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VERY LARGE ADDRESSABLE
MARKETS
1
How Can Start-Ups Assess Market Size & Potential?
1.HOW TO ESTIMATE THE MARKET POTENTIAL
2. YOUR MARKET ESTIMATION
3. DIFFERENT TYPES OF MARKET RESEARCH
4.CUSTOMER SEGMENTS,
5. TARGETING & POSITIONING
6. MARKET ESTIMATION
7. HOW TO TEST ASSUMPTIONS IN YOUR BUSINESS
PLANS
8. CAN WE TEST AND PRICE POINTS
2
1. There's nothing worse than spending years in a start-up only to
discover that it can never grow to more than a few million dollars in
revenue
2. The market size hypotheses help you size the opportunity of your
start-up market .
3. Estimating market size helps determine whether the payoff from
your new venture is worth the toil,
4. Sweat and tears , or whether you're about to do your first pivot
3
1. A large number
of potential active
users or customers
2. Clear future-user
growth in a market
with rapid and
predictable growth
3. Opportunity to
attract active
customers
4
Very Large and Fast growing (VLFG) markets have the power to
elevate mediocre companies into greatness, and conversely, dying
markets can doom otherwise solid companies.
OBJECTIVE OF THIS SESSION you’ll learn how to systematically
research your market and gain a deep understanding of your target
customer.
Understanding include
1. Competitive research,
2. Defining key business assumptions,
3.Interviewing additional potential customers
5
6
1.What type of
customer will buy
the product or
service?
2.Where are
these customers
located?
3.How many
potential
customers (N)
are there?
4. How often do
they consume or
use it?
MP = market potential
N = number of possible buyers
P = average selling price
Q = average annual consumption
FORMULA: MP = N x P x Q
7
• Determinations of
variables that will
influence which
customer segment you
focus on
Segmentation
• How many segments
should you target?
• Which segment should
you target?
Targeting
• Which position within a
segment do you want to
obtain?
Positioning
Segmentation is the ability to:
“Divide the markets into groups, or clusters, of
customers based upon realistic and
meaningful criteria so as to offer clear,
targeted benefits to every customer”
8
Mass Market = Undifferentiated
Segments = Homogeneous groups
Niche = Specialized customer segments
Multiple segments = You serve multiple segments at once – examples
could be Google or even Golf courses
Customized or individual = Dell
Local customer groups = You tailor the offering to meet local needs
9
1. Which
customer
segment
should we aim
at?
2. Can we
spot any gaps
in the
market?
3.Look for fit
between
strategy and
resources
10
6.Market share = Market potential * percent of the market captured.
5. Estimate market share
4. Determine the average household income for the area and state.
3. Derive average expenditures for the category.
2. Define the geographic boundaries of your market.
1. Define your target market and market segments.
11
1.Uptake for Innovative Products is Difficult to Forecast
2.Forecasting Usage is Difficult and Never Constant
3.Buyer Behaviour Among the Unbanked is Hard to Predict
4.Mobile money is still be considered “new-to-world”, since most
potential users have no experience,
5.It is difficult to gauge how customers will react and ultimately sign
up for the service.
6.This does not mean that Innovators should not attempt to forecast
uptake it would be wise to introduce a greater range in the final
market size estimates.
12
“The process of
designing, gathering,
analyzing and reporting
of information that may
be used to solve a
specific marketing
problem”
13
3. USE CASES
2. A reasonable understanding of the targeted segments,/ and thus an ability to position the product or
service
1. A clear objective as to what the VENTURE/ START-UP is aiming to achieve – both through marketing
and corporate objectives
14
15
1. Ask the customers what they want
2. Ask the customers what they dream of
3. How much are they willing to pay for your product or service?
4. Are they Satisfied with Current Products/ Services?
5. What are the Key Pain Points
6. Talk to ”non-customers”
7. Talk to competitors
8. Understand the competitors’ business model
9. Know the positioning map of the industry
10. Talk to distributors
16
Observations
(going native +
anthropology)
Focus Groups
In-Depth
Interviews (In
person, mobile,
Skype or by using
video conference)
Questionnaires
(personal, mobile,
online, e-mail)
Conversation with
Domain Experts
Attending Industry
Seminars and
Listening
&Speaking to
Delegates
17
Secondary Research Methods-(Desk Research)
1. Internal information (sale, payment, inventory)
2. External information (Published or Commercial market research reports,
3. Information about competitors,
4. Government reports,
5. Industry specific homepages
6. Equity Research reports
7. Trade Journals
8. Data Bases
9. Competitor`s websites
18
How To Determine The Price Level
4) Mark-up pricing. Adds a level of profit to the cost of the
product being retailed. Also good for products that are co-
packed.
3) Competitive pricing. Price according to your competitors.
Used in competitive markets with little product
differentiation.
2) Demand pricing. Used by companies that sell their product
through a variety of sources at differing prices based on
demand.
1) Cost-plus pricing. Used mainly by manufacturers, assures
that all costs (fixed and variable)are covered and includes a
desired level of profit.
If your price is too high to compete directly in the market, look for a Niche
market that desires your product’s attributes and charge accordingly.
If your product can be differentiated and offers a higher value than
competing products.
Do not be a price taker or implement a “me, too” pricing strategy
What is thevalue of your product relative to theirs?
Are your prices in alignment with theirs?
Investigate your competition.
Evaluating Price Competitiveness:
19
3 Criteria Test:
1. Does my value
proposition differ
from what is
currently being
offered to the
market?
2. Is the segment
large enough for
my value
proposition?
3. Is it hard for
competitors to
imitate, copy or
replace my value
proposition?
