MBA MK02: Marketing Analytics: Unit-I

Unit-1: Introduction to Marketing Analytics (4 hrs.)

Meaning, characteristics, advantages and disadvantages of marketing analytics, Market data sources (Primary and Secondary).
Market Sizing: Stakeholders, Applications & Approaches (Top-down and Bottom-up), PESTLE Market Analysis, Porter Five Force
Analysis.
MEANING OF MARKETING ANALYTICS
The practice of measuring, managing, and analysing the marketing performance of a firm so that the return on investment (ROI)
can be optimised and increased is called marketing analytics. Marketers can achieve a greater level of efficiency and reduce the
wastage of marketing funds by understanding the concept of marketing analytics.

A lot of vital information related to the preferences and requirements of the customer can be obtained with the help of marketing
analytics apart from the most obvious reason for marketing activities, i.e., increasing sales and generating leads. Most of
organizations are still not able to understand the potential of marketing analytics, despite having several advantages from it. The
following reasons induce the use of marketing analytics:
1) Getting information related to new marketing trends;
2) Identifying successful programs and evaluating their reasons for success;
3) Analysing trends over time;
4) Completely analyzing the ROI of each program and
5) Forecasting the outcomes.

CHARACTERISTICS OF MARKETING ANALYTICS

The characteristics of marketing analytics are as follows:
1) Ensure High-Quality Data→ The analytics rest on the data. That means marketer need a tool that mines both structured and
unstructured customer data from all possible sources, including various interactions and touch points.
2) Get Real-Time Insights→ The marketing analytics solution also needs to deliver real-time insights to marketers. Marketers
can’t be effective if their information is out-of-date; tracking the right metrics at the right time is key.
3) Perfect Dashboard→ While it may be tempting to track as many metrics as possible, the analytics will not be as useful if
marketer do. Rather, define the goals and measure results for the use cases most important to marketers.
4) Choose the Right Analytics Visualization→ Marketing teams and stakeholders must be able to make something of the data
if marketers are to gain meaningful insights from it. The key is to choose the most appropriate data visualizations so he can
find patterns and interpret the data. Thus, marketer must choose a marketing analytics solution that allows him to choose or
customize visualizations instead of using default charts for displaying data.
5) Use a Tool Featuring Machine Learning and AI (artificial intelligence) to Predict and Prescribe→ Marketing must be real-
time and predictive to be effective today. Marketer must be able to make accurate predictions, analyse the data, and make
data-driven decisions to enhance each step of the customer journey.

COMPONENTS OF MARKETING ANALYTICS

The following are the components of marketing analytics:
1) People→ The marketing analytics process is created, executed, and managed by people who own it. In most marketing
organizations, the process owner is the Chief Marketing Officer (CMO) or the marketing director.
2) Steps→ The marketing analytics process consists of a sequence of steps.
3) Tools and Technology→ While the marketing analytics process is not necessarily complex, tools and technology help
marketing organizations deliver greater value faster than they ordinarily might.
4) Input and Output→ Data feeds the process, with insights and decisions as the output of the process.

A 3-STEP METHODOLOGY FOR MARKETING ANALYTICS

At the heart of every data-driven decision lie three essential elements that contextualize data and allow real business decisions to
surface from the sea of numbers that are produced from marketing activity. These are:
1) Understand→ Analysis for the sake of analysis, provides little value and consumes precious time in a marketer’s busy day.
Develop a basic understanding of what you plan to accomplish with marketing analytics, i.e., improved customer knowledge,
new segments, channel effectiveness, etc. It might even be appropriate to back into data requirements by defining a core
business challenge or key question that the organisation would like to answer with the analysis. This will help determine
exactly what data is required and possible, even identify new opportunities for capturing critical data in the future.
2) Execute→ After developing a core understanding of the data itself and translating that into business strategy, it is time to
execute and act. Often involving some additional refinement of the information produced in the Understand Phase, execution
may be done through reporting engines, analytical models, testing, and even spreadsheets.
3) Monitor→ It is critical for marketers to close the loop on analytical exercises through ongoing monitoring of a standard set of
Knowledge Performance Indicators (KPIs). This might be accomplished via a dashboard or periodic report, but the goal should
be to standardise metrics over time, so you can establish a benchmark for significant changes in the data that may alert you
to opportunities to optimise marketing results. This information should also be available for marketers to better understand
and initiate new campaign cycles.

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ADVANTAGES OF MARKETING ANALYTICS

1) Gaining a Full View of Customers across Channels→ With marketing analytics, marketing firms can obtain a full view of
potential customers across different marketing channels such as bricks-and-mortar locations, kiosks, call centres mobile,
partners, e-commerce, social media and so on. For this purpose, the firm needs to first establish a strategy for gaining access
to customer data and then integrating and analysing it with different sources.
2) Becoming More Effective and Proactive→ With marketing analytics, firms can anticipate the behaviours of their customers
and target markets and can respond accordingly in a more proactive manner. Solutions that conduct data mining or statistical
methods are included under marketing analytics which helps the marketing organisations to establish predictive models based
upon the arrangements of different variables.
3) Personalising Customer and Market Engagements→ With marketing analytics, firms can explore and assess the behaviour of
customers in the targeted regions and predict their likely responses. This enables the firms to customise the content, timings
and channels of delivery of products/services so as to fulfil the customers’ preferences.
4) Visualising Success across Enterprise→ With the help of data visualisation, analytics become accessible for non-technical
marketers which further enables collaboration, sharing, and decision-making for becoming more effective and efficient.
5) Treating Data as a Strategic Asset→ There are lot of hackers who try to steal or break into the customer data. This reflects
the importance of customer information. Locking this data into a vault is not the solution of this problem as a balance is
needed between privacy, data access and governance for protecting the interests of the customer as well as the organisation.
Since marketing analytics treat customer data as a strategic asset, it helps the firm in maintaining such balance.

DISADVANTAGES OF MARKETING ANALYTICS

The various disadvantages of marketing analytics are as follows:
1) Misidentifying Market Needs→ One of the elements of marketing analysis is identifying the needs of each market segment.
It also identifies other businesses and products that are attempting to satisfy the needs of this segment. The disadvantage of
doing this is twofold. Marketers may overestimate how well their competition meets customers’ needs and quit before they
even try to market. Marketers also may misidentify the need that is being met. The marketer doesn’t overlook the uniqueness
of own offering. Just because competition wants the same customer that marketers do, that doesn’t mean he is satisfying the
same need.
2) Evaluating Market Growth without Market Share→ Marketer marketing analysis will include a look at how the overall market
is growing, which can give him some idea of his range of opportunities. If his analysis discourages him, however, it can be a
disadvantage. Marketers can successfully compete in limited markets if they capture market share. An analysis of the market
size alone is not enough to indicate the opportunities. Improved market share can compensate for a slow-growth market.
3) Market Segmentation versus Target Markets→ Marketer must identify the segments of the market that have potential
customers for the products or services. This will help him understand the varied approaches marketer may need to take to
reach different types of customers. The downside is that the marketer may spread himself too thin. Few businesses can afford
to market to every single potential customer. Marketers should identify a target market that they choose from among the
available segments, and go after that target market in a focused manner.
4) Improper Interpretation of Data→ A marketing analysis is only as good as the analyzer. Marketers can collect a lot of data in
market surveys, but interpreting that data correctly is vital. Marketers will be at an extreme disadvantage if they misinterpret
facts and make decisions based on that misinterpretation. Marketers should make sure that their analysis is not wishful
thinking.

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MARKET DATA
MEANING OF DATA
The term data has been derived from the Latin plural word “datum”. Any fact or figure that is collected by experience, experiment,
or observation within a computer system is termed as data.

According to Davis, “Data, raw material for information, is defined as groups of non-random symbols, which represent quantities,
actions, objects, etc. Data items in information systems are formed from the characters. These may be alphabetic, numeric, or
special symbols.”

Meaningful information can be generated after processing the data.

Data Processing Information

Research can be carried-out with the help of two types of data, viz., primary data and secondary data. The former can be defined
as the data that is collected for the first time by the researcher, while the latter can be defined as the data that are already
collected and statistically processed for a particular event or problem. Secondary data are indirectly based on primary data or are
directly calculated from the primary data.

In other words, secondary data can be called as processed primary data. Based on the purpose of the research study, researchers
choose the primary or secondary data to find relevant solutions. The methods for collecting primary and secondary data are
different.
Marketing data is information that can be used to improve product development, promotion, sales, pricing, distribution, and
related strategies such as branding.

Methods of Data Collection

Depending upon the sources being utilized, any statistical data can be divided into two categories, which are as follows:
1) Primary Data→ The data which is directly collected by the researcher and was not available before is called as “primary data”.
The sources of primary data are very useful in finding the real facts about the incidents or events. It includes the personal
observation of the researcher and respondent. Primary data are the freshly collected data that provide information about a
particular problem. These data can be gathered using techniques like, interview, observation, mailing, counseling, etc.
2) Secondary Data→ The previously recorded information about an event is very important in finding the solution of similar kind
of problems. This readily available information is called “secondary data”. It is already processed and compiled with an
evaluation. These can be gathered from the published reports like census reports, annual reports, financial assessment
reports, and journals, as well as from unpublished sources. Various statements and records about the performance of a
particular organization and its departments like accounting records, minutes of meetings, inventory records, etc., fall in the
category of secondary data sources.

