Insights Unveiled

Insights Unveiled - Market Opportunity Sizing

• Amanda Seal / Judith Staig / Simon Nordon • Season 1 • Episode 4

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This episode explores the ‘art and science’ of sizing opportunities.  We consider the different levels; from validating the potential for a new product, to estimating the size of a Demand Space. We share suggestions for approaches, and some common ‘pitfalls’ to avoid.  Our guest speaker is Simon Nordon, VP Consumer Products at Capgemini

Judith:

So, hello again, market research friends, and welcome to another episode of the Insights Unveiled podcast, where we try to make sense of the typical business issues that get thrown at the market research department. This podcast is for anyone who wants a deeper insight into the real world of insights and what really happens. So follow us on Apple Podcasts or wherever you normally get your podcast from. So, who are we and what's this all about? Mandy.

Mandy:

Hi, I'm Mandy. I'm a client side market researcher. I've also done a bit of marketing in my time across many different categories across quite a few years now. And Judith.

Judith:

So I was an agency side researcher, but I'm now a writer and content creator for the insight sector and a video maker and also a podcaster. Thank you very much, Randy, for helping me to be a podcaster too. Okay, so we're gonna, we're gonna go on with our episode today, which takes a critical look at how the market research sector tackles business questions, and why market research projects don't always connect to great business decisions. We're taking a typical business issue in each, in each episode and this time it's sizing the market or sizing the opportunity and we're going to lift the curtain on what really happens which can look very different depending on your perspective whether you're on the client side or the agency side whether you're a supplier. We're trying to understand what gets lost in translation along the way and why what happens in reality isn't always the same as what's specified in the brief, proposed in the tender or agreed in the contract.

Mandy:

So across the podcast series to give it a bit of structure, we've taken that logical arc from spotting an opportunity all the way through to innovating, and then finally marketing and selling it. And as Judith says today, we're all about sizing that opportunity. But if you're interested, please do listen to previous topics that we've covered in other episodes. Just an important PS at this point, all opinions are our own and they don't necessarily reflect the businesses that we work for or have worked for previously.

Judith:

Let's get into it. Opportunity sizing, marketing potential. Okay, so Mandy, what's it all about?

Mandy:

Well, this is a very commercial application of market research in all its forms. And very simply, it's about how big, typically in financial terms, an opportunity is. It's an area that personally, I find really difficult. It's a question that comes up a lot and it's always difficult to know how to tackle it. And I think some of that difficulty comes from really knowing what we mean by an opportunity. How are we defining that, that word opportunity?

Judith:

Okay. Yeah, I think you're right, Mandy. I think, I think market sizing is, is a word that strikes fear into the heart of many researchers. I think there's lots of, there's lots of different ways of looking at it, aren't there, and there's lots of different levels that you can tackle it on.

Mandy:

Yes, indeed there are different approaches, and at the most basic level we can be looking at the opportunity for a specific product or service, and that is more straightforward. On the other hand, you've got opportunities for, say, a category of products. which is a little bit more tricky because we've got to think about what we mean by the category. We don't know the extent of that category. But a good example here is if you, if you were thinking in the world of food, if you were trying to understand the, the opportunity for the plant based version of an existing category, for example, that might be something you want to size. But at its highest, and I think most complex level, we could be looking at how big an opportunity is for a need state. Or a demand space, you know, as we, we spoke about in, in episode two. And that is really tricky because if it's very new or, or unusual, of course it's still being defined. So then it is really difficult to know exactly where those parameters are and exactly what we're sizing for.

Judith:

Yeah, so, I mean, it sounds like one thing, doesn't it, market sizing research, but actually, from what you've just said, that's not one thing at all, and, you know, there are completely different methodologies that apply to each of those different levels.

Mandy:

Yeah, there are, but there is a common approach, which we'll come on to a bit later in the episode. So there is a way of thinking about this that kind of makes it a bit more straightforward, I think.

Judith:

Okay. Listen on. Listen on. Do you have, do you have experience to talk about in each of those sort of levels nowadays?

Mandy:

Yes. So my experience is pretty varied in this. in this work, but I've done, I think like a lot of client side market research has done a lot more work on the, the first area, the sort of market sizing of products and ranges. But I always say the latter is a little bit of a, of a dark art and tends to be done by more specialist agencies and consultants. And but luckily we have a consultant as our guest today. So he's also going to talk a little bit more about that, that more ambiguous demand space or, or need space sizing.

Judith:

Yes, the black magic of finding a need space. Yes, that's a really great interview. We'll hear that later on in the episode. Okay, so what's the, from a client side perspective, what's a typical business question? What do business leaders want to know? And what do they chuck at the insights department and say that, yeah, what can you do?

Mandy:

Yeah, well, you can for example, you imagine the scenario you, you might have identified an opportunity for a new product or some, some key trends or need spaces. And you present that to the marketing director, very excited, look at this, this great new thing. And sometimes almost absentmindedly, they'll say, well, that looks lovely, but how big is it? You know, what's it going to bring to my business? What size will this be? And of course that that further additional question can lead to quite, quite a complex project. But yeah, so it can either come up as part of that innovation process that we talked about in the previous episode, or sometimes you can just come up as a, oh, that looks great. How big is it? And

Judith:

You say it sort of, you know, can be almost absentmindedly chucked in as a sort of additional question. Is this not specified to the Influx department at the beginning, you know, with the demand space and also size it, or is it sort of an afterthought?

