What is Market Sizing

Market Sizing

Market sizing refers to the process of estimating a market’s potential. Understanding a market’s potential goes a long way in identifying the potential of a market for a business when unveiling a new product or service. Market sizing is a holistic process that should answer the following questions:

  1. What is the total size of the market?
  2. Who makes up the competition in the market?
  3. Who are the target customers and what is their profile?
  4. What services and products are in the market?
  5. Which trends in the market are the most significant?

Estimating a market’s potential often requires a rigorous approach that ensures all the necessary variables are taken into consideration. The approach commonly adopted is the bottoms-up approach. In this method, the unknown variables are broken down into better-understood assumptions, and then their solutions are evaluated up to the estimate of the total market size. This process requires one to research and also engage in extensive consultations considering that market sizing has a highly distinct nature. Therefore, this process otherwise referred to as a market sizing analysis can only be accurate if the above interventions are executed with a high degree of precision.

What is Market Sizing

A good market sizing approach is often considered so if it produces accurate results that can be relied upon to make significant investment decisions. But, to start there first must be an estimate of the market size. This forecast is essential in establishing precedence for the marketers to pursue or encourage the development of services or products within the market. It is, however, advised to have at least two estimates, created using different approaches before the market sizing is completed. When these two estimates agree, there is an increase in the confidence of the market size range. However, there is always the possibility of the two approaches leading to two different estimates. When this disparity occurs, it is best to conduct a sensitivity analysis to establish the assumptions that are most vital to the process. Furthermore, you are also advised to perform risk reduction or research in the attempt to reduce the range market size estimates.

Market sizing is a highly valuable business tool. An estimate for the market size is a vital ingredient in enhancing a business’s development initiative for any new service or product that it wants to roll out to the public. Therefore, it is essential to reconcile the number of resources directed towards the success of the product or service with the anticipated returns from the market. Doing so will ensure that investments do not end up running a business into unprecedented losses or expenses.

The assumptions used when establishing an estimate of the market size have to be handled with critical analysis. It is beneficial to have the most accurate information on hand when starting a business, or launching a product. You can always consult with a professional that will help identify key indicators, consumer trends and market statistics.