SELECTION OF APPROPRIATE METHOD FOR DATA COLLECTION

The required data collection methods for research purposes are determined by considering the following factors:
1) Complexity of Topic→ The data collection method is employed by analyzing the seriousness and complexity of the topic
chosen for the research study and the nature and types of questions to be involved. The method for data collection is also
affected by the possible quality or length of the responses.
For example, the responses to complicated questions should not be obtained through telephone survey, on the other
hand, personal interviews and in-depth explanatory notes will give more positive results. Moreover, the electronic version
which is capable of performing the complicated sequencing better is preferred in place of a paper version.
2) Types of Data→ Data collection methods cover various types of topics. Self-administered techniques are normally preferred
over interviews when it comes to sensitive topics, as they are considered to be more private. There are cases where, for this
reason, a face-to-face interview is included in a self-administered technique. Self-administered techniques are also required
where the respondents need to inquire from other people or inspect the previous records before responding. This can be
done through a telephone survey in which the respondent is mailed a form to complete with his/her responses, and are
required to deliver their responses over the phone.
3) Non-response→ The extent of response to a research study affects the reliability and quality of the data surveyed. While
achieving a 100% response rate for any survey is very rare, choosing the data collection technique can have a significant impact
on the obtained response rate. The fact that it is difficult to say no to a person’s face, personal interviews are more effectual
than mail surveys. However, the results of the method of response are also affected by other factors (if the survey is necessary,
whether it is fresh or repeated, and how these methods are followed up).
4) Respondent Preference→ The answer to the question of whether the chosen data collection method fits in with the
respondent’s working style and lifestyle influences the selection of the data collection methods. For example, much of the
business of respondents is done over the phone which makes them comfortable in using this method as stated
by the retail business survey and CATI survey. The preference of the respondents to complete their forms using
electronic methods has given rise to the Electronic Transaction Act (July 2001) which gives the respondents the right to use
it for ABS surveys.

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5) Resources Available→ To obtain numerous and quick responses, the researcher might use a less suitable data collection
method. This is mainly applied when there is scarcity of resources (time, money, or manpower) on the part of the researcher.
The survey must be conducted with appropriate quality, so choosing such a data collection method in a hurry gives rise to
conflicts.
There are various alternatives available to the researcher such as, compromising a planned reduction in quality of data,
reducing the coverage, or selecting a less efficient method of choosing data. The researcher might also look for other sources
for cost savings and for acquiring resources.
6) Sampling Frame and the Population→ The selection of data collection methods are influenced by the quality and type of
sampling frame as well. For example, if survey is to be conducted on homeless people, a mail survey method is not at all a
suitable method. Mail surveys are appropriate when the target population includes shift workers or those who are
unavailable at their houses when the researcher can reach them.

PRECAUTIONS IN THE COLLECTION OF DATA

Following guidelines which are based on various data collection sources should be considered while collecting data:
1) Primary Data→ It is a very difficult task to collect the necessary information. Also, it is difficult to collect data from the
field situation in comparison to the data collected from the organisational situation. Various precautions which a researcher
must observe to collect definite, unbiased and accurate information from field, and to overcome the difficulties like
lack of cooperation, inaccurate information and stress are as follows:
a) Friendly Attitude: Interviewer should collect the information in a friendly manner and is presumed to be polite and
disciplined. He should be focused towards creating and maintaining a good relationship with the respondents. The
respondents should be acknowledged regarding their cooperation in the research work.
b) Appropriate Use of Words: The words and sentences must be proper and known to the respondents. Moreover, it should
not hurt the emotions of respondents. Interviewer should replace the unfamiliar words with more suitable and familiar
words so as to provide convenience to the respondents in understanding the questions.
c) Avoiding Objectionable or Unsuitable Questions: Interviewer must avoid socially objectionable questions. But, if it is
necessary, then he must use indirect questions for the objective.
d) Transparency to the Respondents: The researcher should always maintain the transparency with the respondents. He
should clearly communicate the objective of research and fieldwork. At times, respondents are reluctant to answer the
questions if research objectives are not explained clearly.
e) Confidentiality and Privacy of Respondents’ Identity: The researcher should make sure to the respondents that adequate
privacy and confidentiality measures have been adopted during the collection of data.
2) Secondary Data→ Similar to the primary data collection, there are some precautions that are needed to be taken during
secondary data collection. Some of those precautions are described below:
a) Objective of the Study: While collecting the secondary data, whether internal or external, the researcher should keep in
mind that the data collected should be relevant with the objective of research. Also, the researcher should check the
authenticity, accuracy and compatibility of the secondary data based on the objective of study, as it gives the idea of
research procedures, research design, types of data used, etc. Hence, the researcher should focus on the objective of
study and must collect the data accordingly, by using specific techniques.
b) Reputation of Data Sources: While collecting data from secondary sources, it should always be kept in mind that the
quality of data differs vastly among the available data sources. Some sources contain credible, valid and accurate data as
their sole emphasis is on quality work. While, on the other hand, other sources may contain inaccurate and false data
that may disturb the analytical process and thereby provide inaccurate outcomes. The researcher should wisely select
the reputed sources of data.
c) Context of the Data: The researcher should filter-out the available secondary data, as only some part of the data can be
applicable on the research for accuracy and precision. Hence, the secondary data should match with the objectives of
research.
For example, if a research problem is associated with niche marketing, then secondary data on the core marketing
concepts will not be applicable. Therefore, the researcher needs to collect data which is specific to the topic.
d) Time of Information: The time at which the data has been collected, influences the research outcome in a significant
way. The time factor can also affect the measures and their definitions.
For example, if the researcher has the research study on weather reports, then the time of the readings is vital; also if
the research is done on the amount of traffic for a particular city, then alongwith the other factors, time of data collection
is also significant as the amount of traffic in a particular area varies with time.
e) Methodology Implemented: The researcher should possess the knowledge of research methodology implemented
during the process of data collection, so as to evaluate the quality of secondary data. He should have an in-depth
knowledge about research design, sample size, response rates, questionnaires, schedules, interview procedures and
other analytical techniques involved in the research study in order to examine the compatibility of the secondary data as
per the research study.

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PRIMARY DATA
The data collected by the researcher himself for finding the solution of a particular problem or situation, is known as primary data.
This type of data is characterised by its originality as it is freshly collected. Various organisations conduct surveys, observations,
interviews, etc. and as a result generate primary data. Although secondary data provides a basic understanding to the research
problems, but sometime, it becomes necessary to collect primary data as the previously generated secondary data may not serve
the purpose.

Just like secondary data, researchers should also take additional care while collecting primary data such that it is accurate, reliable,
and unbiased. For collecting primary data, researchers need to take many decisions regarding proper selection of relevant sources,
sampling techniques, research tools, etc. To conduct any research effectively and produce valid results, researchers should collect
primary data as it contains current and exact information about the incident or event. One of the major benefits of primary data
is that its validity and reliability can be verified by other experts. There are many ways to collect primary data such as observation,
interviews, group discussions, case studies, etc.

CHARACTERISTICS OF PRIMARY DATA

Following are the characteristics of primary data:
1) Collected for the First Time→ Since the primary data are collected for the first time with an objective, they are natural and
available in raw stage. They are required to be analysed in a systematic way to reach the conclusions. However, status of
secondary data is just opposite and they are already processed after analysis.
2) Collected from the Source→ These are generated after personal interactions or observations of original sources or through
deputed personnel for the task. These are obtained after certain experimental results, close study of sample cases, first hand
encounters of the situations and selection of resources at free will, without following any sequence or particular methods.
The data thus collected is needed to be analysed by a team of experts to arrive at conclusions who may even decide to re-
confirm the validity of data by re-examining certain observations.
3) Considered Prospective in Nature→ The data is generated from first adventure and provides some links on probable
happenings in future. These can be taken as baseline and follow up action can be evolved only after the thorough analysis of
the data.
4) Volume of Data→ The primary data is at raw stage and researchers need to do thorough study step-by- step and summarise
it to use it efficiently. Researchers find the values of data statistically in a presentable format or in simple statements so that
the outcome is easily understood by the general public.
5) Specific Research Objective→ Primary data is collected with specific objective and can be used to generate information which
is reliable and effective to a large extent after extensive analysis and refinements. The primary data can be collected through
different modes like close monitoring, in-depth study of results of different groups, opinion polling at different locations,
recording reaction of general public and making tactical operations to unearth the truth hidden behind the screen.

COLLECTION OF PRIMARY DATA

Major methods for collecting primary data are as follows:
1) Survey→ This technique is one of the most common and widely used techniques for collecting primary data. Survey can be
conducted using various methods such as using mails, telephones, internet, face-to- face, etc. The selection of survey method
relies upon various factors such as the nature of population to be studied, size of sample, allotted time, allocated budget, etc.
2) Interview→ Interview is the exchange of ideas which takes place between two or more people with the purpose of getting
information from the respondent. In this method, the interviewer organises a meeting with the respondent regarding an
object or issue related to the research objective, and asks some questions. The responses of the interviewee are recorded
and compiled to get a better insight into the research problem. Interview can be conducted through various methods such as
personal interview, telephonic interview, mail interview, panel interview, etc.
3) Observation→ Another technique for gathering primary data is observation. When the researcher records information about
a person, organisation, or situation, without making any personal contact, it is known as “observation method”. In this, the
researcher or the field executive observes the activity of the concerned person or organisation, to draw a pattern of behaviour
or response to a particular incident. Sometimes, an artificial environment is created to collect the actual responses of the
participants.
4) Experimentation→ An important method to collect primary data is experimentation. In experimentation, the causal
relationship is determined and analysed between variables. Experimentation is carried-out with the objective to study effect
on a dependent variable by causing a change in the independent variable. For example, a research can be conducted to analyse
the influence on learning due to guidelines and instructions in schools.
5) Warranty Cards→ Warranty cards are generally used by the dealers of consumer durables to get the feedback of products
from their consumers. These are the postal sized cards placed within the package of product. These cards contain various
questions regarding the performance of product and to know the needs of consumers. Customers are requested to fill and
mail it back. It helps in new product development for the manufacturer.
6) Auditing→ Auditing is a technique for assessing the performance and current position of any department or the organisation.
Sometimes, it is also used for understanding the market and buying behaviour of customers. Distributors or manufacturers
use this tool for gaining the competitive advantage and satisfying the need of customers. It is also used by the researchers
for inspecting the products, services or food purchased by consumers, also known as pantry audit.
7) Simulation→ Simulation is a quantitative technique for data collection. It is the creation of an artificial environment

