Know your market: Sizing matters… so does credibility…

A successful launch starts with a firm understanding of your market. So I am happy to say I’ve made a bunch of mistakes market sizing or at least witnessed it in the technology space which have impacted how a product, module or partnership faired in the market. I thought I would spend some time putting forth some concepts which might not be the best way to size a market and a concept of how to get to a credible baseline. There is the easy math priced based solution, which can create an either too big or too small a market size based the validity of your pricing model.

  • 300,000 companies in <insert vertical> in <insert continent>
  • $500,000/unit
  • 300,000 * $500,000 = The total available market

So from an optimist perspective this works, if everyone has the same problem, everyone agrees with the segment baseline and the pricing is reasonably correct. There are a few to many “ifs” in this model and this construct typically works for technologist and founders, but not for the CFO.

The most over-used construct for market sizing is “the analysts probably know” the right answer. Don’t get me wrong, I use analyst anectdotes frequently - in fact these are the easiest slides to use/create and work reasonably well to create the largest baseline market definition. Most importantly they make great pivot or setup slides in your business review. It is important you use multiple sources to help triangulate on the most likely market maximum when leveraging analyst research.

  • “15% growth annually to a reach eleventy billion by 2016” – Analyst A, Firm A
  • “Market growth in the <segment> to double by 2018” – Analyst B, Firm B

Both of these are fairly compelling statements, right until you realize eleventy billion isn’t a number and you don’t know what the baseline is which is doubling. I’m in marketing and I should be able spin eleventy, but alas I cannot.

The problem with this method is no single product is a market and no single market is a product. In fact, most companies and their portfolios straddle multiple market definitions and most analyst firms define sectors differently, as proven by the differing short list of companies in the defined segment. Here an example of even an analyst firm, IDC, supporting the spatial relevance of markets:

So a market definition needs to NOT come from a single source and should reflect your target market, so at the end of the day the two above methods are sanity checks/starting points – not absolutes. Think of the previous two options as “if then” qualifiers which derive a fairly SQL-esque select process to get an actionable market size.

SELECT * from price model.companies where analyst model.sizing and where target buyer class <= perfectcustomer.class.

Perfect customer? Yes, pesky customers… It is important you understand who will buy and benefit, should buy and not just who could theoretically. Tip: Figure out the typical buyer titles and target company attributes and engage a list broker, they will very often give you a count on each of these fairly quickly, then you may actually be able to do a select or SQL statement that works, rather than the fictional one above. The more analyst views, refinement of your target customer and understanding of your pricing and packaging the more real your data with be.

So if you can’t take any single concept on face value, what can you do?

Market share numbers help, if you can find multiple cuts at market share (analysts, competitor messaging…), verify public competitors’ revenues and portfolio revenue mix you can create a definition of YOUR product’s market. This bottom up approach will often produce a number which, if triangulated with the other 2 approaches with a down select, is credible and actionable. It will also provide additional readiness for your go-to-market planning and launch promotions. The cool thing about this method is YOU get to name the market! Get creative acronyms are your friend, at least internally.

I’ve never had any success in getting 1% of an eleventy billion dollar market, but executing in a $250mm market segment is clearly manageable and could be your launching pad into the next trillion dollar market.

David Daniels

David Daniels


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