Calculate Market Size for your Product

Entrepreneurs and organizations can use market sizing to estimate how much profit they could potentially earn from a new business, product or service. This helps decision-makers to decide whether they should invest in it.

The size and potential of the market you cater to is a crucial part of identifying the factors that need to be addressed in the development process of your product.

Now, in order to understand the market size, you need to know three terms:

  • Total available market (TAM): The overall population that presents a revenue opportunity for your product falls in this category.
  • Serviceable available market (SAM): The portion of the markets, geographies, and/or other segments of the TAM that can be reached by your company or product.
  • Target segment: Also known as the serviceable obtainable market (SOM), this category includes the realistic portion of the SAM that can be captured by your company or product.

We can determine the size of your market through two approaches:

Step 1: Combine research from the bottom and the top

To create the most marketable and secure market opportunities, combine competent sales data with industry forecasts and “bottom-up” data that reflect the customer base of a product or service. This approach allows product managers to make more secure estimates that address company specific customer definitions within the context of a much wider market. From the entire market, you can determine the number of customers and the level of consumption to arrive at the target market.

Step 2: Shift focus from estimating the world market to defining a market that can cope

The amount of market available is the segment or category of buyers you have chosen to pursue first because of certain unique features shared by members. Examine honestly and accept the strengths and weaknesses of your company to improve the market potential of the market.

Define and calculate the number of potential customers or users within the immediate category of influence of your business using key entry features such as company component focus, customer features and performance capabilities.

Step 3: Improve available market value into total market capitalization

It is interesting to note that the amount of market available may be large and the total market value is favorable. However, your business leaders and partners need to know what results they can achieve in the current market segment.

To reach your company’s total marketable usability, find out how many customers are expected to buy as the first or regular receivers in your target market. Describe features such as how long it will take for the business benefits of emerging technologies to be accepted among targeted consumers.

“Market share opportunity should represent what your company can expect to achieve in a targeted market”

To quantify the total market value of business leaders and partners their potential agency level in moving the market to adopt new approaches. Product managers can demonstrate that their involvement, investment and resources make a difference in revenue growth over the life cycle of emerging technologies.

Step 4: Focus on real financial implications

The market segment opportunity should represent what your company can expect to achieve in a targeted market. The opportunity should address critical aspects of implementation such as the existing combination of product or service proposed, efficiency and scale, and marketing and sales channels, as well as distribution structure.

Use a survey and various selection strategies to determine the best product balance, features, price and other factors that may lead a company to decide to switch vendors. Check out the detailed details of the business model of the product or service being analyzed, including brand strength, behavior change and price sensitivity trends.

With honest and transparent internal audits, product managers can obtain a market segment calculation that sets realistic expectations for potential business opportunities. Only then can the acquisition of a senior officer be strong enough to bring a product or services to market in the long-term profit.

Important Points

Your “market size” is the total number of potential buyers of your product or service within a particular market. This information can be especially helpful to businesses and entrepreneurs who want to invest in new products. It can also support strategic decision-making and allow you to create evidence-based marketing strategies.

There are two ways you can determine the size of your market:

  1. Top Down – this takes into account the “appropriate” market size of your product or service, and calculates how much your organization might earn from it.
  2. Bottom Up – complete your market research to find the exact and accurate market size of your product or service.

To calculate the market size using the vertical route, follow these three steps:

  1. Describe your target market.
  2. Use market research to evaluate your product interest.
  3. Count possible sales.

Dhruv Verma Written by:

Project Manager @GrowthGraphers

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