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3.3.1 Beyond STP: Evaluating Market Size for Effective Marketing Strategy Development

Overview

Market size and market share analysis are crucial for segmentation, targeting, positioning, and developing marketing strategies. These analyses determine the potential and actual demand for a product or service, guiding resource allocation and strategy implementation.

Key Concepts in Market Size Analysis

1. Potential Market

  • Definition: The set of all consumers who show interest in a product or service.
  • Factors not considered:
  • Income or financial capability.
  • Accessibility to the product or service.

2. Available Market

  • Definition: Subset of the potential market comprising consumers who:
  • Have interest in the product.
  • Possess the income to purchase it.
  • Have access to the market (e.g., distribution network availability).
  • Example:
  • A product available only in the U.S. limits access to consumers in other regions.

3. Target Market

  • Definition: Subset of the available market that the company actively pursues through marketing activities.
  • Factors Influencing Target Market:
  • Resource constraints (e.g., online-only strategy vs. physical store distribution).
  • Marketing strategy (e.g., focus on age group 15–25 for online platforms).
  • Example:
  • A company may target only the 50–60 age group if its product is sold primarily through local stores (kirana shops).

Market Demand, Forecast, and Primary & Secondary Demand

1. Market Demand

  • Definition: Total volume that will be purchased by a specific customer group over a specific time, in a specific environment, and under a specific marketing program.
  • Marketing Program: Combination of the 4Ps (Product, Price, Place, Promotion).
  • Dependence on Marketing Expenditure:
  • Market demand is proportional to resources and efforts allocated to marketing.

2. Market Forecast

  • Definition: Market demand at a specific level of marketing expenditure.
  • Dynamic Nature:
  • Increasing expenditure can increase the market forecast by reaching more customers.
  • Decreasing expenditure reduces the market forecast.
  • Example:
  • ₹10 crore expenditure might allow access to 3 cities; ₹20 crore could expand access to 10 cities.

3. Primary and Secondary Demand

  • Primary Demand:
  • Total volume of demand for a product category (e.g., soap).
  • Secondary Demand:
  • Demand for a specific brand within that category (e.g., Lux or Lifebuoy).

Market Expenditure and Demand Curve

  • Market Minimum:
  • Level of demand without any marketing effort or expenditure.
  • Market Potential:
  • Maximum achievable demand even with unlimited resources.
  • Market Forecast:
  • Demand between market minimum and market potential, dependent on marketing expenditure.

Curve Dynamics

  • Increasing expenditure raises demand, but only up to the market potential.
  • Beyond market potential, additional expenditure has no effect on demand.

Steps in Market Size Analysis

  1. Determine Potential Market:

  2. Identify consumers with interest in the product.

  3. Assess Available Market:

  4. Filter consumers with interest, income, and accessibility.

  5. Define Target Market:

  6. Narrow down the available market based on:

    • Resource constraints.
    • Marketing strategy and delivery channels.

  7. Estimate Market Demand:

  8. Calculate total potential volume that can be sold in a given environment with a specific marketing program.

  9. Create Market Forecast:

  10. Predict demand at different levels of marketing expenditure.

  11. Distinguish Primary and Secondary Demand:

  12. Differentiate between category-wide demand and brand-specific demand.

Key Takeaways

  • Market Size Analysis:
  • Determines the size and growth potential of markets for better targeting.

  • Requires understanding the potential, available, and target markets.

  • Market Demand and Forecast:

  • Market demand is proportional to marketing expenditure and resource allocation.

  • Market potential represents the upper limit of achievable demand.

  • Resource Allocation:

  • Strategic resource allocation ensures efficient targeting and maximizes ROI.

  • The balance between resources spent and market demand must align with company objectives.

  • Primary vs. Secondary Demand:

  • Primary demand targets the product category.
  • Secondary demand focuses on specific brands within the category.
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