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Wonder Research Methodology: Market Sizings
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DETERMINING MARKET SIZE
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- For these requests, you must come up with a number; either the revenue (in dollars or monetary units), the sales figures (in numbers), or the users/customers (in numbers).
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- In some cases, Market Size can be found with search strings like “US market size athletic shoes 2017”. Specifying geographical region and year is important in ensuring you pull the right information. If you find the market size with this approach, it is best to confirm it with a second, valid, reliable industry source, to ensure you’re giving the client accurate information.
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- If you are able to find the Market Size for a previous year. To determine current Market Size, multiply the previous MS by the CAGR (calculated annual growth rate), which you will also need to identify from industry sources.
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- If you cannot find it that easily, then you will have to calculate it by triangulating available data and deriving some logical assumptions.
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Start Here!
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1Copy this Google Sheet and use the market sizing scratchpad to record your thinking ------------------------->Market Sizing Scratchpad (fill in your sizing variables in the yellow cells)
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To download, go to File > Make a copyVariable NameValueReasoning: Why this value?Source
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If you're sourcing, be sure to share the details from your scratchpad with the writer via sourcing summary / notesExNetflix subscribers in the US320,000,000In order to define the U.S. market size for "Netflix & Chill" t-shirts, we will assume that Netflix subscribers will be the primary target population
https://ir.netflix.com/static-files/54972b71-794e-4dc9-88d8-06aebdfc381f
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1<Variable Name><#, %, $><variable reasoning><link>
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2Start with the population, the largest sample of individual people/units in the segment Variable typeExample2<Variable Name><#, %, $><variable reasoning><link>
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Customer population (consumers OR businesses?)#320 million Americans3<Variable Name><#, %, $><variable reasoning><link>
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4<Variable Name><#, %, $><variable reasoning><link>
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3Break down the population into the target segment(s) of the market Variable typeExample5<Variable Name><#, %, $><variable reasoning><link>
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Current customers#54M Netflix subscribers in the US6<Variable Name><#, %, $><variable reasoning><link>
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Segments of population (by demographics, income, preferences, etc.)#21M women in the U.S. aged 25-347<Variable Name><#, %, $><variable reasoning><link>
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Incumbent competitors#6 other leading video streaming sites as of December 20178<Variable Name><#, %, $><variable reasoning><link>
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Countries or regions#130 countries served as of Jan 2018
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Product/service offerings#3 product pricing models as of Jan 2018
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4Identify the relevant information about the segmentVariable typeExample
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Company revenues$$11.7B in 2017
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Market share%49% as of Jan 2017Market Sizing Scratchpad (Example: What is the market size for car rentals in the U.S.?)Market Sizing Calculation Example
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National market sizes (e.g. U.S., China)$ or #39% market penetrationVariable NameValueReasoning: Why this value?Source
What is the market size for car rentals in the U.S.?
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Regional market sizes (e.g. Europe, Asia)$ or #39% market penetration1Average car rental duration11.5This will help determine the number of times an individual car can be rented in a given yearwww.examplesource.com(365/11.5)
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Industry growth rate (e.g., CAGR, annual, by X date)%14% growth per year through 20202Days in the year365This will help determine the number of times an individual car can be rented in a given year-Days in the yearAverage car rental duration
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Usage rates%13M daily active users3
# of times a car can be rented in a year
31.7
This is calculated by dividing the days in a year by the average car rental duration
Calculated
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Market inflation%1.20%4# of rental cars in the U.S.2,313,017
This metric will help us determine the total volume of cars available for booking.
www.examplesource.com(31.7X2,313,017)
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5# of potential car reversations73,413,148
By multiplying the number of times an individual can be rented by the number of available cars, we can determine the total potential bookings per year
Calculated# of times a car can be rented in a year# of rental cars in the U.S.
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5Combine with relevant data to derive assumptionsVariable type6
% of reservations that are completed (as compared with no shows)
70%
Some rental car reservations are booked, but not completed. If they're not completed, we can't factor those into a market size. The service needs to be rendered.
www.examplesource.com
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Time (e.g. days in a week, weeks in a year)#Market Size = 73,413,148X70%
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Populations (global, regional, national, state)## of potential car reversations% of reservations that are completed (as compared with no shows)
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Distances#
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Life expectancies#Market Size = 51,389,204
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6If all the data doesn't exist, make LOGICAL assumptionsExample
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Be sure to explicitly list all assumptions with a clear explanation of what they are and why they were madeIn order to calculate the U.S. rental car market size, we have assumed that we are not including rental car reservations that go unused and therefore do not yield any booking revenue, despite potential "no-show" or cancellation fees. We have excluded these ancillary fees from the total market size as they are not core to the rental car market and vary across rental car companies and their client contracts.
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7Before completing your market sizing, be sure to complete the following
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A. Double check your math! Use our handy calculator on the right or tag a friend in slack to validate your calculations
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B. Be sure every variable is listed and justified clearly. The client needs to know why that variable.
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C. If you're working on a project, confirm your logic and assumptions align with those made by your peers.
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D. Sanity Check: take a step back and ask yourself if that final value seems right. Recommendation: do a quick search for comparable market sizes that may be publicly available
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