The Importance of Market Sizing Research

The Importance of Market Sizing Research

Market sizing is perhaps the most essential preliminary brand metric. Yet we believe that as markets shift over time, ongoing brand tracking of seemingly static metrics like market size is equally useful. Market sizing can be used both to determine the potential size of your market and the potential value of your business. This remains true whether you are an entrepreneur with a small startup of a multinational conglomerate looking to expand. 

So how exactly can we determine market size? And once we have this information, how can it be put into action? Today, we will look at the value of market sizing research from a practical standpoint.

Market Sizing 101

Market Sizing 101

The definition of market sizing is exactly how it sounds: we are estimating the potential size and/or value of a particular market. This is commonly used as a starting point for a new venture or an expansion, but it is much more than that. As part of a well rounded brand positioning effort, market sizing research also explores the true potential of your market and why your sales and/or other brand metrics may be falling short.

Common deliverables from market sizing research might include:

  • Total number of transactions
  • Shopping trends within your market
  • Total dollars spent within your market
  • Units sold within your market
  • Total potential consumer base
  • Profile of a typical/target customer
  • Market trends which might increase or decrease any of these factors
  • Much more

How to Determine Market Value, Market Share, and More

The general goal of most market sizing efforts is to determine a true market value. In this instance, market value is not a fluctuating price of lobster which was brought into the docks that day, but the overall potential value of the consumer base within your particular market. By understanding market potential value and your market share within that population, brands can paint a full picture of their real and potential market size.

While this might seem like a relatively straightforward calculation, measuring market size can actually be quite complex. The factors involved include addressable markets vs. available markets, potential market volume, potential market value, industry trends, and much more.

The good news is that modern marketing firms are able to gather and analyze this data quickly. Furthermore, with adaptive software, your market sizing goals can be tailored to your organization’s individual needs. Rather than spitting out a one-size-fits-all spreadsheet, modern market sizing research can be almost anything you want it to be.

Market Sizing Research Manages Expectations

Market Sizing Research Manages Expectations

This begs the question: what can we do with this information? Let’s say you are a large retailer looking to expand into a new region. Your brand is strong in the continental US, and are looking to expand north into Canada. To determine the viability of this decision, you look into market sizing analysis. The results can go one of three ways:

  1. Market sizing projections exceed expectations
  2. Market sizing projections meet expectations
  3. Market sizing projections fall short of expectations

What is important to understand is that market sizing is not a yes or no survey. Perhaps market size was adequate in total dollar volume but not in potential customer base. Perhaps the analysis showed that customer behavior was trending in a different direction. Well-researched market sizing reports will provide details which brands can use to make well-informed decisions.

Market Sizing Diagnostics and Action Items

arket Sizing Diagnostics and Action Items

So far we have primarily discussed measuring market size in a static environment. As any marketing professional will tell you, this only tells a fraction of the total picture. Populations change, customer expectations change, and market trends are more fickle than ever. So how can we use market sizing diagnostics to drive future decisions?

Determine whether your brand is winning or losing market share. Is your organization gaining or losing customers, transactions, and occasions? When combined with other brand metrics, seeing your internal trends can be illuminating. These gains or losses may be due to internal marketing issues like poor brand alignment or might be due to shifting market realities. 

Which competitors are stealing from your customer base? If your market share is poor, where are your customers shopping? This is step one towards identifying how your brand’s shortcomings can be turned into opportunities for growth. Examine what the competition is doing better and strive to outperform them moving forward.

How much have changing sales been impacted by competitive pressures or changes in the market size? Last but not least, measuring brand metrics to determine what changes have been caused by external vs. internal factors can drive well-informed decisions. In some cases, market size shifts are unavoidable. If you are being outmaneuvered in a strong market, that tells a very different story.

Market Sizing Solutions from Clock Tower Insight

Clock Tower Insight helps our clients to build their brands through any means necessary. We believe in using cutting edge research to deliver unparalleled insight and understanding into today’s rapidly changing marketplace. With over 15 years of dedicated experience, our marketing insight has helped organizations including Belle Tire, Nielsen, Orbitz, and Kraft Foods. 
We are proud to offer a number of services to our clients, including customer experience management, brand positioning in the marketplace, market sizing, market testing, and more.