What is market size? How can you determine the size of your market?
Estimating the size of your market is crucial for business. In his book The Marketing Plan, William M. Luther explains how to determine market size so you can find the total number of potential buyers and the revenue you’ll generate from those buyers.
Continue reading to learn how to determine market size.
Luther explains that market size indicates the total number of potential customers for your product or service—the larger the size, the more potential there is to make a profit. Use the following three-step process to learn how to determine market size:
- Consider what benefits your product or service offers. For example, your product helps people whiten their teeth.
- Customer groups turn to a common pool of competitors and distribution channels that offer products that claim to fulfill their needs. Determine your market by finding a group of potential customers who are seeking the exact benefits you’re offering. For example, your product comes in eco-friendly packaging and you intend to sell it only through online channels. This narrows down your target market to a group of people who want whiter teeth, care about eco-friendly practices, and shop online.
- Total the number of buyers in your target market to calculate the market size.
How to Research Information for Market Size
Luther’s explanation covers how to determine your target market so that you can define your market size. However, this explanation misses a crucial piece of advice: how to research the information you need to complete this step. Marketing experts offer practical advice to help you research effectively.
First, you’ll need to gather relevant data regarding market demand for your product or service. To do this, use the following two strategies:
- Use SEO tools to analyze how many people are searching for similar products and services to yours and what businesses and distribution channels they use to fulfill their needs.
- Sign up for social listening tools and make use of analytical reports to understand how much demand there is for the specific benefits you’re offering.
Second, you’ll need to understand shifts in the data to determine the average size of your market. To do this, consider how demand for particular products and services can fluctuate according to the following three factors:
- Availability—things in short supply usually experience increased demand. For example, fuel shortages prompt consumers to hoard gas.
- Season—some products and services experience demand during certain times of the year. For example, people only tend to search for chocolate bunnies during the run-up to Easter.
Economic and natural events—unexpected downturns or natural disasters impact the popularity of certain products and services. For example, the demand for toilet paper skyrocketed during the initial phase of the Coronavirus pandemic.
———End of Preview———
Like what you just read? Read the rest of the world's best book summary and analysis of William Luther's "The Marketing Plan" at Shortform .
Here's what you'll find in our full The Marketing Plan summary :
- How to build a team and motivate them to work together
- How to hire the right people—and keep them
- How to share and reinforce your vision