Market Sizing & Forecast Research- Three Methods to Accurately Estimate Market Size

Market Size Analysis

Whenever your business plans to expand to new markets, two types of insights play a critical role: the size of the market and the share of the potential market that the business can capture. Market sizing analysis helps you gain insights into these factors.

Through market sizing analysis, you can determine the market, chart the expansion course, and get accurate numbers on the expected ROI. Understanding these nuances and doing market size analysis is critical while expanding to new markets.

What is Market Sizing?

Before any company expands into new markets, they need to answer questions like:

    • Is the market large enough to warrant interest?
    • Is the market trending in the right direction?
    • Is the market growth substantial?
    • Is the market profitable enough for us to expand?

With market sizing research, you can answer all these questions and inform strategic decisions such as launch locations, product investment, and market adequacy. However, knowing the market size alone is insufficient to understand all the necessary factors for investment.

Additional factors, such as strengths and weaknesses of the competition, anticipated profit margins, and ROI, must complement the market size considerations.

Companies must conduct qualitative research to understand why their products might get accepted or rejected, how to penetrate the distribution channels, and how to win over significant customers to get the consideration factors fully.

Critical Considerations in Market Sizing

While conducting market sizing analysis, researchers must decide on the following:

  • The desired level of accuracy of the assessment.
  • How quickly they need to analyze the data
  • What is the cost of obtaining data? This correlates with accuracy and speed.

Speed vs. Accuracy in Market Size Analysis

External deadlines, such as board meetings or investment committee reviews, often dictate the urgency of the study. Company management sets the required level of accuracy.

For example, knowing that a market worth is more than $50 Mn might be enough rather than specifying it at $87.6 Mn.A rough approximation ( e.g., $250 million to $300 million annually) usually suffices unless a high degree of precision is required. A broad spectrum in market size analysis is accepted when:

  • The investment is small compared to the total market value
  • The study is a preliminary scan of the market
  • The main objective is to research the plan of approach to the market.
  • Conversely, high accuracy in market size analysis is necessary when:
  • The investment is substantial within the total market value, and the investors are looking for a major share.
  • The historical market values are required to plot trends.
  • A specific sub-segment of the market is targeted.

Approaches to Arrive at Market Size Values

Every researcher aims to achieve the highest accuracy at the lowest cost. Though there are no fixed rules for how they should conduct the research, several standard methods suit various markets. The three basic approaches are:

Top-Down Approach

The top-down approach starts with a broad industry overview and then doubles down to estimate the specific market size. Research is conducted from industry reports, government publications, and market research databases. This approach is most useful when obtaining a macro-level market view but lacks granularity for niche markets.

Bottom-Up Approach

The bottom-up approach builds the market size estimate by collecting data from each market segment. Researchers collect data on sales, customer numbers, and average transaction value. This method provides comprehensive insights and is effective for niche and target markets, but is time-consuming and expensive.

Competitive Benchmarking

Competitive benchmarking leverages the success of existing competitors to gauge market potential. The approach uses sales data and the companies’ market share to assess the market’s value.

Although this method is insightful, it assumes the competitor data is accurate and comparable. Each method has advantages and disadvantages, and the options depend on the industry, product, or service being analyzed.

Researchers can achieve a balanced and accurate market estimate by combining the different options and customizing them according to your needs. These insights can be tailored to inform outcomes, guide strategic decisions, and optimize investment returns.

Every Company Has A Product That Can Travel, But It’s a Risk

Market sizing analysis can be conducted even in the existing markets to understand new sectors and explore new geographies. The first strategy to increase sales is to target the existing customers.

This is important as the customers have already made the purchase decision and trust the company. Being more persuasive encourages them to buy again.

However, every company has a product that has the potential to sell well in new markets across geographies. These markets come with inherent risks, whether in different segments or countries. It is essential to conduct thoughtful market research when making expansion- or growth-related decisions in these markets.

Optimizing Market Sizing Analysis To Cater Different Scenarios

Borderless Access provides deep insights through market sizing analysis. Our services assist companies in estimating market scope and capacity and give information about how much resources to invest where by taking cost-effective measures.

Comprehensive and Robust Methodologies

We combine robust quantitative models with diverse qualitative methodologies reinforced by industry experts’ consultations. This multifaceted approach ensures that our sizing analysis is accurate and reliable.

Accuracy in Revenue Predictions

Our revenue predictions are highly precise, including economic indicators, technological innovations, consumer behavior, and overall market movement. These factors enable us to forecast future growth rates, giving companies a clear picture of the potential market landscape.

Scenario Analysis for Strategic Planning

Our custom suite of Market Sizing and Forecasting Solutions includes scenario analysis, which empowers strategists to prepare for multiple potential scenarios.

We provide forecasts for optimistic, pessimistic, and moderate scenarios, ensuring companies can plan for different cases. This insight is gathered from comprehensive tools that use rich data analytics to offer a holistic view.

Understand Your Next Market With Robust Market Research

Whether entering a new market or expanding in the existing one, Borderless Access helps you determine the direction and investment you need for your business to grow.

You can choose which approach and how to conduct the methodology. Our solutions offer the precision, reliability, and strategic insights necessary to tackle market expansion complexities confidently.