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resembling a real life situation. This real life situation is simulated by using various mathematical equations and
variables. Researchers can determine the relation between different variables by altering one of the variables and
finding its effect on the others.
8) Depth Interview→ When a small group of respondents is intensively interviewed on individual basis so as to measure their
perception about a particular event, concept, idea or situation, it is called ‘Depth Interview’. For example, a depth
interview can be conducted to explore the reviews of participants of an organisational event about the nature of operations,
activities, its usefulness or changes required if any. Numerous topics or issues like strategic planning, program improvement,
problem identification, need analysis, etc., can be facilitated with the help of depth interviews. It is very helpful for getting
in-depth information from a relatively small number of participants, with the help of asking only open-ended questions.
As depth interviews allow researchers to intensely recognise the attitudes and perceptions of the respondents over a given
issue, they are majorly used for designing and evaluating extension programs.
9) Projective Technique→ Projective techniques are used in those areas of qualitative research where the researcher aims to
achieve a greater understanding of a subject. Under this technique, individuals are asked to express their opinions and feelings
on a situation or behaviour of another individual. Hypothetical situations and/or behavioural patterns of individuals are
created, which are ambiguous and vague in nature, and respondents are requested to express their beliefs and feelings on
the same.

In doing so, researchers are able to study the motivations and attitudes of the respondents themselves, thereby enabling
them to dig deeper into the research. The degree of ambiguity of the situation determines the depth of motivations and
emotions of the respondents that the researcher is able to unveil.
10) Focus Group→ Focus group is a method in which a group of respondents is selected so as to collect desired information
through a formal interactive session. It is also called ‘group interviewing method’. In this, the respondents response to the
questions of a moderator (sometimes researcher himself/herself) to discuss about the given topic or research problem.
Moderator asks specially designed questions so as to explore in-depth information. The information explored here is not
possible to collect from other techniques like surveys, observations or interviews.

Focus group method is characterised by the use of significant methods and strategies so as to collect and analyse the
information generated here. This makes focus group method a reliable source of data collection. This type of method is used
in areas like new product concept or new product development, improvement of production-line in an organisation,
motivation program for new employees, etc.

ADVANTAGES OF PRIMARY DATA

Primary data is advantageous in research due to following reasons:
1) Reliability→ As the primary data is collected originally by the researcher and it is current and accurate, it is more reliable than
secondary data.
2) Variety of Techniques→ Primary data can be collected through various techniques. There are numerous tools and techniques
available to record and analyse primary data such as interviews, questionnaires, observation, audits, etc. It allows the
researchers to explore effectively in almost every area where research is possible.
3) Wide Coverage Including Special Cases→ Primary data is applicable in many areas including some special cases. Sometimes,
researchers want information regarding particular cases for which previous literature is not available. Collecting primary data
is the only solution for these specific research problems or issues. In these cases, primary data is the only source of information
which can be trusted for effective solution.
4) Complete Control over Process→ Sometimes, organisations ask the researchers to conduct the research in specific area
rather than in broader perspective. Collecting the primary data allows the researchers to collect the data of their concern and
represent it in ways that can benefit the organisations. Researchers can also decide the length of study, location in which
research is to be carried out, time duration, etc., as per their requirement and convenience.
5) Cost Effective Collection→ The collection of primary data is cost-effective. Many times unnecessary time and money is wasted
in collecting secondary data, and the information proves to be useless. But in primary data collection, the researcher
concentrates his efforts on potential sources of data which provide reliable information in optimal cost.
6) Sole Ownership of Information→ As the information processed from the primary data is fresh and original, it can be
copyrighted. This way, the researcher becomes the owner of that information. He/she can take the benefit of information
by sharing it with organisations. This is not so in the case of secondary data, as it already belongs to other person or
organisation.
DISADVANTAGES OF PRIMARY DATA
Primary data has following disadvantages:
1) Costly Affair→ Primary data collection is an expensive task. It involves different activities like selecting type of technique,
preparing questions, and hiring trained professionals for collecting information or observing targets, etc. In this process, a
huge amount is spent, which is why it is costly to conduct.
2) Time Consuming→ Collecting primary data effectively takes more time. Developing research plan, deciding sources of
information, and selecting the methods of data collection are time consuming activities.
3) Infeasible Sometime→ Although, primary data considered to be reliable source of information, but, sometimes it is not an
easy task to collect the primary data, as the sources of information may not be in the reach of researcher or may incur a huge
amount of money.

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4) Huge Quantity of Data→ Sometimes data collected through primary sources are in huge quantity. This large volume of data
leads to confusion about the accuracy of the information. The processing and analysis of the data becomes complex and
cumbersome due to large size.
5) Unwillingness to Answer→ Sometimes, participants do not cooperate in data collection by showing unwillingness to answer
or by giving wrong information. These factors act as hurdles in primary data collection and also reflect biasness in responses.

SECONDARY DATA
When a researcher uses data which are previously collected by some other researchers, institutions, or agencies for their own
purposes are called secondary data. The researchers collect secondary data either from an internal source of an organisation, or
from the published sources like reports and journals. The purposes of data may vary from that of the current study. Hence, few
portions of this data may be used for current research problem. It should be kept in mind that, secondary data needs to be
processed before applying in research; as the contexts of data may have changed and modified as per their own purposes.
For example, Total contribution of different sectors to the GDP are published by the government or some trade association, which
may be a secondary data source for analysing the current market position of a particular organisation within a particular industry.
That published data may provide the required information or fraction of it.
Secondary data helps in various activities in a research study, such as, generating new ideas, analysing the needs previously
addressed, understanding the tools and techniques used for similar cases, save the time, etc. Secondary data is given preference
in the situation where a research has to be completed in shorter time duration.

CHARACTERISTICS OF SECONDARY DATA

Different characteristics of secondary data are as follows:
1) Available and Adequate→ The information available from secondary data is also suitable and acceptable to make correct
decision in solving the problem.
2) Cheaper→ Since the information received from secondary data can be received easily, it is comparatively cheaper than
primary data collection. The analysis of secondary data information may also provide equally satisfactory results required for
research. The information thus collected has wider spectrum compared to data collected through primary collection.
3) Less Time Consuming→ The search time involved in data collection is very much reduced in secondary data collection exercise
compared to primary data collection.
4) More Accurate Data→ The secondary data is based upon official count or survey conducted by government departments or
some organisations involved in research and is bound to be more accurate due to vast area coverage and extensive research
work undertaken which is generally not done in primary data collection which is based on limited survey.
5) Helps Defining Research Problem and Generating Hypothesis→ The data obtained through secondary data can also
significantly contribute to research work under initial stage where area is unfamiliar and some theory is evolved based upon
limited inputs. The secondary data certainly helps researchers to understand the ground realities, exposes too many options
that can be followed and suitable alternatives may be adopted.
6) Helps Defining the Population→ Secondary data helps to define the general status of population of an area. For example,
the statically per capita income of people in an area can reveal the financial categories of the people such as affluent, rich,
average middle class or below poverty line. This is also applicable in various other fields like agriculture, weather, etc.

COLLECTION OF SECONDARY DATA

The secondary data can be collected from following sources:
1) Internal Secondary Data→ Secondary data generated within the research conducting organisation is known as internal
secondary data. Data generated within the organisation can be either formal or informal. Formal data are generated
periodically in a structured layout such as reports of various departments, half yearly reports, etc. On the other hand, informal
data are not periodically generated such as conceptual booklets, new policy frameworks, etc.
Formal internal data can be collected from following major sources:
a) Sales Analysis: Sales analysis reports generated within the organisation are important internal source of secondary data.
These reports contain the information about the sales pattern and fluctuations in market position. These can be very
useful in drawing the solution of related problems.
b) Invoice Analysis: The invoices of an organisation also act as a secondary data source. These invoices help in
understanding the sale and purchase pattern of the organisation in different situations or scenarios. The information
collected through the invoices may be summarised carefully to reach a particular solution. Various data related to
customer can be obtained with the help of invoices, such as name of customer, type of product, location of product
delivered, etc.
c) Financial Data: Researchers can get a lot of financial data recorded within the organisation. These records may contain
the information regarding production cost, storage cost, transportation cost, sales cost, etc. these data are very useful
data for marketing research. These financial data are- periodically generated from time to time, and hence are updated.
d) Transportation Data: The transportation data regarding the routes, vehicles, loads, etc., provide a lot of information
regarding the transportation activities. These data allow the researchers to analyse the trade-offs between various costs
and determine the ways to get maximum financial benefits.
e) Storage Data: Various costs associated with storage, such as, handling cost, maintenance cost, etc., are the important
data that are generated within the organisation. These data help the researchers in analysing various pros and cons

