УДК: 339.13.017
D.M. ZIUBANOVA, student,
NTU «KhPI»,
V.I. KOVSHIK, student, NTU «KhPI»,
MODERN METHODS OF MARKET SIZE
ESTIMATION
У статті розглядаються основні підходи до визначення
розміру ринку в процесі маркетингового дослідження і аналізуються особливості
їх застосування. Висвітлюється вплив різноманітних факторів
на процес отримання маркетингової інформації. Зазначається важливість
врахування масштабів діяльності підприємства та наявних ресурсів для здійснення
дослідження при виборі підходу до оцінки розміру ринку з метою підвищення
ефективності системи маркетингу компанії. В зв’язку з відсутністю
універсального підходу пропонується схема вибору методу оцінки ринку виходячи з
наведених факторів.
В статье рассматриваются основные
подходы к определению размера рынка в процессе маркетингового исследования и
анализируются особенности их применения. Освещается влияние различных факторов
на процесс получения маркетинговой информации. Отмечается важность учета масштабов
деятельности предприятия и имеющихся ресурсов для осуществления исследования
при выборе подхода к оценке размера рынка с целью повышения
эффективности системы маркетинга компании. В связи с отсутствием
универсального подхода предлагается схема выбора метода оценки рынка исходя из
приведенных факторов.
In the
article the
main approaches to determining market size in marketing research process are examined and peculiarities
of their usage are analyzed. Influence of various factors on the process of
obtaining marketing information is considered. The importance of taking
into account the scale of the enterprise and resources available for research
when choosing an approach to the estimation of market size to increase the
effectiveness of company’s marketing system is distinguished. In the absence of
universal approach the scheme of selection of market
assessment method based on of those factors is proposed.
Market size estimation is one of the most important
elements of marketing research. Indicator of market size is used in the management
process of a company to assess the situation in a particular market, allows to calculate the competitiveness of companies and products,
to identify new business opportunities, to plan new ways to expand operations.
The use of such precise
indicators as market size provides reasonable decision making in the process of
developing an effective marketing strategy and making the current management
decisions. Market size as a numerical indicator allows the assessment of
competitive environment industry as accurately as possible, a company’s place
in it (market share).
Such
scientists as P.Kotler, J.Evans,
J-J. Lambin, G.Bagiev, V.Anurin were engaged
in researches of the given problem. In their works a definition of the market
size in a context of research of the competitive environment in detail enough
and completely is covered, however, to features of marketing researches
depending on specificity of the studied market sufficient attention has not
been given. The complexity of the subject and the absence of concrete methodic
approaches to market size assessment cause an urgency of a theme of given
article.
Therefore, the objectives of this paper are the following: to
investigate modern methods of market size estimation, summarize existing
information about them and to make conclusions about their practical
applicability for marketing purposes at different types of enterprises. To
achieve the given objectives the following tasks are set: to make review
of features of methods being explored, to examine peculiarities of each
method’s affordability and effectiveness, to define spheres of their
application taking into account defined strengths and weaknesses of each one.
Market size is a real
production sales in this market in a given period [1].
Market size estimation is needed for business diversification, expanding the
boundaries of distribution, improving the product, starting a new project and
launching new product. This process is an obligatory stage of any company’s
activity regardless of industry sector or sales volume. Knowledge of this
parameter is needed to prepare plans and budgets, especially medium-and
long-term, to form programs of development and modernization of enterprises,
the prepare feasibility studies and to construct new facilities, etc. P. Kotler outlined the importance of market assessment and
wrote that company’s sales analysis cannot be used independently to compare its
performance with the results of the competitors. Management must constantly
monitor the market share, which belongs to the firm [2]. And for this purpose
market size is obviously needed. J-J. Lambin also emphasized the urgency of market size
estimation with regard to strategic planning and particularly market share
evaluation. He also accentuated that measuring the market share as a part of
marketing information system functioning may be accompanied some difficulties,
related to the limited availability of required data, that depends on industry
and company specificity [3].
Features of concrete marketing research depend on specificity
of enterprise activity, on purposes of carrying out the given research.
Approach to the selection method of an investigation, the frequency of
reevaluation, and selection of input data depends on many factors.
An important factor
influencing the choice also is a competition type in the market: in the case of
pure competition and in the case, for example, oligopoly approaches to the
assessment of market size may differ due to differences in the number of
competitors, the availability of information and other features of the
competitive environment. It is obvious, that in the case of pure monopoly of
the evaluation becomes meaningless.
An additional point is that it
is necessary to take into account the market segmentation, because consumer
behavior and marketing activities of the company in various segments can essentially
differ. In such cases the market sizes are defined separately on each segment,
and then are summarized. For example, determining the market share of
pharmaceutical companies requires identifying two main segments:
over-the-counter drugs and prescription drugs. In turn, these two groups are
divided into commodity subsegments, such as
cardiovascular, oncologic, antihistamines and other medications. It is
important to create a more complete image of the market. Also the segmentation
of consumer groups, if the same product marketed to different consumer groups,
should be taking into consideration. In addition, it is necessary to pay
attention on industry characteristics that affect the availability of
information: the openness of company’s financial statements in the market, the
prevalence of "shadow" schemes of work, etc.
