Here are three steps to identify your market and calculate market size
1- Target Market
Finding a target market helps in spending marketing and promotion money efficiently on your ideal customers.
A) Focus on the market
- Understand the problem that your product solves
- Find out, what needs your product or service fulfills [6]
- Funnel approach: Use a funnel approach to filter the data according to gender, age group, area, income, etc.
- Value proposition: Find out what type of customers will value your product. Example- if you manufacture a hiking bag, then hikers will be your target audience.
B) Market Research Data
- Survey Data: Do survey via email, newsletter, phone, in person, etc. Find the data and analyze it for your product.
- Existing Data: Find out if there is any product similar to your product.If there is a similar product, then analyze its market and customer segment. Find out the market segment of that product. You can go different coffee shops or bookstores to talk to people and get views of the people for that product. Start visiting review websites and find out negative reviews of the product. Write down the problems which people are going through example- lousy customer support, bad service, etc.
Here are some of the free review website that you can use it Amazon Customer Reviews, Which, etc.
- Self-Market Research: Meet your family members, friends, and colleagues. Tell them about the available product and its features. Ask them to try it or look at it directly or online. Get their feedback. Note down the negative feedback and now tell them about your product and its features and ask for their feedback. Analyze their input.
The analysis of data coming from different paths can help you to find out your target customers and increase return on investment.
2- Competitive Analysis
Find out your top competitors and analyze their value propositions. Knowing about your competitor’s value proposition will help you to find opportunities and threats for your product.
You can do the SWOT (Strength, Weakness, Opportunities, and Threats) analysis of your product. Having a very different value proposition will make your product stand at the top level with least competition.
You can use some of the tools for advanced analysis, like Michael Porter’s Five Forces Model and PEST analysis.
3- Calculate Market Size
Especially when it comes to decision making, market sizing is a very crucial factor in your business success. It helps you to find the market trend and required investment for your business
A) Define your target customer: From step 1, you will be able to find target market features and who is your target customer. Now create personas of your customized market.
To create a persona, please read my article “ 9 Steps to Make a Simple Marketing Plan.”
Case study: (Assuming) We are developing a healthcare software for patients who can get their medical reports via an app. They can upload their diagnostics report or ask a question to doctor through this app. The primary target customers are 66% of U.S population who are using health apps. [12]
B) Calculate the number of target customer: Find out the total target customer number, which may have a similar profile to the targeted customers.
Case study: By doing a general market research, we found that the target customers are 213 million (66% of U.S population) who are using health apps in the USA. [12]
C) Find the penetration rate: “The Penetration Rate in marketing, is a parameter to show the rate of circulation of a product in a specific population.”[9]
Find total number of potential customer(x)= 213 million
Divide total number of potential customer(x) by the total (y) i.e. 323 million total US population [11]= x/y
= 213/323 (Health App users/total population)
=66%
D) Find potential market size (volume and value):
Market volume= penetration rate* # of target customers
=66%* 213 million
=140 million
Market value= Market volume * Average Value
(Assuming average sale of $10 per user per month)
=140*10
=$1.4 billion
Asif Razzaq is the CEO of Marktechpost Media Inc.. As a visionary entrepreneur and engineer, Asif is committed to harnessing the potential of Artificial Intelligence for social good. His most recent endeavor is the launch of an Artificial Intelligence Media Platform, Marktechpost, which stands out for its in-depth coverage of machine learning and deep learning news that is both technically sound and easily understandable by a wide audience. The platform boasts of over 2 million monthly views, illustrating its popularity among audiences.
