

Ask HN: Estimate Market Size - grep

When you are creating a new product, how do you know if your target market is big enough?<p>How big do you think it needs to be before creating the idea?
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ABrandt
Well ultimately you'll be the judge of whether a market is large enough--it
just depends on your goals really. As far as actually quantifying it though,
there's several methods.

I personally think the easiest traditional way of doing it is called the break
down method. This involves taking a total population, and then applying
various percentages to whittle that number down until you got your target
market. To illustrate, lets say you're selling an iPod hookup for cars. You're
targeting US only so you have the total population _n_. You also know that x%
of people drive cars and that y% of people own an iPod. To get your market
size you multiply _n_ by x and y--voila.

A less traditional way of doing all of this involves a little facebook hack
I've been tinkering with. If you go through the process of creating an ad on
their network, it will give you the number of users for the various filters
you place on it (you can specify your demographic by location, age, sex,
keywords, education etc etc). In certain areas of the world the % of people on
Facebook is so high that you can basically use this figure as a solid
estimation. I haven't tested this for accuracy but it works well enough for
most purposes.

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exline
Some times it pays better to be the big fish in a small pond (find niche
markets that you can dominate.)

Be careful with the "we only need 1% of the market to make millions." You can
fool yourself into thinking getting that 1% will be easy. Depending on the
product, the sales channel is different. Focus on how many customers you can
get to the top of your sales funnel. You loose a certain % of customers along
the funnel and you end up with a certain number of paying customers. Even if
the market is 5 million people, if you only get 100 in your sales funnel, then
that is an issue.

If you are going with Adwords, there are pretty standard conversion rates you
can follow to figure out how many customers you need to look at your product
in order to earn X dollars a month.

If you have expensive product that requires a salesperson, then find out how
many deals can get done in a day/month/year. Even if the market is big, but
sales are slow, it doesn't matter in the end.

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mattgratt
I have one answer to this question: google keyword suggest tool/adwords.

it depends what sort of market you're in and what you're doing. Because you're
in this forum, I assume you're building an internet app and intend on
receiving traffic from search engines and social sites.

You can use google keyword suggest or wordtracker to see how many people are
searching for what you're making, and if anyone else makes it.

Yes this works for ISV products too.

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iworkforthem
Quite similar to @ABrandt, I estimate the market using the stats of website
visitor from compete.com/quantcast/alexa, etc. E.g. let's say my
nearest/closest competitor(if any) get around 100K visitor per month, let's
say I get around 20% of his traffic, and if 3% these traffic convert to be
customers. I get a high level figure of the market size for my products.

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pclark
gut; talk to other people; reports/trends; inspect companies in your space.

the potential market should be at least _1_ :) it depends what kind of company
you're building.

If you're building a really large consumer business you want a product that
can have over 50M users. If you're after a tidy lifestyle company you can
dominate a small niche and thrive.

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grep
what if you are building a product in top of other product? Is there a way to
know how big is your market?

~~~
byoung2
You should look at the total market for the parent product, and come up with a
reasonable percentage of those users who will buy your add-on. For example, if
there are 5 million iPhone users, and 5% buy a screen protector, then you're
looking at a total available market of 250,000.

From here, you'll have to figure out what percentage of the market you can
reach, etc.

