22:45
Faizan
Estimating the demand for business products can be challenging, aggravating and time consuming. This is especially true for new products such as Apple's iPad. In 2010, professional analysts predicted that it would sell between 1 million and 7 million units; instead, the company sold over 15 million. Estimating product sales in traditional segments is easier, particularly when there are already similar products available on the market.
Estimate the market size of your industry overall. Use market research firms, competitors or general logic to get an idea of the market size. You can use the bottom-up or top-down method for calculating this size. The bottom-up method researches end users and calculates how much is actually spent. The top-down method researches companies and estimates market share. For example, if you know a company has $5 billion in sales and believe they control 25 percent market share, the industry is $20 billion.
Narrow down your entire market to your individual product segment. If you are creating a new type of chocolate candy, then narrow down the entire sweet foods industry to just the chocolate candy segment. Find this segment size in the same way you computed the entire market size. However, your product may have some particular feature that will allow it to capture some sales from other segments. In this example, you may assume that your candy can steal share from fruit or licorice sweets.
Interview major potential customers to determine how many potential orders they will make. Estimate your advertising and marketing spending campaign. Create a conversion rate based on historical results. If you spent $1 million in advertising in the past and the additional sales were $2 million, use the same metric for your product.
Use all of the information gathered to estimate your market share in your product segment. Inform your estimate with the data from your potential customers and the projected advertising you will spend. Use the "sanity test" to estimate whether the final number makes sense based on comparable products.
Estimate the market size of your industry overall. Use market research firms, competitors or general logic to get an idea of the market size. You can use the bottom-up or top-down method for calculating this size. The bottom-up method researches end users and calculates how much is actually spent. The top-down method researches companies and estimates market share. For example, if you know a company has $5 billion in sales and believe they control 25 percent market share, the industry is $20 billion.
Narrow down your entire market to your individual product segment. If you are creating a new type of chocolate candy, then narrow down the entire sweet foods industry to just the chocolate candy segment. Find this segment size in the same way you computed the entire market size. However, your product may have some particular feature that will allow it to capture some sales from other segments. In this example, you may assume that your candy can steal share from fruit or licorice sweets.
Interview major potential customers to determine how many potential orders they will make. Estimate your advertising and marketing spending campaign. Create a conversion rate based on historical results. If you spent $1 million in advertising in the past and the additional sales were $2 million, use the same metric for your product.
Use all of the information gathered to estimate your market share in your product segment. Inform your estimate with the data from your potential customers and the projected advertising you will spend. Use the "sanity test" to estimate whether the final number makes sense based on comparable products.
Posted in: Products & Brands