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related to the storage of materials and therefore suggesting suitable methods to be adopted.
2) External Secondary Data→ Sometimes, important secondary data is not found within the organisation. The secondary data
derived from different sources outside the organisation is known as “external secondary data”. Some important sources of
secondary data are as follows:
a) Libraries: Library is one of the external secondary data sources, which the researcher may use to collect the necessary
information for the research. Different kinds of libraries provide a range of data for the research. Books related to
research topics, journals, magazines, research papers, etc., are available in various libraries, maintained by different
organisations and institutions.
b) Literature: A variety of literature is available on different subjects and issues. These literatures are the result of extensive
research practices. There is plenty of valuable information in such kind of sources, which can be utilised for the resolution
of current research problems.
c) Periodicals: Business periodicals are published at regular time intervals, viz., yearly, half yearly, bi- monthly, fortnightly,
quarterly, etc. The secondary data are published by various government and non-government agencies regarding finance,
trade, transport, industry, labour, etc. These periodical contain various trends, future prospects, opportunities in market,
etc., which can be used by researchers in their current research problem.
d) References and Bibliography: The references and bibliography of a particular research or journal can be a useful resource
for deriving secondary data related to specific issue. Researchers can take a huge amount of data which can then be
analysed to get deeper insight.
e) Census and Registration Data: Data collected through census and different registration programs may become very
useful in deriving secondary data. As this data is collected through extensive effort and field work, it contains the
appropriate information about various issues like, agriculture, trade, transport, banking, etc.
f) Trade Associations: Large amount of useful data may be derived from trade associations as these contain the relevant
information about the changes and happenings in the industry. The information from one trade association is exchanged
with other trade association for updating the information content. Research firms gain the access to different information
from these associations.
g) Government Departments: The information available from government departments may be utilized as secondary data
in research process. Government departments can provide various information regarding position and growth of different
sectors of an economy like finance, banking, trade and transport, agriculture, etc.
h) Private Sources: There are many organisations which publish the statistically processed data for further use. These are
the private institutions which perform primary research about particular events or situations and compile the final facts
and figures. Some of the examples of such sources are Economic Times, Financial Express, Indian Marketing Association,
etc. The researchers engaged in current marketing research can utilise the information available from these institutions
by purchasing journals, magazines, newspapers, etc., which are publicly available.
i) Commercial Research Institutions: Some institutions in the market deal in purchasing and selling of different kind of data
or information, which are collected through research. Many market research institutions are in the business of providing
statistically processed data or information, by taking help of secondary data or by conducting fresh surveys.
j) International Organisations: Several international organisations like World Health Organisation, World Bank,
International Monetary Fund, International Labour Organisation. Asian Development Bank etc. are helpful in deriving
required information or data about a particular research. These organisations have plenty of information or resources to
provide data about issues like population, inflation, agriculture, education, labour problems, child problems, women
development, trade and transport, etc.

ISSUES TO BE CONSIDERED FOR COLLECTING SECONDARY DATA

Secondary data are those data which already exist and are generated for some other purposes by different agency. These may be
in published or unpublished form. However, before using the secondary data, following characteristic may be verified:
1) Reliability of Data→ For ascertaining the reliability of data, following points should be verified:
a) Name of source of data collection,
b) Name of respondent’s source of data,
c) Methods used for data collection,
d) Time of data collection,
e) Verification of bias angle of compiler and
f) Level of accuracy needed and what is being delivered.
In case, data is collected by government institution, recognised institution or international agency, it is likely to be more
reliable than collected by any private institution or individual. Secondary sources of data, such as government institutions,
institutions coming under parliamentary act and international organisations are considered to be reliable and dependable.
It is important to check the reliability of data prior to using it for research studies. In the first place, it is important to check
the experience, truthfulness, skills and capability on part of the researcher. Secondly, it is important to examine the methods
of data collection. The method of data collection should be as objective and as scientific as possible.
2) Suitability of Data→ The data is collected based upon purpose, extent of area coverage and type of inquiry. These aspects
are to be looked into before acceptance of the data. If these aspects are different, the secondary data remains useless. There
is also a need to carefully analyse the various terms and units of data collection from the original primary sources.
The suitability of data solely depends upon the level of inquiry. The data may be suitable for one level of inquiry which may

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not be suitable for other level of inquiry. Hence, suitability is required to be ascertained before acceptance of data.
3) Adequacy/Sufficiency of Data→ There are cases like dying statement of a person, eye witness of an accident or a murder,
version of a squad deputed on secret mission, etc., which cannot be generated from the primary source and thus, secondary
data has to be considered. In such cases, it is simply not possible to access the original source. However, in cases of availability
of no data, fresh efforts are to be made to generate primary data from original sources.

Sometimes the level of inquiry rises and data collected from the secondary sources is not sufficient to satisfy the requirements.
In such cases no final decision can be made and it remains useful for research work only. Sometimes limited area is selected
for data collection and the information is required for much bigger area or information collected from much bigger area and
information needed for a very limited area, in either case the secondary data may not be useful and cannot be relied upon.
The data has to be reliable, suitable and adequate for the researchers.

For ascertaining if the data collected is sufficient or not, it is important to view it in relationship with the needs of the survey
and the geographical area taken into consideration while collecting the secondary data. For example, in case the research
aims at collecting the data pertaining to salary of the employees in the cotton industry and the literature provides insight
about all the workers in the industry, then such a data might prove to be futile for this study at hand. Data adequacy is also
questionable in terms of the time frame of its availability.
4) Consistency of Data→ Consistency of data means the absence of contradictory reports and this can be achieved by collecting
the data from various sources without any bias and from different locations. For example, for the ground level evaluation of
flood relief supplied from the government agencies, the data has to be collected from different sources other than the
government agencies to arrive at the correct conclusions.
The tools used for collecting the information may be suitable questionnaire format, interviews, observation of official
procedures and other different types of tools used for data collection. This ensures the data collected is accurate and
consistent.

ADVANTAGES OF SECONDARY DATA

1) Economic→ The secondary data is easier and cheaper to access. It is more economically collected compared to the primary
data. Some of the secondary data can be obtained with absolutely no cost.
2) Less Time Taking→ As secondary data is already processed and compiled by other researchers, it takes very less time to collect
this data. There is variety of secondary data available from various sources. Hence, researchers just need to search the data
from the sources.
3) Quality→ The quality of the secondary data is unique and rare as these are originally collected by trained professionals who
have expertise in data collection. Hence, for a researcher it is very difficult to match that level of quality single-handedly.
4) Measuring Instruments are not Required→ In collecting secondary data, there is no need to decide the tools and techniques
for gathering required information, as this data is already recorded and processed by other researchers. The researchers only
need to identify the relevant section of this data which is of their concern.
5) Availability→ Secondary data is widely available and hence easily accessible. Secondary data are helpful especially when it is
quite difficult to collect primary data. Majority of secondary data is available which can be utilised for a particular research.
6) Bases for Comparison→ Secondary data can also be used for comparative analysis with primary data. This way, researchers
can make many interpretations regarding the data.
7) Useful in Exploratory Research→ As exploratory research is conducted with the purpose of getting better insight about an
issue or phenomena, secondary data is very useful in serving its purpose by providing extensive available information from
various sources. This helps the researchers to carry out the research accordingly.
8) Generates Feasible Alternatives→ Secondary data is a source which provides a variety of alternatives to researchers related
to various problems in research. Researchers are required to analyse and study the solutions provided by these data through
various approaches, sources, and methods, etc.
DISADVANTAGES OF SECONDARY DATA
1) Relevance→ As secondary data is collected by other researchers for other purposes, therefore, these data may not be relevant
for the current research work. The secondary data may vary because of many reasons, such as, measurement and scaling,
sampling technique, data analysis technique, purpose of research, time duration, etc.
2) Accuracy→ The accuracy of secondary data is questionable due to many reasons such as using inappropriate data collection
method, researcher biasness, inappropriate sampling technique, etc., due to which Secondary data may not be accurate every
time.
3) Obsolete Data→ There can be a significant time gap between the secondary data and present requirement, and it is obvious
that many times secondary data may contain obsolete information which is not applicable for present scenario. Therefore,
including such data can be a risk to the effectiveness of research work.
4) Non-Disclosure of Research Findings→ It is not always easy to have access to all the findings of a particular research. Some
organisations or research institutions may not allow its disclosure.
5) Difficulty in Tracing-Out Sources→ Sometimes researchers or individuals are not able to identify the appropriate sources of
secondary data. Due to this limitation, the validity of secondary data remains doubtful.

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PRIMARY DATA VERSUS SECONDARY DATA
Basis of Primary Data Secondary Data
Difference
The data is collected by the researcher himself for When a data, which was earlier created by some
1) Meaning finding the solution of a particular problem or researchers or organisations for their own purposes, is
situation, is known as primary data. used in current research for a similar purpose, it is
known as secondary data.

2) Cost The collection of primary data is costly as it includes It is less costly than primary data collection. The
several tools and techniques. secondary data can be obtained easily, involving
zero or very less amount of money.
3) Sources It is directly collected from respondents. It is collected from some already available
published or unpublished sources.
The methods used for primary data collection The methods used for secondary data collection
4) Methods include interviews, include studying and analysing reports, journals,
questionnaires, observations, and surveys. census, and different
databases.
5) Reliability Primary data is more reliable as it is original and new. The reliability of secondary data is
comparatively less reliable, as this data belongs
to different problem or situation.
The selection of primary data is scientific in nature. It The selection of secondary data is manual. It is
6) Scientific includes forming hypothesis about the problem or selected according to the content of the source and
Method situation, collecting data, and analysing data to prove the current research topic.
the hypothesis right or wrong.

7) Precaution Precautions are relatively nominal in A lot of precaution is taken in the selection
collecting primary data than secondary data. of secondary data.
8) Form of Data Form of primary data is like raw which needs to Secondary data are already processed data that
be processed to get meaningful information. needs to be analysed and studied to use in research
study.
9) Accuracy Primary data is original and accurate, as it is The secondary data is not completely
developed according to the need. accurate as it was developed for some other purpose.

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MARKET SIZING
Market sizing is the process of estimating the potential of a market. Understanding the potential of a market is important for
companies looking to launch a new product or service.

Market size is a key component of strategic marketing planning. Knowledge of the size of th e target market allows fully
assessing opportunities and accurately planning the firm’s approach and investments - wisely.

Market size is a measurement of the total volume of a given market. Calculating market size accurately can be a challenge, so it is
important to be clear on what one is measuring. Variables are often dynamic, so they must be clearly defined. Size can also be
based on consumption or production figures, so it is important to know what approach marketers will take.

Marketers must take the time to assess market size and they may find answers that reveal how to achieve the level of growth they
need. When they know their market size, they can more easily determine how to invest R&D budget for the year. It can also help to
determine a wise level of sales and marketing investments - in the right areas. Marketing strategies become clear. Marketers do not
want to spend too much in a market when the return will be low, but they also do not want to underinvest in a high-growth, fast-
moving market. But be careful not to base investment decisions on rumor or expert opinions.

CATEGORIES OF MARKET SIZING

Categories of market sizing are given below:

1) MARKET POTENTIAL→ Assuming 100% market share, the total potential value of product/service sold over a specified
timeframe.
2) TAM (Total Addressable Market)→ The potential value of Product/Service sold to a particular customer segment.
3) SAM (Serviceable Available Market)→ The total value of Product/Service that can fulfill the demand of a segment using one
revenue stream/channel.
4) SOM (Serviceable Obtainable Market)→ The total value of SAM divided by the expected percentage market share that the
company can capture.

EVALUATING MARKET SIZING

There are several kinds of market sizing techniques that businesses should consider and use in their market size analysis. The most
important step, before considering anything that will help marketers estimate to market, is having good data that accurately paints
the picture of the marketplace or industry. Having good data and research is necessary to understand how to estimate the market
size. Before working with any market size estimation techniques, marketers must make sure that he has solid information to draw
from and analyse.

With good data, marketers can:

1) Look at the Competition→ The marketer must identify the number of competitors in the market. This will tell the marketer a
lot about the potential size of the market. If the marketer has a lot of competition, he knows that he is competing with other
businesses for customers, effectively reducing or limiting the potential market.
2) Understand the Product→ The marketer must be realistic about things that will affect who will buy the product. Things like
cost, usefulness, reliability, or availability will influence how many people are truly in the market.
3) Understand Customer→ Similar to understanding the product, the marketer must know something about his customer when
doing market size calculations. Are customers likely to be male? That tells marketers something about the market. Are they
likely to be college-educated? Found in cities? Make a certain salary a year? Knowing the target customer always leads to
helping the marketer to estimate the market size.

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STAKEHOLDERS FOR MARKET SIZING

A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary
stakeholders in a typical corporation are its investors, employees, customers, and suppliers. However, the modern theory of the
idea goes beyond this original notion to include additional stakeholders such as a community, government, or trade association.

Stakeholders can be internal or external. Internal stakeholders are people whose interest in a company comes through a direct
relationship, such as employment, ownership, or investment. External stakeholders are those people who do not directly work
with a company but are affected in some way by the actions and outcomes of said business. Suppliers, creditors, and public groups
are all considered external stakeholders.
1) Internal Stakeholder→ Investors are a common type of internal stakeholder and are greatly impacted by the outcome of a
business. If, for example, a venture capital firm decides to invest $5 million into a technology start-up in return for 10% equity
and significant influence, the firm becomes an internal stakeholder of the start-up. The return of the company’s investment
hinges on the success, or failure, of the start-up, meaning it has a vested interest.
2) External Stakeholder→ External stakeholders are a little harder to identify, seeing as they do not have a direct relationship
with the company. Instead, an external stakeholder is normally a person or organization affected by the operations of the
business. When a company goes over the allowable limit of carbon emissions, for example, the town in which the company
is located is considered an external stakeholder because it is affected by the increased pollution.
Conversely, external stakeholders may also sometimes have a direct effect on a company but are not directly tied to it. The
government, for example, is an external stakeholder. When it makes policy changes on carbon emissions, continuing from
above, the decision affects the operations of any business with increased levels of carbon.

STAKEHOLDERS WITH RESPECT TO MARKET SIZING

The stakeholders involved in the market sizing are:
1) Marketing Departments→ The role of marketing department in estimating the market size is to investigate new
markets and to calculate market share.
2) Operations Departments→ The operations department is responsible for the products manufacturing like how many units
to make and in the service delivery such as how many people to hire.
3) Channel Partners→ In market sizing, channel partners refer to the number of units to move in channel.
4) Financial Services→ Financial services includes VC: Large and growing market, $500M - $1B

PROBLEMS WITH STAKEHOLDERS

A common problem that arises with having numerous stakeholders in an enterprise is their various self- interests may not all be
aligned. In fact, they may be in direct conflict. The primary goal of a corporation, for example, from the viewpoint of its
shareholders, is to maximize profits and enhance shareholder value. Since labour costs are a critical input cost for most companies,
a company may seek to keep these costs under tight control. This might have the effect of making another important group of
stakeholders, its employees, unhappy. The most efficient companies successfully manage the self-interests and expectations of
their stakeholders.

IMPORTANCE OF MARKET SIZING

The importance of market sizing is given below:
1) Quantify the sales or profit potential of new product markets or customer segments.
2) Identify product lines and customer segments with lucrative growth opportunities.
3) Helps validate the Business Model hypothesis.
4) Specify competitive threats and develop strategic responses to those threats.
5) Develop exit strategies or pivot points for the future.
6) Important to Investors. They want a scalable product addressing a large enough market to get the most bang for their bucks.
Listen to them.

MARKET SIZING APPLICATIONS

1) Market Trends: Take advantage of trends
2) Sales Forecasts: Forecast as % of the total market.
3) Salesforce Sizing: Number of salespersons to hire
4) Distribution Channels: Type of channel(s) to employ
5) Market Segments: Number and size of segments
6) Market Share: Need total size to calculate share
7) Adoption Rate: Keeping up with industry average?
8) Life Cycle: Growth or decline?
9) Market Investment: Continue investing in the market. Explore new niches?

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APPROACHES TO MARKETING SIZING

There are fundamentally two different approaches to sizing a market: top-down analysis and bottom-up analysis. Ideally, in any
market sizing exercise, both of these methodologies should be used to ensure the appropriate reliability of the data and to point
out any areas requiring further research for reconciliation.
1) Top-down Approach→ In a top-down approach, the starting point is an existing (or easily developed) estimate of total
demand for a given product that needs to be further segmented or refined based on the outlined scope of the exercise.
2) Bottom-up Approach→ In a bottom-up approach, demand is calculated by applying usage assumptions to an indicator or
statistic that directly relates to the product being consumed (i.e., a direct indicator).
With both approaches, the estimate becomes more refined as more factors are taken into consideration, for example, accounting
for differences in purchasing parity, oil component of GDP, local competition and selling prices, market maturity, brand awareness
and value, etc.

TOP-DOWN APPROACH
When deciding whether to use this form of market sizing analysis, it needs to be determined if a reliable top-line demand estimate
is available. There are numerous sources that one can turn to in
search of a top-line demand estimate, each of which has
advantages and disadvantages that need to be balanced in the
performance of this analysis. Oftentimes, more than one of these
techniques can, and should, be used in conjunction with one
another.

This is where a ‘big picture’ view of a market is used as a starting

point and a series of filters are applied to give an estimate for the
specific market. A simple example of this is taking a global market
estimate and splitting it into a country estimate based on GDP.

The Top-Down Approach estimates the addressable market from

above, by starting with a broad market size figure (e.g. an existing
market research report for a bigger segment) and narrows it
down to the target market segments by using assumptions and
statistics. Some assumptions can be verified via existing data or
statistics; others cannot and have to rely on the best guess or judgment of the market modeller. The top-down approach is usually
considered as a less robust methodology. It is the “fast and cheap” of market sizing and tends to give market estimates that are
too high.

Top-Down Market Size Analysis

In comparison, a top-down analysis is a procedure in which a larger reference market is used and the percentage of that market that
a company expects to capture is estimated. There are two different techniques for top-down analysis, as described below.
1) Using a Known Reference Market→ In this method, the size of a known reference market is required and then the amount
of that market that is contributed by a specific segment of interest is estimated.
2) Market Sizing Using Population Metrics→ This can almost always result in misleading information. In this method, the size
of a specific population is used and then a company estimates the percentage of that population that it can capture with its
services.

BOTTOM-UP APPROACH
The bottom-up approach is typically taken when no reliable sources of top-line demand exist or when a more reliable estimate
can be developed by analysing product consumption as it relates to a direct indicator. This approach can be more time consuming
than a top-down methodology and is sensitive to seemingly small assumptions that can cascade through the analysis.

This uses the reverse approach, building up the estimate from the
lowest point where the product can be used. For example, if a product
is sold into hospitals, we could start with the number of hospital beds.
Assuming we see a £5 average sales data, we can multiply £5 by the
total number of hospital beds. As with the top-down approach, further
refinement is often needed, for example, to account for different sizes
and types of hospitals as well as differences in bed use, etc.

Bottom-up Market Sizing

Step 1: Identify Relevant Market Segments: The very first step in the
bottom-up market sizing approach is to identify the relevant and
potential market segments. For example, if marketers are selling an
educational product, two relevant criteria for that might be “user
sophistication” and “resources.” Plotting all the different groups of

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customers might yield something like the below plot.

One can even go a step further with segmentation. For example, Universities come in all shapes and sizes. Universities may
include: Research Universities, Liberal Arts Colleges, and Community Colleges. Likewise, Government funded groups vary in size,
from 100K students (small) to urban school programs (large) which may support up to 500K students.

