Why Do Companies Care About Market Sizing?

The answer to this question might appear to be obvious. However, the reasons companies invest in market sizing and the approach they use or purchase will vary dramatically based on what they (you) are trying to do, the requirements for precision, and  the tolerance for ambiguity in the room.

Market sizing is (and this is true of many areas of market research) a combination of science and art. Many analyst firms provide market sizing services to companies as a cornerstone of the syndicated research programs they offer. Companies interested in understanding (typically from a supply side analysis) the size of a market, use these services to determine market share and to plan future business strategy.

Gathering sales information from at least all the major players in a market is a typical approach to sizing. Further detail by market segment and geography is also typically part of the effort to size a market. The greater the detail the easier it is to find errors in the estimations.

Ultimately, companies use market sizing to estimate the position they hold in the market place. The estimates of market share become increasing accurate as firms compare the data for current size with the historical information they have collected. An analyst firm with five or more years in the business can pinpoint the size of a market with remarkable accuracy – assuming they are using a solid methodology, but that’s a topic for another time.

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