How to Value Your Market Size

January 27th, 2016   |    By: Clarity Team

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Once you’ve selected a target audience how do you value market size?

 

Let’s say I have defined a target audience for my startup, defined a clear problem to be solved and the type of customer I want. How do I go from there to calculate the market size? Are there any good free tools out there for entrepreneurs and investors to figure out the monetary size of the market or to estimate the number of potential users?

Serena De Maio, Brand Builder, Marketing Strategist, & Entrepreneur, answered:

Let’s take the example of Uber, shall we? You have defined the following target group: 30-40 who use taxis but that are dissatisfied with the current taxi offer.

 

You could estimate your target group as follows:
1. Get the number of taxi users and apply the same % of 30-40 years old that currently are in the population (it would be conservative as probably 30-40-year-olds are over-indexing in taxi usage vs. rest of the population).
2. Get the % of the 30-40yo population with a car. Subtract that portion from the total 30-40 population, here you have the non car owners. Apply an estimate to define how many of those take a taxi.
3. Interview 100 people who are representative of the 30-40yo population and show them your product. Take note of the % of people interested in your offer. To above figures you should always apply a good dose of pessimism, so for example, a % of people will never switch to something else than official taxis, or some will never use an app to call a cab, etc… For the market size, the total market size is one of the above figures multiplied by an estimate of number of rides per year.

 

It will probably be helpful if you divide your target group in sub groups i.e. heavy users (1 drive per week), etc. Happy to work together to calculate your market size.

About Serena De Maio
Commercial Leader in Procter & Gamble Fragrances (Luxury, Premium & Lifestyle), alternating brand management, incl. the development of 20+ luxury products & campaigns, and operational marketing in 40 countries. Experience in beauty (perfumes, cosmetics, hair care, skin care, male grooming), fashion, restaurants, retail, & entertainment industry.

She currently coaches 6 startups in different development phases; her specialties being: making their offer unique and irresistible to their target group, and sharing innovative ideas accelerating the growth of existing business.


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