Target Market Sizing

Discover User Groups and Reasons for Buying 1
Target Market Sizing is necessary for business and marketing planning, and budgeting for all startups, especially when seeking third-party financing.

Table of Contents

What is Target Market Sizing?​

Target Market Sizing is key for business and marketing planning, and budgeting for all startups, especially when seeking third-party financing. A diligent preparation makes sure, that you go-to-market in the right niche.

Target Market Sizing quantifies the financial potential of your business in money terms or consumption units. Target Market Sizing helps you refine business model canvas hypotheses. A very small market size may not be worth pursuing.

Why does Target Market Sizing matter?

Expanding internationally comes with obstacles. Expect cultural barriers. different tax codes, business regulations and standards in different countries

Only a few companies have the resources to conduct market research beyond their core market. They have brilliant expertise in this home-turf but little understanding about cross-industry threats, or black-swan scenarios. While this wasn’t a problem in the past – today, disruption comes from tech platforms or startups.

Expanding internationally comes with its own unique set of obstacles. Expect language and cultural barriers. You will have to understand the different ways people communicate. Different tax codes, business regulations and packaging standards in different countries

Market Size Estimates

Step 1

Total Addressable Market = Entire chain of buyer/seller relationships. Value of the relationships at the point of consumption.

We use two methods to determine the total addressable market. First, a top-down analysis relies on secondary market research such as market analysis reports to determine how many end users meet your different characteristics. Then, a bottom-up analysis to identify how many customers there are, as well as how many end users each customer has

Step 2

Served Addressable Market = The part of the Total Addressable Market for which your business model’s value proposition is strongest. The served addressable market is more clearly defined as that market opportunity that exists within a firm’s existing core competencies and/or past performance. A firm most likely can only service markets that are core or directly adjacent to its current customer base

Step 3

Target Market = The part of the Served Addressable Market segment with the most direct path to success. A segment of people considered likely to buy a product or service. A target market consists of customers that share the same buying motives and often as well follow similar characteristics, such as age, location, income and lifestyle, to which a business directs its marketing.

What Readiness means:

Even if you are a champion in your home market, you will find different conditions in your target market. How well is your company prepared to support business ambitions in the new region?

 

Going-to-market in a mature market is like running a marathon. Without serious preparation. Even if you are making it to the finish line, the race itself won´t be fun on kilometer 20 and comes with a negative impact on your health – or in business terms profitability.

What Market Entry Barriers are

Market Entry Barriers stand between you and your product´s success in the target market. Which boils down to 2 questions: 1. Will any organization buy your product? and 2. Will people use your product?

 

Expect 4 types of hurdles that will try to stop your ambition

 

1. Cognitive Hurdle
People and organizations historically have grown comfortable with the status quo.
2. Resource Hurdle
The greater the shift in strategy, the greater the resources it requires for execution.
3. Motivational Hurdle
Do opinion leaders need to be motivated to carry out a break from the status quo?
4. Political Hurdle
One needs to overcome opposition from powerful vested interests.
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