Market size

Definition

The number of buyers and sellers in a particular market. This is especially important for companies that wish to launch a new product or service, since small markets are less likely to be able to support a high volume of goods. Large markets could bring in more competition.

How to Estimate Market Size

Market Size is measured by the total volume and or value of all sales in the market. Sales volume is measured in terms of the number of units of goods purchased, whilst sales value measures the total amount spent by customers on the volume of goods sold. Estimating Market size is an essential first step to calculating the Market Share of a business, and of its competitors. By comparing changes in market size over a selected Period, trends in the market can be identified. Consider the table below providing actual and forecast figures for the size of the leisure market in the UK, expressed in terms of Sales value.

The figures suggest a Growth Market with an average annual growth rate of approximately 6%. In the short term growth markets tend to favour the supplier, because there is usually a time lag before the supply side catches up with increases in demand. This in turn tends to reduce the level of competition in the market as buyers focus more on obtaining the product/service rather than shopping around, and suppliers focus less on each other and more on meeting customers' requirements. In the long term a growth market will attract new businesses, and thus increase competition. In a static or declining market, competition is fiercer, and companies can grow only at the expense of others. The result may be price wars, low profits and low (or no) business growth. Using sales value figures by themselves, to identify market trends, can however be a misleading measure of growth or decline, and it is more useful to compare changes in both sales value and volume over time. As an entrepreneur, your time is a very valuable asset. It takes as much time and effort to build a business whether youre attacking a small market or a big one. But the rewards for success in a big market are much greater, so it makes sense to attack big markets.

Summary- Agricultural product

Evaluating the market size of a niche agricultural product and/or farm experience is fundamental to the financial success and growth of the business. Starting relatively small with new products and variations on existing products is generally a good way to test the waters (to try something new) and verify consumer response and feedback. Finding products and activities that compliment each other is often key to identifying a successful market niche. For example, home cooked apple burgers are not likely to be a successful draw by themselves, but combined with a U-pick experience and festival atmosphere filled with fun family activities, it may very well provide an edge over alternatives such as the zoo, a national monument, or a museum. It is also important to determine whether the market base will be primarily made of local or destination consumers. If individuals are looking to travel from one destination to a metro center, activities will need to cater to shorter time periods unless overnight lodging facilities are nearby. The trade-off between a market that is too small and a market that is too large is fundamental to niche marketing. A consumer base that is too small will be unable to generate sufficient sales to cover time and capital investments, and will not be economically viable. However, a very large market potential is likely to meet stiff competition from other competitors, unless the product is differentiated or truly targeted at a niche market segment.

Operating Synergy
Combining two or more entities results in gains in revenues or cost reductions because of complementarities or economies of scale or scope.

Marketing Synergy

The principle in marketing that the whole is greater than the sum of the parts; putting the marketing mix variables together in a way that achieves maximum effect.

8 P Marketing Mix