To Estimate the Size of an Emerging Market

"Growthink calls the first approach 'peeling back the onion.' In this approach, we start with the generic market (e.g., the coffee market) that that company is trying to penetrate, and remove pieces of that market that it will not target. For instance, if the company created an ultra high-speed coffee maker that retailed for $600, it would initially reduce the market size by factors such as retail channels (e.g., mass marketers would not carry the product), demographic factors (lower income customers would not purchase the product), etc. By peeling back the generic market, you eventually will be left with only the relevant portion of it.

The second methodology requires assessing the market from several angles to approximate the potential market share, answering questions including:

Competitors: who is competing for the customer that you will be serving; what is in their product pipeline; once you release a product/service, how long will it take them to enter the market, who else may enter the market, etc.

Customers: what are the demographics and psychographics of the customers you will be targeting; what products are they currently using to fulfill a similar need (substitute products); how are they currently purchasing these products; what is their degree of loyalty to current providers, etc.

Market factors: what other factors exist that will influence the market size - government regulations; market consolidation in related markets, price changes for raw materials, etc.

Case Studies: what other markets have experience similar transformations and what were the customer adoption rates in those markets, etc. "

From this BusinesKnowhow article by by Dave Lavinsky, President, Growthink.