Market Sizing

What is Market Sizing?

Market Sizing is the process of estimating the potential of a market. Understanding the potential of a market is important for companies looking to launch a new product or service. Using a wide variety of secondary market research sources and databases, we synthesize results from previously published research and other data sources to help define:

  • The total size (or potential size) of a market
  • The major competitors in a market by category
  • The composition and profile of a target customer
  • The products/services available in the market
  • The most significant trends in the market

Market Sizing Analysis

To estimate the potential of a market we often use a “bottoms-up approach” — breaking the unknown pieces down into granular sets of assumptions and then roll it back up to an overall market size estimate. Due to the highly distinct nature of each Market Sizing project, they require a great deal of consulting and special attention to produce an accurate Market Sizing analysis.

Market Sizing Approach

We typically start with a quick estimate – a “back of the envelope” market size estimate that can provide marketers with enough information to decide if further investments in product/service development even make sense. A second pass at the market sizing question involves much more granular analysis. Often we’ll develop 2 or more estimates using different approaches. When these approaches “triangulate” – confidence in the estimated market size range is increased. When the approaches provide widely disparate results, we use sensitivity analysis to understand which assumptions are most critical. Additional research or risk reduction is sometimes recommended to narrow down the range of market size estimates.

The Value of Market Sizing

Developing a Size of Market estimate is a critical first step in building the business case for any new product development initiative. The amount of investment required to be successful needs to make sense given the potential return that the market offers.

By being explicit about the facts and assumptions used to generate a market size estimate, we are able to identify critical factors that need to be addressed in downstream development business planning activities.

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