7. Market Size and Market Type

Question 1

What you need to know

Answer 1

• Is the opportunity REAL?
• How big is the opportunity?
• Who are the competitors?
• Can it grow?

Question 2

How big is the opportunity?

Answer 2

TAM / SAM / TM

Question 3

What is TAM?

Answer 3

TAM = Total Available Market

• How many people would want/need the product?
• How large is the market in $ if they all bought?
• How many units would that be?

How do I find out?
- Industry Analysts - Gartner, Forrester
- Wall Street Analysts - Goldman, Morgan

Question 4

What is SAM?

Answer 4

SAM = Served Available Market (People you could serve)

• How many people need/can use the product?
• How many people have the money to buy the prodcut?
• How large would the market be if they all bought in?
• How many units would that be?

How do I find out?
- Talk to potential customers

Question 5

What is TM?

Answer 5

TM = Target Market

• Who am I going to sell to in year 1, 2, 3?
• How many customers is that?
• How large is the market if they all bought?
• How many units would that be?

How do I find out?
- Talk to potential customers
- Identify and talk to channel partners
- Identify and talk to competitors

Question 6

Market Types

Answer 6

• Existing Market
• Resegmented Market
• Clone Market
• New Market

Question 7

What is an existing market?

Answer 7

• Incumbents exist
• Customers can name the market (name the competition)
• Comfortable, feature driven
• Incumbents will defend their turf
• Cost to build awareness
• Continuing innovation

Question 8

What is a resegmented market?

Answer 8

You jump into an existing market with a clever feature that puts your competition in a box. e.g., a high end grocery store (you can get X anywhere but if you want special X come to us…we import it from Italy)

• Low cost provider, or
• Unique niche via positioning

Question 9

What is a clone market?

Answer 9

Foreign business model adapted to local conditions
- Language
- Culture
- Price points or revenue model
- Import restrictions
- Local control/ownership

Need market large enough to justify effort

Question 10

What is a new market?

Answer 10

• Customers don’t exist today
• Pains/gains not well known
• How will they find out about you?
• How will they become aware of their need?
• How do you know the market size is compellin?