Step 2: Find the Market Contribution of Each Segment: Use resources such as Census data, Bureau of Labour Statistics, or other
public databases. For example, if a marketer is looking at Community Colleges, The National Centre for Education Studies reports
that there are 1,669 Community Colleges in India in total. These schools spend 465 million dollars annually. Of this total, 15 million
is allocated to IT services. If one can realistically capture 1% of this segment, then the Community Colleges segment can
contribute
$150,000 to his total annual market potential. Repeat the process for the Research University segment, Liberal Arts College
segment, etc.

Step 3: Iterative Market Analysis: These projections are not set in stone and they will change as one can understand his market
better. Refine this model as one learns more about competitors and customers. Maybe the market is much smaller than
anticipated and you need to reposition the offering. Maybe it is much larger than expected, and one needs to raise funding, to
achieve the necessary scale to become profitable.

MARKET SIZING ILLUSTRATION: EXAMPLE FROM INDIA'S E-COMMERCE INDUSTRY

To illustrate market sizing in the Indian context, we will take the example of the E-commerce market in India. We'll estimate the
market size using the Top-Down and Bottom-Up approaches, relying on available data and making some assumptions for clarity.
1. Top-Down Approach: E-Commerce Market in India
Step 1: Population Estimate
• Total Population of India (2024): ~1.4 billion
• Internet penetration in India: 55% (i.e., 770 million internet users)
Step 2: Target Market
• E-commerce users as a percentage of internet users: 35%
• Estimated number of E-commerce users:
o 770 million × 35%770 = 269.5 million users
Step 3: Average Spending per User (Annual)
• Average annual spending by an Indian e-commerce user: ₹12,000 ($150 approx.)
Step 4: Market Size Calculation
• Market Size (in ₹):
o 269.5 million×₹12,000= ₹3.234 trillion
Thus, the market size for e-commerce in India using the top-down approach is approximately ₹3.2 trillion annually.
2. Bottom-Up Approach: E-Commerce Market in India
Step 1: Estimate Total E-Commerce Transactions
• Average number of transactions per user per year: 12
• Average transaction value: ₹1,000
Step 2: Total Transaction Value per User
• 12 transactions×₹1,000= ₹12,000 per year per user (matches the assumption in the top-down approach)
Step 3: Total Market Size
• Total market size = 269.5 million users×₹12,000= ₹3.234 trillion
Market Sizing Adjustments & Trends:
• Growth Rate: India’s e-commerce market is expected to grow at a CAGR of 18-20%.
• Major segments: E-commerce includes sub-segments like Fashion, Electronics, Groceries, and Services (e.g., travel,
entertainment).
Example Breakdown:
o Fashion contributes ~25% of total market size.
o Electronics: ~35%
o Groceries and Essentials: ~20%
Key Considerations:
• COVID-19 Effect: Post-pandemic, online grocery shopping has surged, increasing the average basket size and transaction
frequency.
• Rural Penetration: As internet penetration increases in rural areas, the potential user base expands further.
• Logistics and Payment: The growth of digital payments and logistics innovations will contribute to e-commerce expansion.

Based on these assumptions, the Indian e-commerce market is currently valued at ₹3.2 trillion annually, with robust growth potential
driven by rising internet penetration, increased digital adoption, and the ongoing shift towards online shopping.

This method of market sizing can be applied to other industries by adjusting for user base, average spending, and market trends
relevant to the target sector.

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MARKET SIZING ILLUSTRATION: EXAMPLE FROM INDIA'S ELECTRIC VEHICLE (EV) MARKET
In this example, we will estimate the market size of electric vehicles (EVs) in India using both the Top-Down and Bottom-Up
approaches, relying on available data.

1. Top-Down Approach: EV Market in India

Step 1: Population Estimate
• Total population of India (2024): ~1.4 billion
• Estimated number of households: 300 million
• Target market for EVs: Urban households (60% of the total households)
o 300 million × 60% = 180 million households
Step 2: Target Market for EVs
• Estimate: 10% of urban households are currently potential EV buyers, based on income, infrastructure, and
awareness.
• Target market size: 10% of 180 million = 18 million households
Step 3: Average EV Price
• The average price of an EV in India (e.g., Tata Nexon EV, MG ZS EV): ₹15 lakhs (₹1.5 million)
Step 4: Market Size Calculation
• Total potential market value = 18 million households × ₹15 lakhs
• Market size = ₹270 lakh crores or ₹2.7 trillion
Thus, the potential market size for electric vehicles in India using the top-down approach is approximately ₹2.7 trillion.
2. Bottom-Up Approach: EV Market in India
Step 1: Estimate Total Sales Volume
• Estimated EV sales for 2024: 1 million units (as per current trends and growth projections)
Step 2: Average EV Price
• Average price per EV: ₹15 lakhs (₹1.5 million)
Step 3: Market Size Calculation
• Market Size = Total units × Average price
• = 1 million units × ₹15 lakhs
• = ₹15,000 crores or ₹1.5 trillion
Market Sizing Adjustments & Trends:
• Growth Rate: The EV market in India is expected to grow at a CAGR of 40-45% over the next decade due to
favorable government policies, rising fuel prices, and growing environmental awareness.
• Government Support: The Indian government has launched several initiatives such as FAME (Faster Adoption and
Manufacturing of Electric Vehicles) to promote EV adoption, which will expand the market size in the coming years.
• Infrastructure Development: The development of charging infrastructure and battery-swapping stations will be
critical to supporting this market.
• Segmentation:
o Electric Two-Wheelers: 60% of the EV market.
o Electric Four-Wheelers: 30%.
o Commercial EVs (buses, delivery vehicles): 10%.
Key Considerations:
• Battery Costs: As battery technology improves and economies of scale are achieved, the cost of EVs will decline, making
them more affordable and increasing the addressable market.
• Consumer Adoption: In cities like Delhi, Mumbai, and Bangalore, the adoption of EVs is higher due to infrastructure
availability and high disposable incomes, but adoption rates may vary regionally.

Based on these calculations, the Indian EV market is currently estimated at ₹1.5-2.7 trillion, with significant potential for growth over
the next decade as infrastructure and consumer awareness improve.
This market sizing example highlights how the combination of top-down and bottom-up approaches can provide insights into the scale
and potential of emerging industries like electric vehicles in India.

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MARKET SIZING FOR SMART PHONE MARKET:
Total Smartphone Smartphone Replaceme Annual Expected Sales Average Estimated
Regio Age Income Growth
Population Penetration Users nt Cycle Smartphone Sales in 2025 Selling Price Revenue (₹
n Group Bracket Rate (%)
(millions) Rate (%) (millions) (years) (millions) (millions) (₹) millions)
Urban 18-35 Low 100 65% 65 1.5 43.33 10% 47.67 10,000 476666.667
18-35 Middle 120 85% 102 2 51.00 12% 57.12 15,000 856800.000
18-35 High 80 95% 76 1.5 50.67 15% 58.27 25,000 1456666.667
36-55 Low 80 55% 44 3 14.67 5% 15.40 8,000 123200.000
36-55 Middle 110 70% 77 2.5 30.80 6% 32.65 12,000 391776.000
36-55 High 70 80% 56 3 18.67 8% 20.16 20,000 403200.000
56+ Low 50 30% 15 4 3.75 2% 3.83 7,000 26775.000
56+ Middle 60 45% 27 4 6.75 3% 6.95 10,000 69525.000
56+ High 40 60% 24 3 8.00 4% 8.32 15,000 124800.000
Rural 18-35 Low 250 40% 100 2.5 40.00 8% 43.20 8,000 345600.000
18-35 Middle 150 60% 90 3 30.00 10% 33.00 10,000 330000.000
18-35 High 30 75% 22.5 2 11.25 12% 12.60 18,000 226800.000
36-55 Low 200 30% 60 3.5 17.14 6% 18.17 7,000 127200.000
36-55 Middle 130 45% 58.5 3 19.50 8% 21.06 9,000 189540.000
36-55 High 20 65% 13 3 4.33 9% 4.72 14,000 66126.667
56+ Low 150 20% 30 4 7.50 4% 7.80 6,000 46800.000
56+ Middle 100 35% 35 4 8.75 5% 9.19 8,000 73500.000
56+ High 10 50% 5 3 1.67 6% 1.77 12,000 21200.000
Market Size= 5356176.000
Several insights can be gained from the above market sizing.

MARKET SIZING PROCESS FOR A SHOPPING MALL :

Step Metric Calculation Result
1. Population in Geographic Area Total Population of the city/region Assumed data 500,000
2. Target Demographic % of population in target age group 60% of 500,000 300,000
(18-45 years)
3. Average Spend per Visit Average spend per visit per shopper Retail: $50, Food: $20, $80
Entertainment: $10
4. Frequency of Visits Average visits per shopper per year Assumed data 24 visits/year
5. Total Addressable Market Potential annual revenue 300,000 shoppers × $80 spend × $576,000,000
(TAM) 24 visits
6. Competition Adjustment % of total market captured Assumed to capture 30% market 30% of
(Market Share) share $576,000,000
7. Final Adjusted Revenue (SAM) Estimated annual revenue after 30% of $576 million $172,800,000
competition
Summary of Market Sizing:
Metric Value
Population in Geographic Area 500,000
Target Shoppers (18-45 years) 300,000
Average Spend per Visit $80
Average Visits per Shopper/Year 24 visits
Total Addressable Market (TAM) $576 million
Market Share Captured 30%
Final Adjusted Revenue (SAM) $172.8 million
This table provides a clear breakdown of the market sizing process and the final estimated revenue for the shopping mall based on the
assumptions made.

