A thorough market analysis is the cornerstone of success for any marketing campaign or expansion efforts made by a company. Resorting to a bleak alternative of ‘guesswork’ or intuition often proves to have adverse effects. The first step in a b2b market analysis is to identify the market size. When the b2b market size is identified, companies can easily determine how to invest in the R&D budget for the year.
What is b2b market size?
B2B market size refers to the number of individual companies in a market who are potential buyers or sellers of a product or service. In fact, market size is a key component of strategic marketing planning. Market size is a measurement of the total volume (number of buyers) of a given market. Market size is typically depicted in terms of total people or potential sales volume. It is a quantified value of a designated target.
Importance of b2b market analysis
Having a clear-cut idea of the size of the target market allows companies to fully assess opportunities and accurately plan an approach for investments more wisely. However, a market size calculation alone is not the only factor to be considered while making an investment decision; other research inputs on the strengths and weaknesses, of the competition, anticipated profit margins, and return on capital are essential.
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Strategies to get your formula right
Every researcher aims to attain the maximum accuracy at the lowest cost possible. By being explicit about the facts and assumptions used to generate a market size estimate, we can identify critical factors that need to be addressed in downstream development business planning activities. Let’s take a look at some of the key steps involved in determining the market size of your business:
Adopt a top-down approach
Most businesses start determining the size of the market using a top-down approach. In this technique, companies begin by researching the total market for their product or service. Then a reasonable estimate of their portion of that market is formed, which becomes their available market. Thorough research of the market, the industry, and competitors are the key to accurate estimation. This also involves getting access to and evaluating the figures from various government and trade associations. The market size data is often accurately recorded by government publications. Researchers can also begin by identifying any trade associations, which could be a repository for sales or production statistics.
Evaluate the supply side of the market
The supply side of the market can be evaluated by consolidating and adding the sales of companies that operate within a market. In order to obtain the suppliers’ sales, researchers will have to consult a variety of sources. But the challenge here is that, in many cases, small and medium-sized companies are not required to make their turnover figures public. In such cases, researchers must try to accurately estimate the sales of various companies. Other sources which may provide insights on the sales turnover maybe are in websites, articles in the trade press, or in the company’s sales literature. In many cases, the references might prove to be oblique; thus, referring to the number of employees or productive capacity rather than sales. However, they provide a position that can be further refined.
Another option that provides a quick and more accurate means of assessing the market size is to find people with an overview of the market. Insights from these market and industry experts help sharpen the estimates and add to the researcher’s wider appreciation of the market.
Competitor analysis
Having a comprehensive understanding of the competitors is critical when determining your market size. Your available market depends significantly on the amount of direct competition you face in your industry. If your competitors deal in products that are outdated, provide terrible customer service, and set higher prices, then you can position against their weaknesses and start attracting some of their customers. On the other hand, if there are a handful of excellent competitors in your space doing lots of things right, it’s going to be harder to break into that market, so you’ll really need to dig into their customer bases and look for areas in their products that fail to meet customer expectations. Your company’s products can be then positioned to win some of those frustrated customers by using the correct marketing mix.
Tips for effective market measurement
There are no hard and fast rules as to how market value needs to be ascertained. Here are some useful tips for companies to determine the size of the market:
- It is important for companies to conduct both primary and secondary research. Primary research explores the specific aspects of a market that are not addressed without interacting with the parties directly involved. Secondary research, on the other hand, identifies criteria or assumptions on which further analysis is based and points out the gaps that require rectification.
- Communicate with different audiences that include manufacturers, suppliers, distributors, and end-users. An important but sometimes overlooked group is that of the industry experts who have significant experience in a given market. They can include regulators or legislative bodies, trade associations, or other industry groups.
- It is important to ensure that all sources are documented so that they can be updated and referred to later.
- Even in the most comprehensive analysis, there might be some gaps in This requires researchers to display the confidence to make assumptions and to be explicit to decipher the analysis.
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