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Default CategoryMar 10, 2020

Market Sizing: How to Address the Fog of Innovation

Cameron Weinert

Innovation can provide companies with the opportunity to create new products, and sometimes those new products even create new markets. This blank canvas provides excitement but also some anxiety around a crucial question: Is there even a market for this innovation opportunity?

This question and those like it can cause innovation initiatives to stay in the starting blocks and never attempt to create a new market. However, we believe there is a process to navigate the fog of innovation and create market adoption projections that can inform an investment decision, even when no market exists.

Our process consists of a four-step approach to sizing the market and projecting consumer adoption.

step 1: define the desired market

Questions to consider:

  1. Where will my product be sold?

  2. What will my product launch strategy be? In what markets?

  3. Who is my target customer? Is there a specific type of buyer I want to target?

These questions may seem simple, but they are crucial to address with your team before conducting any market projections. Every individual on the launch team needs to be on the same page in their understanding of what the market they are projecting will be.

At Credera, we partnered with a client focused in Brazil—this meant working alongside our client to define the markets where they wanted to gain an understanding. We ended up projecting the Brazilian, Latin American, and global markets for their specific product, but would not have been able to segment our research unless we had already answered the above questions. Our findings proved valuable to our client as they explored how to launch their product and where to focus their efforts.

step 2: research the market through credible sources

Questions to consider:

  1. What assumptions do I need to make about the market and potential customers?

  2. Are there comparable markets that will provide a similar customer base?

  3. What are credible sources in this industry and is the data still relevant?

  4. Does the data pass a sanity check?

Once the market is defined, teams will begin their research and develop revenue projections. It is key to gather as much information as possible, but the importance of the quality of the data collected far exceeds the quantity of the data. If innovation is an ongoing business focus and new markets will be created on a consistent basis, subscriptions to credible databases may be a necessary investment.

To address the unknown Brazilian, Latin American, and global markets through third-party research, our team identified tangential products that existed and made assumptions on customer buying trends. It is imperative to never conduct market projections in a vacuum; we shared our findings with co-workers and client resources who had little to no context of the project. This provided a non-biased view into our analysis and assumptions that led to impactful feedback and recommended adjustments to our approach.

step 3: research the market through consumer testing

Questions to consider:

  1. Does this product solve a pain point in the market that is not currently addressed?

  2. What would a customer pay for this product?

  3. How often would a customer need to purchase this product?

The most important piece of a product launch, especially when developing a new market, is ensuring there is actually a market need. Markets are created by the buyer and their pain points or unmet needs. Companies must know their desired customer and commit to conducting interviews and focus groups to gather information to help shape the product as well as your market projections.

Credera partnered with a global company to develop an application that would provide a variety of products and services to their customers. To ensure the hypothesis was accurate, we conducted surveys and interviews with the potential customer to verify our assumptions, shape our adoption projections, and build a prototype that addressed our customers’ pain points.

step 4: develop scenarios to project outcomes

Questions to consider:

  1. What is the best, most-likely, and worst-case scenarios for this new product launch?

  2. What is the projected growth rate?

  3. How much will the company need to invest in this initiative?

To complete your analysis, it’s important to be realistic with your projections, which can be accomplished through developing multiple outcomes. These potential outcomes are informed by the market research and customer insights into price, quantity sold, and projected customer adoption.

In our work with the Brazilian company, they appreciated the range of projections we provided because it gave them an idea of the potential revenue without the pressure to hit an exact number. Scenario creation decreases a company’s risk and provides executives a realistic outlook on the potential return. This activity also provides executives the opportunity to adjust certain assumptions based on their prior experience or research.

make your own projections

Market projections, especially in new and disruptive markets, can be ambiguous and risky for businesses, which can lead to a lack of innovation altogether. Unfortunately, the lack of innovation is even more risky to a company because the customer needs are always changing and markets are always evolving. By systematically approaching revenue projections for new opportunities, companies can grow their innovation capabilities and remove some of the fog around innovation that creates anxiety and apathy.

We love helping organizations think through market sizing and other innovation strategies. Feel free to reach out to us at findoutmore@credera.com if you have any questions or would like to learn more.

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