Market Sizing Research

What Is Market Sizing Research?

Whether entering a new market, planning an expansion, or preparing for product launch, knowing the size of your market is critical when forecasting revenue. A market sizing analysis takes a variety of forms, such as total sales revenue, potential number of customers or sales volume.

There are numerous methods for calculating market size including top-down, demand-side or supply-side analyses, but the most important factor for Wakefield Research’s Market Intelligence research is ensuring results are established through rigorous analysis.

This research can come in a variety of forms, such as survey and other primary research methodologies, or through the use of existing data. Wakefield Research specializes in all of these methods.

Market Sizing For Business Decisions

Market Sizing can play a crucial role in many business decisions, such as:

• Estimating the potential value of introducing a new product to the market

• Evaluating the impact of introducing a product to a new region or market segment

• Prioritizing markets to target for roll-out

• Determining products/services to invest internal resources

• Evaluating a partnership or acquisition opportunity

• Assessing staffing needs for a given segment

Market Sizing Methodology

Identifying the size of a market opportunity is one of the core applications of market research. Constructing an accurate market size estimate requires several steps:

1) Define the market of interest: what products, services and geography are relevant?

2) Build a model: determine a top-down or bottom-up approach.

3) Identify sources: through publicly-available information and subscription databases, a range of sources will be employed.

Several measurements are commonly used for market size:

• Total addressable market (TAM) is the entire potential market. This refers to the combined revenue (or unit sales) of all the companies in a specific market.

• Served available market (SAM) is the share of the total addressable market that companies providing a specific solution can fulfill. This is usually the part of the market that a business is targeting, for example people aged between 35 and 55 or a particular geographic region.

• Share of market (SOM) represents market share. It is the portion of the served available market that a business model can realistically serve.

Market Sizing Case Study

Market sizing techniques can be applied to almost any market and industry, ranging from popular consumer services to niche B2B products. The following example fits into the latter. It involves a company that planned to sell cleaning chemical dispensers for use in commercial kitchens. It needed to gauge the total addressable market for the product.

Step 1: Define the Market
The first step was to define the market. For example, what type of kitchens and end-users are in scope? What is the geography? Are there variations in dispenser offerings and do these variations impact use?

Step 2: Calculate a Market Estimate
Once defined, a bottom-up approach was used for this question, meaning that the size of the potential market is calculated by examining:

• Number of commercial kitchens by segment in the U.S. (restaurants, supermarkets, schools, hospitals, etc.)

• Number of cleaning chemical dispensers used per kitchen in each segment

• Price of dispensers

• Lifespan of dispensers

Step 3: Verify & Present the Market Size Estimate
Once the necessary information was acquired, it needed to be verified. Subsequently, a model based on data and rational assumptions was constructed to provide a market size estimate.

Of course, the above is just one high-level example of a market size. In any market size calculation, there are likely to be a series of key variables that, when combined, provide an indication of market size.

Ultimately, the goal for Wakefield Research’s Market Intelligence offering is to provide an accurate insight into the addressable market so our clients can assess its appeal, seek new opportunities, and develop marketing and sales plans based on data.

Contact Wakefield Research for help with market sizing or to learn more about our market intelligence, quantitative and qualitative research services.

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