Market Sizing:

Market sizing is the process of estimating the size of a market for a product or service. It is an important part of product management, as it can help to inform decisions about product development, marketing, and sales.

There are two main approaches to market sizing: top-down and bottom-up. Top-down market sizing starts with the total addressable market (TAM), which is the total market for a product or service, regardless of who the competitors are. The TAM is then segmented into smaller markets, such as by geography, industry, or customer type. The size of each segment is then estimated.

Bottom-up market sizing starts with the number of potential customers. This number is then multiplied by the average purchase price to estimate the total revenue potential.

The two approaches can be used together to get a more accurate estimate of the market size.

Market sizing is an important tool for product managers, as it can help them to make better decisions about product development, marketing, and sales. By understanding the size of the market, product managers can focus their efforts on the most profitable opportunities.

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Some of the benefits of market sizing for product managers:

• Helps to identify opportunities. Market sizing can help product managers to identify new market opportunities. By understanding the size of the market, product managers can see where there is demand for their products or services.
• Helps to prioritize features. Market sizing can help product managers to prioritize features. By understanding the size of the market for each feature, product managers can focus on developing the features that will have the biggest impact.
• Helps to set goals. Market sizing can help product managers to set goals. By understanding the size of the market, product managers can set realistic goals for sales, revenue, and market share.
• Helps to measure success. Market sizing can help product managers to measure success. By tracking the size of the market over time, product managers can see how their products or services are performing.
• The market for electric vehicles is estimated to be worth $1 trillion by 2025. This estimate is based on the number of potential customers, the average purchase price of an electric vehicle, and the growth rate of the market.
• The market for social media advertising is estimated to be worth $100 billion by 2023. This estimate is based on the number of active social media users, the average amount of money spent on social media advertising, and the growth rate of the market.
• The market for cloud computing is estimated to be worth $371 billion by 2025. This estimate is based on the number of businesses that use cloud computing, the average amount of money spent on cloud computing, and the growth rate of the market.

Here are some of the factors that can affect market sizing:

• The size of the population. The larger the population, the larger the potential market.
• The level of economic development. In more developed economies, there is more disposable income available, which can lead to a larger market for goods and services.
• The level of technology. New technologies can create new markets or expand existing markets.
• The regulatory environment Government regulations can affect the size of a market by making it more or less difficult to operate in that market.

Currently, I am working on a project focused on Subway Surfer, specifically with the objective of “Retaining existing users on the platform.” As part of this project, I have conducted a market sizing analysis to provide a clearer picture of the market potential. Please refer to the slide below to gain a better understanding of the market sizing findings.

Hence, you should know terms like TAM, SAM, DAU, and MAU to gain a proper understanding.

Let’s consider an another example of market sizing for a fictional product called “Srcych,” which is a mobile app that offers a unique meditation and relaxation experience. To estimate the market size for Srcych, we would typically follow these steps:

1. Define the Target Market: Determine the specific target market for Srcych. In this case, let’s say the primary target market is individuals aged 25–45 who are interested in mindfulness and stress reduction.
2. Gather Relevant Data: Collect data on the total population within the target market. Suppose there are approximately 100 million people in this age group within the geographic regions where Srcych plans to operate.
3. Determine the Addressable Market: Assess the portion of the population within the target market that is likely to be interested in and willing to use a meditation and relaxation app like Srcych. Let’s assume that through market research and competitor analysis, it is estimated that 20% of the target market is interested in such an app.
4. Assess Competitive Landscape: Analyze the existing competition in the market. Identify other meditation and relaxation apps or related products that cater to the target market. Determine their market share and estimate the potential percentage of the market that Srcych can capture. Let’s assume that, based on this analysis, Srcych has the potential to capture 15% of the market.
5. Calculate Market Size: Multiply the total population within the target market by the percentage of the target market interested in such an app and the estimated market share for Srcych. Using the numbers from our example, the calculation would be as follows:
6. Market Size = Total population within the target market * Percentage interested * Estimated market share for Srcych
7. Market Size = 100 million * 20% * 15%
8. Market Size = 3 million potential users for Srcych

In this example, the market size estimate suggests that there is a potential market of around 3 million users for Srcych.

It’s important to note that market sizing is an iterative process, and the accuracy of the estimation depends on the quality of the data, the assumptions made, and the specific characteristics of the product and market. Market sizing provides a rough estimate and serves as a starting point for further analysis and decision-making in product management.

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I’ve written about — The Power of redefining the problem statement, check it out!

I’ve also talked about competitive analysis.