Whether you are entering a new market, expanding within a market or releasing a new product, it is crucial you understand the total size of the market – or the total revenue available in the market – before you make any investment decision. Even more important than the total market size is the accessible market size – the size of the segment or segments that your business might realistically sell to.
B2B International is a world leader at providing rigorous market sizing research based on multiple sources. We ensure the most accurate possible market size estimation by calculating the market size in up to four different ways, with each of these calculations being made independently, before being cross referenced and the final market size settled upon.
Calculation 1 – macro method
Our practitioners estimate what overall percentage of the total market your market represents using a mixture of primary and secondary data.
Calculation 2 – demand-side method
The demand-side method relies heavily on survey data. We survey a representative cross-section of the target market, collecting spend data in relation to your offering and similar offerings. This data is then scaled up to estimate the market as a whole. This methodology works best when the companies in your market are relatively homogeneous in their activities and spending patterns.
Calculation 3 – supply-side method
The supply-side method is a crucial cross-check to the demand-side method. In short, if somebody is buying a particular offering, somebody else must be selling it. When identifying the total revenue in a market, it is crucial to specify which suppliers are generating this revenue. We calculate revenue on the supply-side by:
- Identifying all of the players in the market
- Identifying the total revenue of these businesses
- Estimating the proportion of these businesses’ revenues that is represented by the offering we are researching
There are several complexities to the market size formula on the supply side, notably when researching niche products offered by large corporates:
- Identifying the relevant revenue can be extremely difficult
- Most markets operate internationally; therefore, foreign suppliers must be taken into account
- In fragmented markets, there may be a long “tail” of suppliers who may be difficult to identify
Calculation 4 – consultancy with your team
Information within businesses tends to be dispersed throughout the organisation, amongst different departments and particularly sales people. As B2B market research specialists, we have learnt that many of our clients already possess a wealth of data that can be used to calculate market size, they just don’t know it yet and, as a result, no one has ‘joined the dots’ between all of the data held within the business. To fast-track estimating market size, we lead internal workshops and conduct interviews with sales people and other senior staff, drawing information and estimates from them before aggregating this output.
Calculating potential market size
In addition to calculating current market size, we are experts at calculating potential market size. This can represent the market size at a future date, in which case we conduct PEST analysis in order to estimate market growth rates over the coming years.
Alternatively, potential market size can mean the revenue that could be achieved by introducing a completely new offering. In this case, our estimate is based on interviews with potential customers who evaluate the proposed offering and state how much they would spend on it.
Case study: Sensing new opportunities abroad
Our client, a multinational provider of industrial sensors was defining its strategy for the coming decade. Key to this was deciding whether, and to what extent, to expand geographically. In particular, the company wished to evaluate the possibility of expanding into China, Brazil, South Africa and Canada.
What we did
Using our research teams in each country, we began by verifying the value chain for sensors based on desktop research and interviews with key market players. Our market sizing research then moved on to size the market in four different ways: workshops and interviews with our client’s staff across a wide range of countries; interviews with potential customers – in this case electrical distributors in the four countries in question; mystery shopping interviews with competitors’ sales people in each country; supplemented by analysis of competitors’ financial results. All of this enabled us to identify the country with the biggest accessible market opportunity. Our client invested, significantly increasing its sales force and technical back-up in this country.