This article is about size of the market.
Successful marketing requires firms to understand which market they are operating in, who their consumers are and where they are located, whether the market is growing or shrinking, what the business’s share of that market is and how strong the major competitors are.
What is meant by market size?
Market size is the measurement of total sales of all the companies within a defined market.
Think of market size in terms of a pie chart that looks like a circle, or an apple pie. The entire circle represents the total market size.
How to measure market size?
Let’s define the market boundaries.
Market size can be measured in two ways including Volume of Sales and Value of Sales. Volume of Sales is the number of units sold. Value of Sales is the sales revenue received from the units sold.
Markets differ in their size as measured either by the number of products sold or the sales revenue generated from selling them.
The markets for soft drinks, middle-class passenger cars and fast food are huge as there are millions of customers around the world who buy those goods on daily basis. While the markets for scuba diving, ski jumping or golfing equipment are rather very small as only a relatively tiny group of people in the global population does those sports.
Why is market size important?
Knowing the size of the market is important for several reasons:
- To enter the market or not? Marketing Managers can assess the market and decide whether the business should enter that market or not.
- To calculate market share. Market size serves as the basis for calculating market share. Firms can calculate their own market share and compare with market share of close competitors.
- To assess market trend. Growth, stagnation or decline of the market can be easily identified. Then, the reference point for trends can be done either referring to markets as:
- Growing market
- Flat market
- Shrinking market
The process of globalization has meant that the size of a modern market is not limited to the domestic market only. Nowadays, markets have various market sizes and market locations including local markets, regional markets, national markets and international markets.
