Market sizing vs. market segmentation

May 10, 2009 at 11:55 pm 3 comments

tape-measure

Does size really matter?

Get your mind out of the gutter. I’m talking, of course, about market sizing, a common and deceptively unproductive exercise. Let me explain… how many times have you heard someone say something like this:

“We’re looking at expanding our business into the Blah Blah industry because it’s currently a $78 Billion market and expected to grow 10% this year. If we could only get 0.04% of the new market, we could add another $3.12 Million to our revenue stream with almost no effort at all!

You’re currently nodding your head and saying, “yup, I’ve heard that before.” Or perhaps you’re saying, “yup, that’s me.

As you know, this approach can be very challenging for many reasons. By jumping into the big pool, you’re joining the countless competitors that are doing the same thing. This results in lots of companies chasing after the same dollars, with very little chance of getting them. In all reality, only the biggest companies in your industry have a chance of winning most of that business, and you’ll unfortunately spend a lot of time, money, and energy with little to show for it. Another disadvantage with this approach is that it’s very broad and unfocused, which means you’ll need to spread your resources very thinly across many different marketplaces, demographics, price points, and time frames.

To answer the question, “does size really matter?”, the answer is yes, to a degree. It’s the first half of a great solution to help you expand your business and increase your revenue. The second half of the solution is market segmentation, which will be your very best friend when it comes to new business development. Market segmentation makes the numbers derived from market sizing realistic, attainable and, above all, more focused on customers that play to your company’s strengths while reducing the amount of competition.

Let’s take the Blah Blah industry as an example. Suppose you did a little more research and determined that focusing on customers

  • in the southwest
  • that are female
  • between the ages of 24-40
  • with median incomes of $61,000
  • that like the color fuchsia

presents a current market of $46 Million, which is expected to grow 30% this year. Yes, this is way less than the $78 Billion mother lode, but there are only 3 competitors in this entire micro-market and one of them is probably going out of business this year. That means that you are competing with one other company for almost $14 Million worth of new business, and $60 Million in total. This approach allows you to ignore 99% percent of the overall market, most of the competitors, and a majority of the business development efforts, while providing over four times the revenue potential.

Ah, the magic of market segmentation, the less popular, often misunderstood, and regularly underutilized little brother of market sizing. If you do your homework and spend a little more time and resources on good market research, the results can be amazing. If you need some guidance with this, talk to us. We’d love to help you.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

Advertisements

Entry filed under: Best Practices, Leadership & Management, LinkedIn, Marketing, Messaging, Sales, Sales Tools, Strategy. Tags: , , , , , , , , , , , , , , , .

Marketing Churn – what is it, and how to avoid it New Coke – worst marketing idea ever. Don’t repeat it.

3 Comments Add your own

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Recent blog posts

Tweets!

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

RSS Headlines

  • An error has occurred; the feed is probably down. Try again later.

RSS Marketing Metrics

  • An error has occurred; the feed is probably down. Try again later.

Top Clicks

  • None
May 2009
M T W T F S S
« Apr   Jun »
 123
45678910
11121314151617
18192021222324
25262728293031

%d bloggers like this: