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Refine Your Estimates of the Total Addressable Market for Better Targeting

September 22, 2015 | By Mike Raimondi

  • SiriusDecisions’ b-to-b relative targeting framework focuses on category spend
  • Understanding market size and growth by detailed segment helps marketing and sales seize the best opportunities
  • Spend a little more time to get it right, as the resulting market estimates will be more accurate

One aspect of SiriusDecisions’ b-to-b relative targeting framework focuses on category spend – the amount businesses spend on the types of products and/or services you offer. Accurate estimates of market size, segmentation and expected segment growth, among other things, affect your ability to target your marketing, sales and product management efforts and efficiently allocate resources.

Over the years, much of the work I have done for clients has addressed several key questions about the market:

  • How big is the market in total?
  • How is it segmented?
  • How fast is each segment expected to grow?
  • What is my market share of the total and of each segment in each geographic area?
  • How should I allocate resources to achieve the highest return and boost my market share?

Understanding market size and growth by detailed segment helps marketing and sales seize the best opportunities, avoid some of the risks and improve their position in the market.

Given the importance of market size and segmentation, using the correct data to gauge and prioritize each segment and each prospective account is critical. In many cases, companies start with a list of businesses or other organizations that constitute some preconceived notion of their market. But be careful. Just because there are many businesses in a segment doesn’t necessarily mean that you should target that segment in lieu of others. You need to determine how many potential users exist in each segment. In the context of b-to-b markets, that often translates into the number of employees in a segment or in a business that could use your product or service. So, how many people are employed in each segment or in each target account? There are many databases that can help you figure that out.

Government sourced databases offer a great starting point. They’re usually free, and they’re comprehensive. The number of employees is available for dozens or even hundreds of industry segments, and the data is usually delineated by size segment. Most people overlook another dimension that adds significant value – the occupation distribution in each industry, which refines market estimates by focusing the analysis on the most likely users of a product or service rather than assuming that all employees are equally important.

For example, if you offer IT products and/or services to the market, you could assume that all employees use your offering. But this assumption could easily misrepresent the importance of each industry segment in the market. The accompanying chart shows alternate views of the market distribution to 11 broad industries. In one case, total employment by industry defines the distribution. In the other case, IT-intensive users based on a selection of occupations represent the market in each industry. The distributions differ significantly. If you use the wrong data, your efforts could be misdirected and, therefore, less effective.

Large-scale database integration and thoughtful analytics pave the road to some answers. With a little effort, you can combine external market data with your company’s internal data to yield comprehensive, consistent and detailed market metrics by industry, company size, function and geographic area. All the data can be cast to reflect your unique view of the markets that are most important to you. This type of analysis brings market characteristics into focus and supports successful go-to-market activities and resource management.

Spend a little more time to get it right. The resulting market estimates will be more accurate. They will yield more effective and efficient resource allocations, more equitable territory assignments, more defensible quotas and better performance measurement. They will also support more successful tactical and strategic decisionmaking at all managerial levels of the organization in many functional areas.

Mike Raimondi

Mike is a global business analytics leader. For more than 25 years, he has provided b-to-b consulting support to clients in a wide range of industries, analyzing markets, customers and costs. Using large-scale data integration and pertinent quantitative methods, he estimates total addressable market, segments markets, prioritizes and targets opportunities, and quantifies potential sales to new and existing customers.