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OTHER APPROACHES TO MARKET SIZING:
Market sizing is the process of estimating the potential of a market in terms of revenue or customer base. Different market sizing
approaches are used depending on the context, data availability, and the level of detail required. Here are the main approaches to
market sizing:
1. Top-Down Approach
• Overview: This method begins with the total size of the market and narrows down by applying filters or assumptions to estimate
the target market size. It uses existing data like industry reports, government statistics, or research papers.
• Process:
• Start with the total market size (e.g., total industry revenue).
• Apply filters such as geographic region, target customer segments, or specific product lines.
• Narrow down the market based on the proportion relevant to your business.
• Example: Estimating the smartphone market in India by starting with the global smartphone market, narrowing it down by
country, and further by demographic or purchasing power.
• Pros:
• Quick and easy when using established data.
• Works well for established markets with reliable data sources.
• Cons:
• Based on assumptions that might not reflect actual conditions.
• May overlook nuances or segments that could be crucial.
2. Bottom-Up Approach
• Overview: This method builds up the market size estimate by aggregating data from smaller units or segments (e.g., sales data
from individual stores, customers, or regions).
• Process:
• Start by estimating demand or revenue for individual units (e.g., per store, per customer).
• Multiply by the number of units to build a larger market estimate.
• Example: Estimating the total revenue of a fast-food chain by calculating the average sales of a single restaurant and multiplying
it by the total number of restaurants.
• Pros:
• More accurate and specific to the business’s situation.
• Allows for detailed market segmentation.
• Cons:
• Data collection can be time-consuming and difficult.
• May miss out on larger trends that could affect the market.
3. Value Chain Analysis
• Overview: This method assesses the different stages in the value chain, from raw materials to end customers, to estimate the
market size. It examines the flow of products through the supply chain and their value at each stage.
• Process:
• Identify key stages in the value chain (suppliers, manufacturers, distributors, retailers).
• Estimate the market size at each stage by analyzing production, sales, or revenue data.
• Aggregate or adjust these estimates based on margins or markups at each stage.
• Example: Estimating the market size for a new consumer electronics product by analyzing production volumes of components,
assembly data, distribution channels, and final retail sales.
• Pros:
• Provides a comprehensive view of the market structure.
• Useful in industries with complex supply chains or high levels of intermediation.
• Cons:
• Requires detailed knowledge of the industry’s value chain.
• May be difficult to find data for every stage.
4. Demand-Side Approach
• Overview: This approach focuses on analyzing the demand side of the market by studying customer needs, behaviors, and
purchasing patterns. It often involves surveys, interviews, and secondary data on consumer behavior.
• Process:
• Identify potential customers and their spending habits.
• Segment customers by factors such as demographics, purchasing power, or usage patterns.
• Estimate market size based on the likely adoption rates and willingness to pay.
• Example: Estimating the market size for a new fitness app by surveying potential users on their interest and willingness to pay
for premium features.
• Pros:
• Focused on actual customer behavior.
• Useful for understanding new or emerging markets.
• Cons:
• Survey data may be biased or incomplete.
• Adoption rates and willingness to pay are often uncertain.
5. Supply-Side Approach
• Overview: This method examines the capacity and output of producers, suppliers, or distributors to estimate the potential

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market size. It is useful in industries where supply constraints or production capacity play a significant role.
• Process:
• Assess the production capacity or output of key players in the market.
• Analyze factors like supply chain constraints, manufacturing capacity, or distribution channels.
• Estimate the market size based on the supply-side limitations.
• Example: Estimating the market size for electric vehicles by analyzing the production capacities of major automakers and their
ability to meet future demand.
• Pros:
• Useful in supply-constrained markets.
• Provides insights into how production bottlenecks affect market potential.
• Cons:
• Ignores demand-side factors like customer preferences or price sensitivity.
• Supply constraints may change rapidly due to technological or economic factors.
6. Comparative or Analogous Market Approach
• Overview: This method estimates market size by comparing it to a similar, more established market. The analogy is based on
similarities in customer behavior, product types, or market conditions.
• Process:
• Identify a similar or analogous market.
• Assess key similarities between the markets (customer base, product lifecycle, economic conditions).
• Adjust for differences and estimate the target market size.
• Example: Estimating the market size for electric scooters in India by comparing it to the market for electric bikes in China,
adjusting for population and income levels.
• Pros:
• Fast and relatively easy when good analogies exist.
• Works well for new markets with limited direct data.
• Cons:
• Assumptions may not hold, leading to inaccurate estimates.
• Differences between markets may be larger than initially perceived.
7. Hybrid Approach
• Overview: This approach combines elements of both top-down and bottom-up methods to achieve a more accurate market
size estimate. It triangulates different data points and approaches.
• Process:
• Start with a top-down estimate to get an initial market size.
• Use bottom-up data or supply/demand insights to validate and refine the estimate.
• Example: Combining industry reports on the total size of the smartphone market with specific sales data from major retailers
to estimate market size in a specific region.
• Pros:
• Balances speed with accuracy.
• Can use multiple data sources to provide a more comprehensive view.
• Cons:
• More complex and time-consuming than using a single method.
• May require reconciling contradictory data sources.
8. Extrapolation Method
• Overview: This method involves projecting future market size based on historical data and trends. It assumes that past growth
rates or patterns will continue into the future.
• Process:
• Gather historical data on market size, growth rates, or sales.
• Apply trend analysis or regression techniques to project future market size.
• Example: Estimating the future market for smartphones by extrapolating from historical growth rates in unit sales and customer
adoption.
• Pros:
• Simple and easy to implement when historical data is available.
• Useful for mature markets with stable growth rates.
• Cons:
• May not account for disruptions, changes in technology, or market saturation.
• Assumes the future will mirror the past, which is not always the case.
Each of these market sizing approaches has its strengths and weaknesses, and the choice of approach depends on the industry, the
availability of data, and the complexity of the market. Often, businesses use a combination of methods to cross-verify estimates and
get a more accurate and reliable picture of the market potential.

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PESTLE ANALYSIS
PESTLE stands for political, economic, socio-cultural, technological, legal, and environmental. It is an analytical tool available to
companies to determine how external factors influence their operations and make them more competitive in the market.
This method looks at the factors in a nation or marketplace, and examines how those factors affect the consumer:
1) Political factors→ Includes government policy and legislative changes that affect the economy, such as tax and employment
laws.
2) Economic factors→ These are inflation, exchange rates, recessions, and supply and demand.
3) Socio-cultural factors→ Includes consumer demographics, culture, and lifestyle.
4) Technology→ These are factors like changes in technology, how technology is used in different sectors and industries, and
research.
5) Legal factors→ These are legal aspects that affect businesses such as consumer law, copyright law, and health and safety law.
6) Environmental factors→ These have little to do with the actual business, including climate, pollution, weather, and
environment-related laws.

PESTLE analysis allows managers, marketing, and financial experts to examine specific factors (outside of money) when making
decisions about the company's services or products.

Results from PESTLE analysis allow the company to make specific choices when planning the company's future, from how the brand
should be presented, to any changes within the structure of the company's organization, to the development of new products.

ROLE OF PESTLE ANALYSIS IN MARKET SIZING:

PESTLE analysis (Political, Economic, Social, Technological, Legal, and Environmental analysis) plays a significant role in market sizing
by helping businesses understand the external factors that influence a market's potential. It provides a structured framework to
evaluate macro-environmental conditions, enabling more accurate and informed estimates of market size. Here's how PESTLE analysis
contributes to market sizing:
1. Political Factors
• Influence on Market Regulations: Political stability, government policies, tax regulations, and trade restrictions impact
market size by affecting business operations, industry growth, and international trade.
• Market Entry Barriers: Political environments can either encourage or discourage foreign companies, influencing the
potential customer base and demand for products/services.
• Example: If a country introduces favorable policies for electric vehicles (EVs), such as subsidies and incentives, the market
size for EVs would grow due to increased demand.
2. Economic Factors
• Market Demand and Purchasing Power: Economic indicators like GDP growth, inflation rates, and unemployment levels
directly influence consumer purchasing power and spending behavior, which are critical for estimating market size.
• Currency Exchange Rates: For companies dealing with international markets, exchange rates affect pricing, profit margins,
and demand in foreign markets.
• Example: In an economy with rising disposable incomes, demand for luxury goods might increase, leading to a larger market
size for high-end products.
3. Social Factors
• Consumer Behavior and Preferences: Social trends, cultural factors, and demographic shifts (e.g., aging population,
urbanization) shape demand patterns and preferences, helping estimate the target market size.
• Lifestyle Changes: As consumer priorities shift (e.g., preference for health-conscious products), companies can anticipate
increased demand in certain categories.
• Example: A growing health-conscious population can increase the market size for organic food or fitness-related products.
4. Technological Factors
• Innovation and Adoption Rates: Technological advancements drive the creation of new products, services, and business
models, while the adoption rate of new technologies affects market size.
• Efficiency and Productivity Gains: Technological improvements can reduce costs, increase accessibility, and expand markets
by making products/services available to a broader audience.
• Example: The rise of smartphones and internet penetration dramatically increased the market size for mobile apps and
online services.
5. Legal Factors
• Regulatory Environment: Legal considerations, such as industry-specific regulations, consumer protection laws, and
intellectual property rights, influence market dynamics and competitive conditions.
• Compliance Costs: High regulatory compliance requirements can increase operational costs, affecting market size,
particularly for new entrants.
• Example: In the pharmaceutical industry, the strictness of drug approval laws in different countries affects the speed of
product launches and, therefore, the potential market size.
6. Environmental Factors
• Sustainability and Environmental Regulations: Environmental policies, sustainability trends, and climate change concerns
shape market demand, especially in industries such as energy, manufacturing, and transportation.

