Of course it depends on how you look at it, but, for me, one of the very few upsides to the financial doom and gloom these days is that business decisions are being placed under ever more scrutiny – gone are the days when companies can base their strategies on hunches and whims, gone are the days of commissioning research for research’s sake.
For us, this means that the research we’re doing has to have real purpose and also that it has to be of the utmost quality – both creative and robust.
Regardless of what you may read in Cosmo magazine, size matters, and a robust estimate of the size of your addressable market has to be at the base of your business planning; to give you the confidence to make the bold business decisions to pull out or to invest at the critical moment.
From the outset it’s important to accept that what we’re typically dealing with is estimation, not measurement, especially when sizing potential markets. The secret to effective market sizing is triangulation, combining different primary and secondary sources, top down and bottom up; working through the issues of conflicting estimates in an iterative process to arrive at a plausible outcome. There’s rarely a silver bullet and the process varies from one market sizing task to another, and between geographies (e.g. developed market vs. emerging markets).
Market sizing also needs to evolve with the market. For our clients, the BRIC countries now occupy many of the slots in their top five or top ten markets. And behind them lies a second group of increasingly import markets such as Mexico, Indonesia and Thailand. Sizing in these markets poses further challenges ranging from the variable quality of primary market research to the paucity of accurate demographic information to weight data. Successful sizing research in these markets requires partners who have been through it before, who know the culture and know what to look out for.
Furthermore, market size estimates are a snapshot in time. No sooner are they calculated than they start to date. So market sizing estimates need to be accompanied by analysis of market growth drivers and competitive forces. For example, would you base an estimate for the market size for a home improvement product on early 2007 market growth estimates? We’d strongly advise that you didn’t!