Estimating market size is one of the important tasks for marketers. Accuracy of it will affect actual sales figure of a product or service.

Marketers can relatively easily estimate sales of a replaced model by sales of an existing model but have to estimate sales of an entirely new model by another way.

Logical formula of estimation

When market size is estimated, logical formula is the most important thing. For example, sales figure of logical formula is as below.

Sales = The number of customers * Purchasing quantity by time * Purchasing frequency * Average customers spend

Estimating factors of formula

Ways to estimate factors of above formula is as below.

The number of customers * Purchasing quantity by time * Purchasing frequency

1. Target age * Rate of intention to buy
Target age can be estimated by population statics of an area or a country and rate of intention to buy can be estimated by customer research.

2. Referring to sales of similar products
This way is frequently used. This can let us know all of factors of the formula but disadvantage of it is that we cannot detailed number of each factor.

3. Using amount of traffic
Amount of traffic multiplied by rate of customer traffic to a store is commonly used in catering business.

Average customers spend 1. Using customers research
One of representative of this method is PSM analysis.

2. Analyzing average spend for similar products
For example, in case of software which can make time to make materials half, appropriate price should be estimated if personnel cost to make materials is found. This method is useful for B2B marketing.