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• Eco-friendly Products and Green Technologies: As consumers and businesses move towards eco-friendly products, market
sizes for sustainable products and services are expanding.
• Example: Increasing demand for renewable energy solutions in response to environmental concerns can boost the market
size for solar panels, wind turbines, and electric vehicles.
How PESTLE Analysis Supports Market Sizing:
1. Risk and Opportunity Assessment: PESTLE helps identify risks (e.g., political instability, legal barriers) and opportunities (e.g.,
economic growth, technological advancements) that can expand or contract the market size.
2. Better Forecasting: It improves the accuracy of demand forecasting by integrating macroeconomic factors that influence
customer behavior, such as economic downturns or technological disruptions.
3. Strategic Decision-Making: By understanding external influences through PESTLE, businesses can make more informed
decisions on market entry, product development, and resource allocation.
4. Customizing Market Sizing Models: Each factor in PESTLE may require adjustments to market sizing models. For example, a
new regulation could shift market demand or alter competitive dynamics, leading to adjustments in sales estimates or pricing
strategies.

Example of PESTLE in Market Sizing:

In the electric vehicle (EV) industry, PESTLE analysis could provide insights into market potential:
• Political: Government incentives and tax breaks for EV buyers.
• Economic: Rising fuel prices and increasing disposable incomes boost demand for EVs.
• Social: Growing environmental awareness increases consumer preference for sustainable transport.
• Technological: Advances in battery technology make EVs more affordable, expanding market size.
• Legal: Stricter emission regulations force consumers to adopt eco-friendly alternatives like EVs.
• Environmental: Climate change concerns drive both consumers and governments toward supporting greener technologies.

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 MBA 301: STRATEGIC MANAGEMENT-UNIT 1
PORTER FIVE FORCE ANALYSIS
Porter’s 5 Forces is an analytical model used to help identify the structure of an industry and to help companies determine
their competitive strategies. The model was developed by Harvard Business School professor Michael E. Porter as part of his
book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” published in 1980.
The model can be applied to any segment of the economy. It helps explain why various industries maintain different degrees
of profitability.
The model is widely used to analyze the industry structure of a company as well as its corporate strategy. Porter identified Page |
five undeniable forces that play a part in shaping every market and industry in the world. The forces are frequently used to 21
measure competition intensity, attractiveness and profitability of an industry or market.
These forces are:

1) Threat of new entrants→ This force determines how easy (or not) it is to enter a particular industry. If an industry is
profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same
market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to prevent new
entrants. Threat of new entrants is high when:
• Low amount of capital is required to enter a market;
• Existing companies can do little to retaliate;
• Existing firms do not possess patents, trademarks or do not have established brand reputation;
• There is no government regulation;
• Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries);
• There is low customer loyalty;
• Products are nearly identical;
• Economies of scale can be easily achieved.
2) Bargaining power of suppliers→ Strong bargaining power allows suppliers to sell higher priced or low quality raw
materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for materials. Suppliers
have strong bargaining power when:
• There are few suppliers but many buyers;
• Suppliers are large and threaten to forward integrate;
• Few substitute raw materials exist;
• Suppliers hold scarce resources;
• Cost of switching raw materials is especially high.
3) Bargaining power of buyers→ Buyers have the power to demand lower price or higher product quality from industry
producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher
quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong
bargaining power when:
• Buying in large quantities or control many access points to the final customer;
• Only few buyers exist;
By Pashupati Nath Verma
 MBA 301: STRATEGIC MANAGEMENT-UNIT 1
• Switching costs to other supplier are low;
• They threaten to backward integrate;
• There are many substitutes;
• Buyers are price sensitive.
4) Threat of substitutes→ This force is especially threatening when buyers can easily find substitute products with
attractive prices or better quality and when buyers can switch from one product or service to another with little cost.
For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle. Page |
22
5) Rivalry among existing competitors→ This force is the major determinant on how competitive and profitable an
industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits.
Rivalry among competitors is intense when:
• There are many competitors;
• Exit barriers are high;
• Industry of growth is slow or negative;
• Products are not differentiated and can be easily substituted;
• Competitors are of equal size;
• Low customer loyalty.
When a company’s management uses the five forces, it can create ways to take better advantage of a situation of strength,
overcome a situation of weakness, and avoid making mistakes that would provide someone else a competitive edge.

PORTERS FIVE FORCES MODEL & MARKET SIZING PROBLEM

Porter's Five Forces model can significantly enhance market sizing analysis by providing a deeper understanding of the
competitive environment and the profitability potential within a market. While market sizing helps quantify the revenue
opportunity, Porter’s Five Forces helps evaluate the feasibility of capturing that market share and sustaining profitability over
time. Here's how each force can influence market sizing problems:
1. Threat of New Entrants
• How It Helps: Estimating the ease or difficulty for new players to enter the market is crucial for market sizing. If barriers
to entry are low (e.g., low capital requirements, few regulations), the market may attract many competitors, shrinking
the obtainable market share (Serviceable Obtainable Market or SOM). On the other hand, high barriers to entry (e.g.,
brand loyalty, large capital investments) may restrict competition, allowing companies to capture a larger portion of the
market.
• Example: In a tech-driven market with rapid innovation, if barriers are low, more companies can enter the market,
affecting the overall demand and supply balance.
2. Bargaining Power of Suppliers
• How It Helps: Suppliers' power can directly affect the cost of goods sold (COGS), impacting profitability and pricing
strategy. If suppliers have high bargaining power, companies may face higher input costs, which could limit the volume
they can produce and sell profitably. This may reduce the effective size of the market you can capture without hurting
margins.
• Example: In the electric vehicle (EV) market, battery suppliers have significant power, as there are few high-quality
battery manufacturers. This can affect the pricing and, ultimately, the size of the market companies can profitably target.
3. Bargaining Power of Buyers
• How It Helps: Understanding buyer power is essential for forecasting demand and determining price elasticity. If buyers
have significant power, they may demand lower prices or better terms, which could reduce overall market size or shrink
the share of the market a company can profitably capture. If buyer power is low, companies may be able to set higher
prices and still capture significant market share.
• Example: In highly competitive consumer goods markets, like electronics, buyers can compare prices easily, which forces
companies to compete aggressively, reducing profit margins and the size of the obtainable market.
4. Threat of Substitutes
• How It Helps: The availability of substitute products can reduce demand for a company’s offerings. By analyzing the
threat of substitutes, you can better estimate the adjusted demand and refine your market size calculation. A high threat
of substitutes indicates that the market may not grow as expected, or companies may have to invest more in
differentiation to maintain market share.
• Example: In the beverage industry, if a new health-conscious drink is entering the market, the presence of substitutes
like energy drinks or soda can affect its demand. The higher the threat, the smaller the share of the total market that new
entrants can realistically capture.
5. Industry Rivalry
• How It Helps: The intensity of competition among existing firms influences pricing, marketing spend, and innovation
rates. In markets with fierce competition, businesses may need to lower prices, which would reduce the overall revenue
potential in the market sizing model. High rivalry can also lead to market fragmentation, meaning that capturing a large
market share becomes more difficult.

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 MBA 301: STRATEGIC MANAGEMENT-UNIT 1
• Example: In the smartphone market, rivalry is high between major players like Apple, Samsung, and Xiaomi. Market sizing
in this space must consider the intense competition and potential for price wars, which could lower potential revenues.

How Porter’s Five Forces Enhances Market Sizing:

1. Realistic Estimation of Market Share: While market sizing estimates the total potential demand (TAM), Porter’s Five
Forces helps businesses understand how much of that market can realistically be captured, i.e., Serviceable Obtainable
Market (SOM). For example, strong competition (high rivalry) can shrink the obtainable share, while weak competition
Page |
may allow a firm to dominate.
23
2. Profitability Forecasting: Beyond just estimating volume, Porter’s Five Forces helps predict profitability within the
market. A large market (TAM) with low profit potential due to strong supplier power or high competition might not be
attractive, while a smaller but highly profitable market may be worth entering.
3. Identifying Barriers and Opportunities: By examining the forces, companies can identify strategic opportunities to
overcome barriers or leverage favorable conditions (e.g., low threat of substitutes, low buyer power) to maximize market
capture.
4. Tailoring Strategies for Market Penetration: Porter’s Five Forces provides insights into how companies should position
themselves. For example, in markets with high buyer power, companies might need to adopt a low-cost strategy to attract
more customers, influencing how they approach market sizing and pricing models.

Example: Applying Porter’s Five Forces to Market Sizing in the Indian EV Market
Step 1: Estimate Market Size (TAM)
• Estimate the total population of potential EV buyers.
• Forecast demand based on government policies, consumer preferences, and industry growth rates.
Step 2: Apply Porter’s Five Forces
• Threat of New Entrants: Government subsidies lower barriers to entry, meaning the obtainable market share might
decrease due to new entrants.
• Bargaining Power of Suppliers: High supplier power from battery manufacturers may increase production costs, affecting
pricing and profit margins.
• Bargaining Power of Buyers: Buyers may demand lower prices due to various EV brands, shrinking the obtainable share.
• Threat of Substitutes: Traditional gasoline vehicles are substitutes, reducing the total demand for EVs.
• Industry Rivalry: High rivalry in the EV market may lead to price wars, further reducing margins.
Step 3: Refine Market Size
After applying Porter’s Five Forces, the initially estimated market size is adjusted to reflect competitive dynamics and profitability
constraints, leading to a more accurate and strategic market sizing model.

In conclusion, combining market sizing with Porter’s Five Forces ensures that businesses not only understand the revenue
potential but also the competitive challenges and profitability in a market. This comprehensive approach allows for better-
informed decisions about market entry, product positioning, and growth strategies.

By Pashupati Nath Verma