Resources > Articles

Know Your Market: Sizing & Credibility Matters

market

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 in
  • $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.

market
Photo By William Iven on Unsplash

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 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 maximum when leveraging analyst research.

  • “15% growth annually to a reach eleventy billion by 2016” – Analyst A, Firm A
  • “Growth 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, 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?

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.

Other Resources in this Series

Most Recent

A dashboard on a website showcasing product management measurement
Article

Measurement-Driven Product Management

If you are a vice president, director or team leader for a product management function, one of the biggest challenges you face today is how to demonstrate the team is making a significant contribution to top line or bottom line targets. If you can’t measure your team’s effectiveness, or if you are focused on the wrong metrics, your headcount and budget allocation could be at risk.

Product life cycle: Introduction, Growth, Maturity, Decline
Article

23 Metrics Mapped to the Product Life Cycle

Learn what to measure and how to avoid vanity metrics during each stage of the product life cycle: development, launch, growth, maturity and decline. Also learn the difference between a mission and objective and how to identify which stage your product is in.
ROI of being market driven. An image with illustration dollar signs
Article

The ROI of Being Market-Driven

Market-driven companies are more profitable, twice as fast in getting new products to market, and have higher customer satisfaction levels.
Article

23 Metrics Mapped to Each Stage of the User Journey

23 metrics for the user journey, which is the path a user takes while interacting with your product (sometimes called a flow funnel).
A person holding up a sign that say who is responsible
Article

Product Marketing or Product Management

Roles Before Titles The job titles of product marketing manager and product manager are confusing enough to start raging debates about who does what. Organizations often transpose the job titles, adding to the confusion. This article

OTHER ArticleS

A dashboard on a website showcasing product management measurement
Article

Measurement-Driven Product Management

If you are a vice president, director or team leader for a product management function, one of the biggest challenges you face today is how to demonstrate the team is making a significant contribution to top line or bottom line targets. If you can’t measure your team’s effectiveness, or if you are focused on the wrong metrics, your headcount and budget allocation could be at risk.

Product life cycle: Introduction, Growth, Maturity, Decline
Article

23 Metrics Mapped to the Product Life Cycle

Learn what to measure and how to avoid vanity metrics during each stage of the product life cycle: development, launch, growth, maturity and decline. Also learn the difference between a mission and objective and how to identify which stage your product is in.

Sign up to stay up to date on the latest industry best practices.

Sign up to received invites to upcoming webinars, updates on our recent podcast episodes and the latest on industry best practices.

Training on Your Schedule

Fill out the form today and our sales team will help you schedule your private Pragmatic training today.

Subscribe

Subscribe

Training on Your Schedule

Fill out the form today and our sales team will help you schedule your private Pragmatic training today.