20

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Very large addressable markets for Start-Ups

  • 1. VERY LARGE ADDRESSABLE MARKETS 1 How Can Start-Ups Assess Market Size & Potential?
  • 2. 1.HOW TO ESTIMATE THE MARKET POTENTIAL 2. YOUR MARKET ESTIMATION 3. DIFFERENT TYPES OF MARKET RESEARCH 4.CUSTOMER SEGMENTS, 5. TARGETING & POSITIONING 6. MARKET ESTIMATION 7. HOW TO TEST ASSUMPTIONS IN YOUR BUSINESS PLANS 8. CAN WE TEST AND PRICE POINTS 2
  • 3. 1. There's nothing worse than spending years in a start-up only to discover that it can never grow to more than a few million dollars in revenue 2. The market size hypotheses help you size the opportunity of your start-up market . 3. Estimating market size helps determine whether the payoff from your new venture is worth the toil, 4. Sweat and tears , or whether you're about to do your first pivot 3
  • 4. 1. A large number of potential active users or customers 2. Clear future-user growth in a market with rapid and predictable growth 3. Opportunity to attract active customers 4
  • 5. Very Large and Fast growing (VLFG) markets have the power to elevate mediocre companies into greatness, and conversely, dying markets can doom otherwise solid companies. OBJECTIVE OF THIS SESSION you’ll learn how to systematically research your market and gain a deep understanding of your target customer. Understanding include 1. Competitive research, 2. Defining key business assumptions, 3.Interviewing additional potential customers 5
  • 6. 6
  • 7. 1.What type of customer will buy the product or service? 2.Where are these customers located? 3.How many potential customers (N) are there? 4. How often do they consume or use it? MP = market potential N = number of possible buyers P = average selling price Q = average annual consumption FORMULA: MP = N x P x Q 7
  • 8. • Determinations of variables that will influence which customer segment you focus on Segmentation • How many segments should you target? • Which segment should you target? Targeting • Which position within a segment do you want to obtain? Positioning Segmentation is the ability to: “Divide the markets into groups, or clusters, of customers based upon realistic and meaningful criteria so as to offer clear, targeted benefits to every customer” 8
  • 9. Mass Market = Undifferentiated Segments = Homogeneous groups Niche = Specialized customer segments Multiple segments = You serve multiple segments at once – examples could be Google or even Golf courses Customized or individual = Dell Local customer groups = You tailor the offering to meet local needs 9
  • 10. 1. Which customer segment should we aim at? 2. Can we spot any gaps in the market? 3.Look for fit between strategy and resources 10
  • 11. 6.Market share = Market potential * percent of the market captured. 5. Estimate market share 4. Determine the average household income for the area and state. 3. Derive average expenditures for the category. 2. Define the geographic boundaries of your market. 1. Define your target market and market segments. 11
  • 12. 1.Uptake for Innovative Products is Difficult to Forecast 2.Forecasting Usage is Difficult and Never Constant 3.Buyer Behaviour Among the Unbanked is Hard to Predict 4.Mobile money is still be considered “new-to-world”, since most potential users have no experience, 5.It is difficult to gauge how customers will react and ultimately sign up for the service. 6.This does not mean that Innovators should not attempt to forecast uptake it would be wise to introduce a greater range in the final market size estimates. 12
  • 13. “The process of designing, gathering, analyzing and reporting of information that may be used to solve a specific marketing problem” 13
  • 14. 3. USE CASES 2. A reasonable understanding of the targeted segments,/ and thus an ability to position the product or service 1. A clear objective as to what the VENTURE/ START-UP is aiming to achieve – both through marketing and corporate objectives 14
  • 15. 15
  • 16. 1. Ask the customers what they want 2. Ask the customers what they dream of 3. How much are they willing to pay for your product or service? 4. Are they Satisfied with Current Products/ Services? 5. What are the Key Pain Points 6. Talk to ”non-customers” 7. Talk to competitors 8. Understand the competitors’ business model 9. Know the positioning map of the industry 10. Talk to distributors 16
  • 17. Observations (going native + anthropology) Focus Groups In-Depth Interviews (In person, mobile, Skype or by using video conference) Questionnaires (personal, mobile, online, e-mail) Conversation with Domain Experts Attending Industry Seminars and Listening &Speaking to Delegates 17
  • 18. Secondary Research Methods-(Desk Research) 1. Internal information (sale, payment, inventory) 2. External information (Published or Commercial market research reports, 3. Information about competitors, 4. Government reports, 5. Industry specific homepages 6. Equity Research reports 7. Trade Journals 8. Data Bases 9. Competitor`s websites 18
  • 19. How To Determine The Price Level 4) Mark-up pricing. Adds a level of profit to the cost of the product being retailed. Also good for products that are co- packed. 3) Competitive pricing. Price according to your competitors. Used in competitive markets with little product differentiation. 2) Demand pricing. Used by companies that sell their product through a variety of sources at differing prices based on demand. 1) Cost-plus pricing. Used mainly by manufacturers, assures that all costs (fixed and variable)are covered and includes a desired level of profit. If your price is too high to compete directly in the market, look for a Niche market that desires your product’s attributes and charge accordingly. If your product can be differentiated and offers a higher value than competing products. Do not be a price taker or implement a “me, too” pricing strategy What is thevalue of your product relative to theirs? Are your prices in alignment with theirs? Investigate your competition. Evaluating Price Competitiveness: 19
  • 20. 3 Criteria Test: 1. Does my value proposition differ from what is currently being offered to the market? 2. Is the segment large enough for my value proposition? 3. Is it hard for competitors to imitate, copy or replace my value proposition? 20