how to size an emerging market in your business plan
In developing their bag plans, companies of all sizes face the claiming of determining the size of their markets. To activate, companies must ad hoc the size of their “relevant marketplace” in their plans. The relevant marketplace equals the company’s sales if it were to capture 100% of its specific alcove of the marketplace. Conversely, stating that you were competing in the $1 trillion U.S. healthcare marketplace, for archetype, is a telltale sign of a poorly reasoned bag aim, as there is no company that could reap $1 trillion in healthcare sales. Defining and communicating a credible relevant marketplace size is far added able than presenting generic industry figures.

The claiming that abounding firms face is their inability to size their relevant markets, particularly if they are competing in advanced or rapidly evolving markets. On one hand, the actuality that the markets are advanced or evolving is the astuteness why there may be a ample befalling to authorize them and alter to the marketplace baton. Conversely, investors, shareholders and senior management are generally skeptical to invest resources as, since the markets accomplish not yet exist, the markets may be too baby, or not really exist at all.

Growthink has encountered the claiming of sizing emerging markets abundant times and has developed a proprietary methodology to solve the botheration. To activate, it is critical to accept why traditional marketplace sizing methodologies are ill-equipped to size emerging markets. To decorate, if a research firm were to statement traditional methods to size a mature marketplace such as the coffee marketplace in the United States, it would accede demographic trends (e.g., aging baby boomers), psychographic trends (e.g., increased health consciousness), former sales trends and consumption rates, price movements, competitor brand shares and advanced product adding to, and channels/retailers among others. However, conducting such an analysis for emerging markets presents a claiming as several of these factors (e.g., former sales, demographics of the customer when there are no current customers) don’t exist as the markets are presently untapped.

The methodology required to size these advanced markets requires two approaches. Each access will crop a altered approximation of the abeyant marketplace size, and generally the figures will assignment at buttoned up to accommodate a solid foundation for the marketplace’s abeyant. Growthink calls the aboriginal access “peeling back the onion.” In this access, we alpha with the generic marketplace (e.g., the coffee marketplace) that that company is trying to penetrate, and remove pieces of that marketplace that it will not target. For instance, if the company created an ultra aerial-speed coffee maker that retailed for $600, it would initially lessen the marketplace size by factors such as retail channels (e.g., mass marketers would not act the product), demographic factors (lower income customers would not purchase the product), etc. By peeling back the generic marketplace, you eventually will be left with alone the relevant portion of it.

The second methodology requires assessing the marketplace from several angles to approximate the abeyant marketplace share, answering questions including:

– Competitors: who is competing for the customer that you will be serving; what is in their product pipeline; once you release a product/service, how continued will it booty them to enter the marketplace, who else may enter the marketplace, etc.

– Customers: what are the demographics and psychographics of the customers you will be targeting; what products are they currently using to fulfill a agnate charge (substitute products); how are they currently purchasing these products; what is their degree of loyalty to current providers, etc.

– Marketplace factors: what other factors exist that will access the marketplace size – government regulations; marketplace consolidation in related markets, price changes for uncooked materials, etc.

– Position Studies: what other markets accept acquaintance agnate transformations and what were the customer adoption rates in those markets, etc.

While these methodologies are generally added painstaking than traditional marketplace research techniques, they can be the aberration in determining whether your company has the abutting iPod or the abutting Edsel.

About the author:
GT Bag Plans has developed over 200 bag plans for clients that accept collectively raised over $750 million in financing, launched abundant advanced product and service lines and gained competitive advantage and marketplace share. GT Bag Plans is the sister site of GT Adventure Chief

Originall posted May 2, 2012