How to Size a Market with Consumer Research

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How to Size a Market with Consumer Research

 

So you’ve got a great idea for a new product. You’ve tweaked the formula to perfection, hired designers for the packaging, and started talking to distributors. Maybe you’re already pitching to investors or you’ve even launched your product in some local grocery or restaurant chains. These are exciting times and things are moving fast! 

But how do you know how popular your product might be? How can you convey the opportunity to your investors? In other words, how do you size your market?  

One Size Fits Most

There are a number of ways to approximate your market size, including expert estimates, scanner data, research, and internal sales figures. Our focus here is on sizing your market with data from consumer research (i.e., surveys) using the same techniques that Moonshot Collaborative recommends to our clients. 

First, you need to decide what you want to measure. For relatively unknown products or categories, interest in trying is an excellent place to start, to gauge initial reactions to a concept and understand how many people might give it a go. For more established categories (or to raise the commitment threshold), you may want to ask about consumers’ interest in buying. See a couple of question examples below. 

You can increase the commitment threshold even more by asking about their interest in buying regularly or their likeliness to recommend the product to others. It should be noted that, with all of these techniques, one is limited by self-reporting and the possibility that consumers will overstate their interest levels. And the higher the commitment threshold, the more speculative  consumers’ predictions about their own behavior are. 

Second, you need to decide how to measure these things. Because these are fairly standard approaches to sizing an audience for a new product or service, there are some known best practices when it comes to question wording and response options. For instance, it’s best to keep the questions simple and the language neutral and to stick with either 5-point or 7-point scales for the response options. 

Examples 

Plant-based foods are becoming more popular, but may not be available everywhere. For this question, imagine that plant-based lobster has become widely available at grocery stores, restaurants, and butchers. How likely would you be to try plant-based lobster? [5-point unbalanced scale]

  • Not at all likely
  • Somewhat likely
  • Moderately likely
  • Very likely
  • Extremely likely

Imagine you’ve had the opportunity to try plant-based lobster and you found the taste and texture to be identical to conventional, animal-based lobster. How likely are you to purchase plant-based lobster at least monthly? [7-point balanced scale]

  • Extremely unlikely
  • Moderately unlikely
  • Slightly unlikely
  • Not sure
  • Slightly likely
  • Moderately likely
  • Extremely likely


Know Your Customers 

Perhaps even more often than asking for our help with sizing their market, clients ask us how to identify who will buy their products or services. Let’s say you asked the question above in a survey and found that 62% of consumers are at least “moderately” likely to try plant-based lobster. That would sound promising! But what kinds of consumers make up that 62% and how can you appeal to them most effectively? 

Identifying target audiences takes a little more planning, but is easily accomplished through survey research. You need to give some thought to the kinds of personal attributes you think might distinguish your audience. You should look at differences by age and gender, of course, but what about household size and relationship status? How about their motivations for buying plant-based foods or their willingness to pay a premium? 

To really know your target audience, you should segment your survey responses by a variety of demographic, behavioral, and psychographic variables. If you were to perform such a research project on your own, gathering this data about the population you’re surveying would require a lot of survey questions (and therefore money) and also may require some expertise to analyze and understand the segments. As an alternative, you could work with Moonshot Collaborative, where we’ve deeply profiled our panel of plant-based buyers and can provide details for up to 70 different consumer attributes with your survey results. 

Learn how we can help you identify your audience.


But What Will They Pay?

Sometimes it’s not enough to know how many people say they’ll buy a product or service. If you really want to understand the potential value of a new market, you may also need to ask how much they are willing to pay. While real-world validation of a pricing strategy would be ideal, consumer research provides a good proxy and is sometimes the only option. 

You can estimate willingness to pay in a few different ways, from simple to complex. If you already have a good idea of what you plan to charge at retail, you could set a specific price point and ask about willingness to buy at that price. You could ask how much they would expect to pay for a product after describing it, either using a range of prices or letting consumers set the price. You could also gauge price sensitivity relative to conventional products or as a comparison to existing plant-based products. 

Examples

Plant-based meat alternatives cost about XX% more than conventional meat, on average. How likely would you be to pay the same premium for plant-based lobster, assuming the taste and texture are identical to conventional, animal-based lobster?

  • Not at all likely
  • Somewhat likely
  • Moderately likely
  • Very likely
  • Extremely likely

Assuming it has the same taste, texture, and appeal as conventional, animal-based lobster, how much would you expect to pay for one pound of plant-based lobster? 

  • Less than $5.00
  • $5.00 to $7.49
  • $7.50 to $9.99 
  • $10.00 to $12.49
  • $12.50 to $14.99 
  • $15.00 to $17.49
  • $17.50 to $19.99 
  • $20.00 to $22.49
  • $22.50 to $24.99 
  • $25 or more 
  • I would not buy this product

There are more complicated and reliable methods of measuring willingness to pay, such as MaxDiff and Conjoint Analyses. These are beyond the scope of the current blog, but we hope you see that there are a number of ways to both measure the size of your market and determine what people are willing to pay for your product or service. 

In fact, with just a single survey question, you can estimate how many people will try your product and discover who they are. With a custom study, you can go even further and optimize your pricing strategy to maximize sales. 

Interested in learning more? Contact us for a free consultation.

 

Photo by William Iven (@firmbee), Unsplash.

 

Che Green

Che is a co-founder of Moonshot Collaborative and a 25-year consumer research veteran who has helped startups, established businesses, and nonprofits succeed in their goals to help protect the environment, public health, and animal welfare.