What is Market Size - Cover Image
Brand InsightsOctober 11, 2022

What Is Market Size and Why Does It Matter?

October 11, 2022
Ashley Lightfoot Photo
Ashley Lightfoot
Content Marketing Manager

Market size is a vital metric that can be used to measure the health of a particular industry and the scope of opportunities that exist within it. Understanding market size is essential for marketers and brand managers, but it’s not the easiest concept to understand — especially because there isn’t a one-size-fits-all way of measuring it.

But fear not. In this article, we’re going to break down what market size is — and how we define it here at Latana — as well as why it’s important for you to have some idea of the scope, shape, and size of the market within which your brand exists.

So without further ado, let’s begin.

We all know that growing a brand is no easy feat, it takes a lot of moving parts to get right.

You’ll need a product or service that fulfills consumer needs, ad creatives and marketing campaigns to promote it, a strong sales strategy to get it into customers’ shopping baskets, and, of course, a brand strategy to help build an emotional connection between your offering and consumers.

But, even if you somehow score straight As on all of these, if you overlook one vital factor, then you’re still not guaranteed to grow your brand. So, what exactly is that dividing line between success and failure?

The answer: It’s whether the team behind your brand understands the marketplace within which it needs to compete. And the most vital element of any marketplace is its size.

But What is Market Size?

Put simply, market size is the total number of consumers who could potentially purchase a particular product or service within a given window of time.

When marketers measure the size of a market, they’re attempting to estimate the potential of their product — it’s more than just seeing if consumers like the idea of your offering, but gauging who actually has the need, means, and intention to make that purchase.

How To Measure Market Size

As we’ve already said, there’s no one-size-fits-all way of working out market size — it all depends on what you’re attempting to get the measure of. Brands that are looking to gauge the size of the market specifically for their products or services would typically measure the number of potential customers and then calculate the revenue on sales that this potential demand would create.

Alternatively, you might want to look at the scope of opportunities available within an entire industry — for this, you would just need to measure the number of potential buyers of a particular product type.

One thing to take into account is that consumers behave in different ways in relation to different products and services, and this may affect how potential customers can be measured.

A mattress brand, for example, has relatively few alternative products to compete with and is only replaced on average every 9 - 10 years — so finding out how many consumers intend to buy a mattress this year is relatively straightforward. However, for other products, particularly fast-moving consumer goods (FMCG), consumers may not consistently buy the same types of products week in and week out. A snack brand, for example, isn’t just in competition with other snack brands but a range of grocery items.

So in order to gauge the size of your market, you’ll need to accurately categorize your offering in a way that reflects how consumers make their purchasing decisions and allocate their budget across different products and services.

Once you’ve worked out the type of insight you’d like to gain, you’ll need to run a survey — and remember to make sure that it’s free of potential biases that might skew how consumers respond. Or, you could leave that to the professionals, like Latana, who can collect the data for you — while also relying on some technical wizardry to draw accurate insights into different audience segments.

How Latana Measures Market Size

At Latana we measure the market size of a range of different industries by asking consumers about their intentions. Because we’re giving an industry-wide impression, rather than focusing on a single brand, our definition of market size relates only to the number of potential buyers and doesn’t include estimated revenue.

When we run our surveys, the format of the question is standardized but adjustable, to account for the different customer behaviors that surround different product types.

Questions may use the verb “buy” or “use” or may use different time frames (“regularly” vs “next 3 months” vs “next 6 months” vs “next 12 months”) so that we allow for a variety of measurements depending on what makes sense for the product.

Some examples of our market size questions:

“Are you regularly buying sweet biscuits and baked goods?”

“Are you considering using a digital banking app in the next 6 months?”

“Are you considering purchasing or selling a car in the next 12 months?”

Why is Market Size Important?

Imagine for a moment that you have a great new product that you’re about to bring to market. You’ve developed an eye-catching brand identity and you’ve built a functional website from which it can be sold to customers.

At launch, things start slow but the few customers you do have leave rave reviews. Your campaigns are getting tons of impressions but nothing seems to shift the needle — even when you offer big discounts. What could be happening here? Your marketing strategy is sound, your product has good reviews, and your website is optimized.

However, did you ever stop to think about how many people actually need or want your product — or even have the means to buy it? It doesn’t matter how great your advertising campaigns are, in most cases, if consumers can’t afford it, or don’t need it, they’re not likely to buy it.

Of course, a large function of advertising is to persuade consumers to take action, so there’s always going to be some wiggle room — where, with a great campaign, you might just grow the market and activate consumers who didn’t expect or intend to make a particular purchase. But these would only represent minor deviations from the baseline, and, ultimately, it’s essential that you map the natural boundaries of your industry.

Measuring market size allows you to understand the environment in which you're launching your product. You can see how many consumers consistently buy certain product types as part of their regular grocery shopping or how many plan to make a specific purchase within the next few months. This gives you a crucial window, not only into the value of the market and the potential opportunities that it holds but also into customer behavior patterns associated with your product category.

It’s also important to track market size over time because new products or services — including your own — can shift consumers’ intentions, while all manner of factors can suddenly reshape consumer priorities.

Think about the current cost of living crisis in 2022, with energy prices high and inflation driving up the cost of day-to-day essentials, consumers are starting to cut back on luxuries — many markets may experience shrinking numbers of customers who expect to purchase a particular product, while of course, others might experience growth. Tracking market size can give you a clear picture of how large numbers of consumers are making those types of purchasing decisions and allow you to predict the impact of those decisions on your brand — and bottom line!

Final Thoughts

Put simply, a business that has no idea of its category’s market size is asking for trouble. Either you’ll overestimate the demand for your product or be caught off guard when consumers come flooding and you can’t keep up — it’s unlikely you’ll get the balance right while going in blind.

But, ultimately, measuring and understanding market size isn’t about averting disaster, rather it’s about gaining insights that can empower your brand to make the most of the opportunities that currently exist. It’s about knowing when the time is right to release a campaign, where consumers will be most susceptible to it, and who to target when you do.

By tracking who has the need, means, and intention to spend on a particular product or service, you’re making sure that no opportunity passes your brand without you taking notice first. And that could be the difference between your brand growing or your competitors taking the prize.

Brand Insights
Brand Tracking

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