How do you determine the market size for a product that doesn’t yet exist? This is a problem that investors, sellers/resellers, innovative enterprises, and investment banks face on a regular basis — and yet, the solutions for estimating market size are limited and often yield inaccurate estimates. I’ve encountered this issue myself, both in my former career as a partner with McKinsey & Company, as well as on behalf of NewtonX clients, upwards of one hundred times. In response, The NewtonX Market Research Team and I developed a three-pronged approach to using expert surveys, interviews, and a qual-quant-qual approach to quantify market opportunity for products before they hit the market.
There are three problems to be solved within doing a market analysis:
- Who Do You Ask?
- What Do You Ask Them?
- How Do You Calculate Market Size Based On Their Answers?
Part 1: Who To Ask
There are three groups of people who can give data to inform a market size analysis, each of which has a distinct viewpoint. These three groups are:
1. Buyers/ Users
Your target buyer/user, audiences who buy similar products, or who are likely to buy the product based on interest, demographic, and price point.
Data Collection Strategy: Survey to 1,000 users/buyers
Products currently on the market that fulfill a similar need to your own product in a partial or incomplete way. For instance, if you were to launch the first ever voice-operated concierge, then a comparable would be high-end human concierge services such as the ones from hotels or credit cards.
Data Collection Strategy: Expert interviews with former employees and leaders at the comparables.
3. Future Market Leaders
Potential market leaders who could break into the space. For instance, if you were launching the first ever voice-operated concierge, you’d look at Microsoft, Apple, and Google to ask how these tech giants would enter the market and what strategies they would employ.
Data Collection Strategy: Qual-Quant-Qual (see an explanation of this here)
Each of these groups can give data and insights that, together, can be used as variables to calculate overall market size. This next section will outline how to employ different data collection strategies for each cohort, and the following section will detail how to calculate the results into an accurate market size estimate.
Part 2: What To Ask Them And How To Use Their Answers
Each cohort has different data points to offer, and should therefore be approached differently in terms of data collection.
1. Buyers/ Users
Data from potential customers should be issued in a survey format to a large population sample (500+ if B2B, 2,000+ if B2C). Sample questions should address size of the pain point your product would solve (e.g. how much time do you waste on this problem, and how much money do you make per hour/minute). You can then multiply time wasted by the value of that time in terms of a person’s salary, in order to quantify the per user value of solving the pain point.
Data from comparables can be collected through either a small scale survey or through expert phone interviews (2-5) with former executives at the comparables. The data should reveal the market size of the comparable (e.g. $Xb), thereby allowing you to calculate your market size as a function of its scale in relation to the comparable. For instance, if the comparable is a $5B market, and the product you’re investigating would be more mass market than the comparable, roughly 5x the size of the comparable, then the product you’re investigating would have a market size of $25B.
3. Future Market Leaders
Future market leaders can give data on monetization, market size over time, competition, and investment. The best way to collect this data is to take a qual-quant-qual approach, wherein you issue interview several (3-10) future market leaders to gain a broad understanding of the space and scope of their market, then issue a survey based on the qualitative interviews to several hundred future market leaders, and finally identify outlier or interesting responses and conduct interviews with these respondents to understand the anomaly.
In following this structure, you will end up with three numbers:
- Value per user for the product
- Market size of comparables and extrapolated market size of your product of interest
- Market competition and investment from future market leaders
Additionally, this approach gives qualitative data on market entry strategies, monetization strategies, and future projections. This qualitative information can inform investment decisions, stocking/ordering, and market entry strategies.
Best Practices on Data Sourcing and Collection
NewtonX uses a proprietary knowledge graph and search algorithm to find the best possible expert for specific client needs. The identification process works equally well both for extremely niche needs where there might be only a handful of people in the world who would qualify, and for broader needs such as large-scale executive surveys. By using a combination of AI, automated reach-outs, and human screenings, NewtonX can identify and reach out to experts faster and with better results than any other service.
Additionally, NewtonX offers custom reporting and survey design to ensure that clients get the highest quality data possible. Clients that currently use this service include 3 of the top 5 management consulting firms, top ten tech companies, and global market research firms.
To learn more about how NewtonX can help you do a market size analysis for a market that doesn’t yet exist, send a request to firstname.lastname@example.org