How big is the market?

The second question is, “how big is the market?”  If you have done the steps in determining if there is a market, you will already but a long way towards understanding how big the market is.  There are three directions one can take to understand the market size and I recommend doing at least two of them if market size is a potential issue for you.

The first method is simply researching existing data on the size of a market.  There are many public and private sources that estimate market size.  Be careful to not over estimate YOUR market size based on the overall market size.  For example, one company I spoke with made high end tile light switch plates.  Their market is not the entire light switch category, which is dominated by $1 and $2 dollar plastic plates.  Their portion of the market is just the high end switches.  You can slice a larger market estimate into more manageable estimates by combining these larger markets with one of the following methods.

The second method is determining consumer demand.  This can be done through a variety of means, although surveys and focus groups are the most common.  Here you are looking for the % of your target demographic/psychographic would be interested in purchasing your product within the next year.  Be sure to discount the results of either method as customers who are not expected to actually open their wallet are more interested in everything.  Extend the amount of people (discounted of course) by the amount they would purchase on an annual basis.

The third method is estimating competitor size.  Use all the information you gathered in determining if their is a market and extend by level of investment your competitors appear to put into your concept.

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