your model perceive how a lot income you possibly can make when you offered to each single buyer out there.
You possibly can calculate this by multiplying the variety of prospects in a market with the annual worth of every buyer.
Serviceable out there market
The serviceable out there market (SAM) is the goal addressable market serviced by your model.
You possibly can calculate this by multiplying the goal section of the TAM with the annual worth of every buyer.
Serviceable obtainable market
The serviceable obtainable market (SOM) is the share of the SAM your model can truly seize.
You possibly can calculate this by multiplying final yr’s market share with this yr’s SAM.
Market penetration
Market penetration is how a lot your model’s product is definitely being utilized by prospects in comparison with the entire potential market.
You possibly can calculate this by dividing the variety of prospects you’ve got by the goal market dimension.
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Why you must calculate market dimension with GWI
In terms of calculating market dimension and making massive enterprise selections on new markets and merchandise, you want knowledge you belief. We run the world’s largest research on the web shopper. Manufacturers like Spotify, Microsoft, LinkedIn, Snapchat, and an entire heap of others depend on GWI, so on the subject of market sizing, you’re in good palms.
- Market dimension is a transferring goal. Recognizing early shopper developments to plug into forecast fashions is one thing that shopper insights HAS to be a part of, and it’s one thing we’re type of execs at.
- With market sizing, it’s actually essential to have historic and trending knowledge. Having the ability to zoom out and see modifications, but additionally zero in on fluctuations by quarter is important for manufacturers massive and small.
- Topline market dimension is one factor – however GWI can truly aid you outline how a lot cash you may make out there with knowledge on buy intent, willingness to pay, and spending behaviors. Shopper Insights may be overlaid with your individual knowledge (EPOS, Gross sales, Cargo numbers and so forth) to assist predict market route and future development.
- GWI’s segmentation performance is a gamechanger in your model. Through the use of both Core or Customized to create your segments, you’ll be able to dimension up your goal audiences by marketplace for every section on a world scale.
- You can even create new (or recreate present) segmentations, and use these particular audiences to plug into your promoting to make sure you’re reaching the precise folks
- If you’ll want to get granular or wish to dig deeper in a particular space, you’ll be able to recontact particular audiences within the platform and ask further questions, or additional section by way of customized.
The way to calculate market dimension and determine enlargement alternatives with GWI
A step-by-step information to understanding viewers and market dimension
Say you’re a whiskey model seeking to verify what market is the very best guess in your model to broaden into. Right here’s how easy it may be with GWI.
- Create an viewers.
Step one is constructing your viewers. Right here you must actually be taking a look at product purchasers, those that’ve both lately or are planning to buy a product, or those that have interaction with a conduct usually – for instance those that drink alcohol.
While you outline your viewers, you’ll be able to open the viewers dimension query and apply the viewers right here. This will provide you with the entire viewers dimension globally, which is 115,125 million whiskey drinkers (appropriate as of November 2023).
2. Start constructing your chart
So now you wish to see which nation has the best proportion of whiskey drinkers. Head to charts, apply your saved viewers of whiskey drinkers, go to “add attribute” and choose “viewers dimension”.
Then go to “Phase by” and choose “By world area”. Be sure you click on “On” the place it asks you whether or not you wish to section your base viewers.
3. Refine by area
Right here you’ll be able to choose section your base viewers and have a look at the info level proportion to see which nation has the best quantity of whiskey drinkers – right here we are able to see that it’s Latin America with 41%.
4. Drill down by nation
Latin America is a reasonably broad area, so it’s time to get particular. Right here, you’ll want to take away the worldwide area section and alter the placement to Latin America. Now section by nation.
Now we are able to see the share of whiskey drinkers in every nation – and, identical to that, the very best market to broaden into along with your whiskey model.
5. Dive into your new viewers
Now you’ve received your viewers, you’ll be able to start to dig deeper into their consumption habits, model engagement and attitudes, and advertising and marketing touchpoints to start out constructing out your technique.
Using world trending knowledge to foretell market route and buy intention
Let’s say you’re a profitable wellbeing firm with a spread of intestine well being merchandise. You’ve received a line of digestive well being dietary supplements which are doing extremely effectively within the UK, however you’re prepared for transatlantic development. You’ve seen quite a few US influencers promote well being dietary supplements, however you need some hardcore knowledge to again up your launch.
When having a look at this knowledge, we are able to see that the share of Individuals who say they take well being dietary supplements has gone from 12% in Q2 2020, to 16% in Q2 2023. That’s a reasonably good case in your model.
30% enhance (from Q2 2020 to Q2 2023)
The truth is, the intestine well being market appears so robust, you’re contemplating trialing a line of kombucha within the US. So that you dig into the info.
In the event you had been to check the This autumn 2022 to Q1 2023, you would possibly assume there’s a rising development at play. However if you zoom out and see historic trending knowledge, you’ll be able to inform it won’t be the precise time. The truth is, these consuming kombucha have been fluctuating since Q2 2020, however you wouldn’t have found the volatility with out viewing curiosity on a historic timeline.
GWI in motion: How Blizzard Leisure drove development throughout areas
Blizzard Leisure is a number one leisure software program developer and probably the most standard and well-respected makers of pc video games.
Commercialization is on the very prime of their agenda, based mostly largely on creating efficient partnerships. To drive this, the model must craft compelling, data-rich narratives that present how Blizzard and its esports viewers are worthy of funding.
When a chance arose with a number one U.S.-based snack model, Blizzard’s gross sales crew wanted to show their esports viewers had an curiosity in shopping for the snack.
To try this they wanted a narrative that stood out and was supported by exhausting knowledge. The problem was their present understanding was lacking the very important world view.
Blizzard set to work leveraging GWI knowledge to indicate how esports followers throughout key markets actually felt concerning the snack model in query.
As Alan Lan, Technique & Analytics Supervisor for AB Esports at Blizzard, places it, “The info on buy intent and consideration was particularly invaluable. It proved we weren’t making assumptions and that our suggestions had been based mostly on reality.”
Utilizing GWI knowledge, Blizzard had been in a position to say precisely what number of of their esport viewers used the snack in every class, together with how this in comparison with their rivals and the general market dimension.
The outcome confirmed the true market potential of the partnership, providing quantifiable proof to justify long-term funding.
Because of this the snack model signed a sponsorship deal for Blizzard’s outstanding Overwatch League, adopted by a multi-year partnership that opens the door to much more future development.
The case for market sizing
Market sizing helps new and increasing companies to:
- Get a broad understanding of their viewers and market developments based mostly on up-to-the-minute knowledge
- Assess the demand for a services or products, each normally and in mild of latest developments occasions
- Perceive audiences intimately, so manufacturers know precisely who to focus on, which channels to make use of, and who to disregard
- Use a knowledge supply that gives instantaneous, authoritative solutions on viewers numbers, each globally and in particular markets
Market Sizing FAQs
1. What does market dimension imply?
Market dimension is the entire variety of potential prospects in a market.
2. What’s the distinction between market dimension and market share?
Market share is how a lot of the market is held by a single model, it’s completely different to market dimension because it’s based mostly on the precise figures fairly than potential ones.
3. How do you discover your complete addressable market?
You will discover your complete addressable market by multiplying the variety of prospects in your potential market with the annual worth of every buyer.
