Step-by-step mar­ket analy­sis

A thor­ough mar­ket analy­sis helps to under­stand the poten­tial and posi­tion­ing of your prod­uct. It pro­vides impor­tant insights for prod­uct devel­op­ment and the busi­ness mod­el. It pro­vides you with insights into mar­ket size and dynam­ics, com­peti­tors and alter­na­tives as well as cus­tomer seg­ments and needs.

1. iden­ti­fy the prob­lem you want to solve

In order to clear­ly iden­ti­fy the prob­lem you want to solve, ask your­self the fol­low­ing ques­tions:

• Prob­lem and USP: What prob­lem are you solv­ing? Which fea­tures and ben­e­fits are par­tic­u­lar­ly impor­tant? This clar­i­ty will help with mar­ket analy­sis lat­er on.
• Impact per­spec­tive: How does your solu­tion dif­fer from con­ven­tion­al solu­tions in terms of social or envi­ron­men­tal ben­e­fits? Describe your pos­i­tive impact clear­ly and con­cise­ly.

Ide­al­ly, you have already dis­cussed the prob­lem in the chap­ter “Prob­lem and tar­get group analy­sis: How val­i­da­tion works for impact star­tups” and ana­lyzed your solu­tion in the chap­ter “Solu­tion design for impact start-ups: How the real­i­ty check for solu­tion ideas works” clear­ly defined. If not, look at it from the fol­low­ing per­spec­tives:

2. deter­mine your Total Address­able Mar­ket (TAM)

The Total Address­able Mar­ket (TAM) is the total mar­ket that you can the­o­ret­i­cal­ly reach with your impact start­up. It is cal­cu­lat­ed as fol­lows:

Total num­ber of poten­tial cus­tomers x aver­age annu­al turnover per cus­tomer

To cal­cu­late the TAM, you should research cur­rent indus­try reports, mar­ket sta­tis­tics and pub­licly avail­able data, for exam­ple from gov­ern­ment agen­cies or indus­try asso­ci­a­tions. Also ask your­self the fol­low­ing ques­tions:

• How broad is the total address­able mar­ket real­ly?
• Which offer­ings are actu­al­ly part of your impact start-up’s mar­ket?
• Who could the­o­ret­i­cal­ly use the offer, regard­less of the cur­rent range?

3. define your Ser­vice­able Avail­able Mar­ket (SAM)

TheSer­vice­able Avail­able Mar­ket (SAM) is the part of the TAM that you can real­is­ti­cal­ly reach. In oth­er words, you deter­mine how many peo­ple in the total pop­u­la­tion you could reach if resources were not an issue. It is cal­cu­lat­ed as fol­lows:

Num­ber of reach­able cus­tomers x aver­age annu­al turnover per cus­tomer

To cal­cu­late the SAM, nar­row down your tar­get group, e.g. by geog­ra­phy, demo­graph­ics or indus­try. Con­sid­er your prod­uct spec­i­fi­ca­tions and sales capac­i­ty and ask your­self the fol­low­ing ques­tions:

• For which spe­cif­ic seg­ments with­in the TAM is your solu­tion par­tic­u­lar­ly effec­tive?
• What are the geo­graph­ic, demo­graph­ic or psy­cho­graph­ic lim­i­ta­tions of the mar­ket?
• Are there any tech­ni­cal or logis­ti­cal fac­tors that influ­ence your reach­able mar­ket?

4. esti­mates the Ser­vice­able Obtain­able Mar­ket (SOM)

The Ser­vice­able Obtain­able Mar­ket (SOM) is the mar­ket share that you can actu­al­ly achieve with your cur­rent resources and capac­i­ties. It is cal­cu­lat­ed as fol­lows:

Real­is­ti­cal­ly achiev­able mar­ket share x SAM

Ana­lyze your com­pet­i­tive sit­u­a­tion and mar­ket posi­tion for the cal­cu­la­tion. Ide­al­ly, you have already reviewed exist­ing solu­tions in the solu­tion design — in the chap­ter “Solu­tion design: Find­ing a solu­tion with which a start­up can cre­ate real impact”. Also check what resources are avail­able to you to gain mar­ket share (e.g. sales, mar­ket­ing bud­get, part­ner­ships). And ask your­self the fol­low­ing ques­tions:

• How much of the SAM can you real­is­ti­cal­ly achieve with the cur­rent resources?
• Which com­pet­i­tive fac­tors influ­ence the achiev­able mar­ket share?
• How long will it take to achieve this mar­ket share?

5. clear­ly dis­tin­guish­es between TAM, SAM and SOM

To ensure that your mar­ket analy­sis is reli­able, you should clear­ly delin­eate the three cal­cu­lat­ed val­ues. Make sure that there is no over­lap and define clear cri­te­ria for each area. Doc­u­ment the assump­tions and sources used to make the analy­sis com­pre­hen­si­ble. Also ask your­self the fol­low­ing ques­tions:

• Are there clear, non-over­lap­ping cri­te­ria for TAM, SAM and SOM?
• Can you clear­ly delin­eate each area?
• Have you made sure that you are not antic­i­pat­ing parts of the SAM in the TAM?

6. ana­lyzes mar­ket trends and exter­nal influ­enc­ing fac­tors

Now it is impor­tant to include oth­er influ­enc­ing fac­tors such as indus­try trends (e.g. tech­ni­cal devel­op­ments or legal frame­work con­di­tions) and social trends that could increase your impact (e.g. sus­tain­abil­i­ty funds or social inno­va­tion). You can then ana­lyze pos­si­ble exter­nal risks (e.g. reg­u­la­to­ry changes, eco­nom­ic fluc­tu­a­tions) that could influ­ence the mar­ket. Also ask your­self the fol­low­ing ques­tions:

• What trends could influ­ence the suc­cess of your impact start-up?
• What exter­nal fac­tors should you keep an eye on in order to be able to react to changes?
• Are there any polit­i­cal or legal devel­op­ments that could influ­ence your tar­get group or your solu­tion?

Next chap­ter: Check­ing assump­tions

Anoth­er impor­tant step has been tak­en: You have car­ried out a mar­ket analy­sis for your solu­tion and looked at trends and oth­er exter­nal influ­enc­ing fac­tors.

Next, we rec­om­mend check­ing your assump­tions by talk­ing direct­ly to the tar­get group and col­lect­ing feed­back. We will do this in the next chap­ter.