The next point is estimation
the boundaries of the territory within which the market size is estimated.
Transnational companies do business in a global scale while areas for the small
businesses are single countries, regions or districts. In accordance with the
business scale the sources of information will be different.
Important input parameter for
the assessment is the initial price of the product (service) in the case when
the market size is measured in monetary units. When determining the market size
it is important to distinguish between the usage of retail and wholesale
prices: if the company operates in a segment of b2b, then the calculations will
be based on wholesale prices, and if b2c – on retail.
One more important parameter
is time. Most often, a year is selected as this parameter, because during this
period it is possible to determine seasonal changes the in demand for goods or
service most accurately. For seasonal goods such as fresh fruits and
vegetables, shoes and clothes it is necessary to calculate the market size
during the different periods of time (seasons) for obtaining a full picture of
the market and planning of marketing activity.
Authors of article pay
attention on that fact that universal approach to estimation of market size
doesn’t exist because of various combinations of factors, stated above. In
modern marketing there are the following approaches [1]:
-
based on structural characteristics;
-
by production volumes;
-
by volume of consumption;
-
by sales volumes;
-
indirect
methods.
On the basis of structural
characteristics, such as export and import volumes, manufacture scales, the
markets of the countries and regions are analyzed. The main source of the
information for similar researches is the data of state statistics. The given
method is very convenient and clear, however the received information can be
incomplete and inexact because real volumes of production and international
trade operations can be hidden because of concealment of real data by the
companies, especially in some branches and the countries, and also some subindustries can be not included in statistics.
In the next approach based on
the production volume analysis, the market estimation is carried out in a
country scale on the basis of an assessment of domestic production regardless
export-import transactions (at their small share). The advantage of this
approach is that carrying out field studies often is not required, because only
statistical data more often are used. However, this method has the same
disadvantages as the previous one, especially if the industry has high share of
shadow economy. In both methods, as in the case of the analysis of structural
indicators, as well as production volume, it is difficult to accurately assess
the market for services.
It
is more difficult to estimate the market, using the approach based on the
analysis of consumption volumes in those cases, in which one static data is
insufficient and serious marketing research is required. This method very
expensive as include expenses on following actions:
-consumer
surveys;
-expert
estimations;
-personal interview.
Usually
this approach is applied to the markets of consumer goods. This approach is
characterized by possibility of research of circumstances not perceived by
means of observation, but reliability of the information is lower, a problem of
the samples representativeness appears. [4]. So, the
sample structure under the significant indicators (income level, other
social-demographic and economic indices) should correspond to entire assembly
of consumers of the given product.
Also, the market size can be
determined using the last approach, based on sales results in the wholesale and
retail trade, which uses such methods as audit of retailers, the survey of
wholesale companies and expertise.
An audit of retail trade is a
measurement of goods flow from producer to consumer through the retail trade
network. Audit of retail trade allows to define volume
of the market and a share of all its participants, market development in time,
availability of various trademarks, areas of the best market opportunities for
company [5, 6]. In this method indicators of sale of
all retail sellers are summarized. In a survey of wholesale companies the main
goal is to determine the necessary parameters such as volume and frequency of
purchases and brand preferences, and no less important – the search for such
qualified individuals.
Heads of commercial services
of the companies-participants of the market, representatives of professional
associations, research officers of branch institutes, journalists and
analytics, dealing with as problems of the given market and officials supervising
activity of branch can act as experts. Even in the most closed market the information
on sales volumes is accessible. In some markets companies exchange information
themselves, e.g. it is practiced in the advertising market.
A
number of indirect methods that allows to calculate the size of the market at a
lack of statistical data or shortages of resources on their research exists [1,
6]:
-
By analogy: The market size is
defined proportionally to indicators of the similar market.
-
By the adjacent markets: The
commodity market can be determined by the market size of complementary goods to
this commodity.
-
Normative Consumption: Market size is
equal to the product of consumers’ number and the rate of commodity
consumption.
-
Extrapolation: Market size is estimated
on the basis of historical data and growth rate of the market.
So, article’s
authors conclude that a choice of approach to market size depends on scale of
company’s business activity and resources available to perform such a research.
According to this statement authors propose to use the following matrix chart
to approximately define the appropriate way to estimate market size (Figure 1). The chart is not
comprehensive, but it’s purpose to the simplify the
process of needed approach definition and help marketing managers to avoid undesirable
expenses and to obtain better results.
In the
article important factors influencing market size estimation and most popular approaches
to such research were considered and existing bibliographical sources on the
theme were explored. Thus, it is possible to conclude that there is no common
approach to define market size in different market conditions, industry’s
peculiarities and competitive situation. Also the dependence of approach on the
business activity scale and available resources for performing market research
was outlined. As the result of the investigation authors propose the universal
model for determination the more suitable approach to market size assessment.
This model is designed to help managers in the process of making marketing
decisions. The model can be improved and enhanced to be more relevant to the
market investigation process and also can be adapted to various conditions in
different spheres of companies’ business activity.
Figure 1. Selecting
the market size estimation approach.
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Надійшла до редколегії 12.03.11