Market sizing can be a difficult task without the correct resources or knowing what to do with the information that’s available. Yet market sizing is essential in making strategic decisions and attracting investors.
Having 'one truth' can also be invaluable for giving consistency to decision making, ending internal debate and interpretation.
Advantage Market Intelligence are experts at providing accurate estimates of market size by gathering and piecing together different sources of information. Market sizing varies from industry to industry, which is why our approach is customized for each client.
Our methodologies include:
Top-down market sizing: Market size is calculated by using a big-picture view of the market and then whittling it down to the specific country or region. It is essentially the process of splitting up a large market into its smaller component parts.
Bottom-up market sizing: Market size is calculated by multiplying a single product or service with the number of potential buyers in the market. This approach extrapolates the market size using a smaller piece of the whole.
Ideally both methods should be used to validate each approach.
The choice of method is largely dictated by the availability of data, time and budget. Simple calculations can be prepared quickly, with greater consideration of different variables needed for a more accurate estimation.
Top Down Market Sizing
This is where a 'big picture' view of a market is used as a starting point and a series of filters are applied to give an estimate for the specific market. A simple example of this is taking a global market estimate and splitting it to a country estimate based on GDP.
The estimate becomes more refined as more filters are applied ,e.g. accounting for differences in purchasing parity, oil component of GDP, local competition and selling prices, market maturity, brand awareness and value etc.
Bottom Up Market Sizing
This uses the reverse approach, building up the estimate from the lowest point where the product can be used. For example, if a product is sold into hospitals we could start with the number of hospital beds. Assuming we see a £5 average sales data, we can multiply £5 by the total number of hospital beds.
As with the top down approach, further refinement is often needed, e.g. to account for different sizes and types of hospital as well as differences in bed use etc.