Mandy:

Sometimes it is, and sometimes it isn't. So, you know, quite often we'll, we start things out looking for opportunities. That's the big ask. What will consumers be buying in the future? But one thing I would say is, even if it's not specified at the start, it's probably something we should always be prepared for, because you can either have to react to that question if it comes, or you can be very proactive about it and say, look, we found this opportunity space, and by the way, we think it's going to be roughly the size of This other category, or it's going to be roughly X percent of the market and so on. So I think even if you're not asked for it, it's really important to be prepared for this question because actually it's a good discipline to get into to understand roughly what the size of an opportunity will be. So whilst questions we've said in questions in this case can be pretty straightforward. There are definitely some areas that can lead to misinterpretation and can maybe derail. if we're not aware of them. So firstly, you know, understanding what exactly we are sizing and what do we need to size is important because businesses can get a bit carried away. And say, for example, they want a full category sizing, which is a lot more complex and. To be honest, less accurate when perhaps all they really need is the sizing for a specific product. But, but in any case, we, we need to really know what we're sizing for also understanding why we need to size the opportunity. Whether it's for, for example, volume forecasting or just simply relative sizes of different competing opportunities within a business is really important because that also leads to the third question, which is how accurate Do we need to be and whether there's a trade off between accuracy and indeed cost and and speed.

Judith:

Yeah, I mean, it sounds like there's a bit of a sort of continuum in a way between, you know, the more straightforward sort of market sizing, which is down at the very specific product or service, right up to the, as you said, the dark art, the higher level of the sort of need space. And I wonder if it's, that it's easier to be accurate down at that more simple level than it is at that more abstract, conceptual sort of level. Is that right? Right.

Mandy:

Yeah, absolutely. Absolutely. I mean, no sizing is, of course, 100 percent accurate. It's not a crystal ball, but you can definitely have more confidence, I think, in the sizing. If something is more clearly defined, the more clearly defined the space, then the better.

Judith:

Brilliant. So what's the best way to then actually tackle this question? You know, your, your your marketing director comes to you and says they want to do some market sizing. What, how do you approach it?

Mandy:

Well, I've got two simple rules and, and one approach for us to consider in this, in this episode. We

Judith:

like, we like simple rules.

Mandy:

Excellent. Simple rules. So simple rule number one is to really apply common sense to any sizing outcomes. So you've done your work, you've got a size, but really apply some common sense there. So how does it compare, for example, to existing categories? And another good one is what what market share. with this size represent if you were to compare it to, to other things in the market? Asking ourselves, you know, are we being too modest with this size or more typically, actually, are we being too bullish? Probably not. Yes, exactly. Are we being too bullish is the more

Judith:

the more usual way people go. Do you have a sort of a rule of thumb? How would you, you know, how would you know you were wrong if you sort of, if you, you know, you calculated your market share, what would tell you you were, you were Yeah, you were being too bullish.

Mandy:

I think it's probably different category by category or product by product, but my personal one is the 10 percent rule. So, and this comes from experience as well. If we're sizing a product and we say, well, what percentage of the category would that be? If it's around about 10%, I know it's probably wrong because it's unusual for anything new to ever gain that much market share. Typically be looking at something two to three, maybe 5 percent depending on what it is. But yeah my personal rule is a 10 percent rule, but I think we all have to find our individual percentage rules.

Judith:

Yeah. I think that I think it's good to have a rule of thumb. Like you say, it could be personal to your particular market or category, but that's that's really helpful. Okay. And what's rule two?

Mandy:

So rule number two is to definitely have assumptions, but to make those assumptions and your caveats really clear to, to the business. And if possible, have a range. Businesses, In my experience, like one number because it's clear and it's simple, but it's, it's frankly a bit daft to build plans based on one number. When you know that there's likely to be a best case scenario and a worst case scenario. So have that range and just make that really, really clear to your stakeholders.

Judith:

So I imagine there's some tension here, isn't there, inside the client organization between you know, the stakeholder who wants that sort of one simple number and also wants to hold you to account for it as well. So how do you sort of manage that tension between You know, giving enough information that it's usable and, and being so certain that you're, you're going to be held responsible for the failure of everything later.

Mandy:

Yeah, absolutely. Well, this is, this is why a range is so important. Because I think you need to remind a business that there are lots of things that can happen once a product gets into a market or once an opportunity gets into a market. You don't know what your competitors are going to do. For example, you don't know that that competitive environment is going to stay the same in the future. Success very much depends on what distribution you get as well, for example. So I think it's just reminding the business that the reason it's a range is because there are some things you can't predict and that by having that, you know, lower and upper level you are, you know, you're actually setting a better expectation because you're absolutely right. The worst thing that can happen is that, you, you build up your volume manufacturing and you, you, you go to a retailer with a certain number. that you think you're going to attain and then you don't reach that and sure as eggs is eggs quite often it then comes back to the market research department to say what what verification are you using, what prediction methods are you using because they're wrong etc. So really be very very clear with the business at the outset that you're You believe that there should be different scenarios and don't get tied into just one number.

Judith:

As with everything, good communication.

Mandy:

Yes.

Judith:

It's a bit of a theme, isn't it? It's a bit of a theme. Okay, and so you said you had two rules and one approach. What's the approach?

Mandy:

Yeah, so the approach I take is the kind of the bottom up versus the top down approach. So if I'm thinking about the, the bottom up approach this can be used for measuring the appeal of a very specific proposition. So something that's a lot more defined. So it can be, you know, how many people might use this product or service, how often, how much, for example. And for this, you can use direct consumer based evidence from things like concept tests or concept product tests or even conjoint studies. And clearly there are some very established agencies that offer very sophisticated methodologies in this area. So that would be a kind of an example of bottom up approach. A top down approach is something I might use for things like demand spaces or needs that are less well defined. And you can ask yourself questions like, well, how universal is this need? What proportion of the population is it relevant for? When or where in a typical day might they use it or access it? And then ask things like, you know, are there restrictions or opportunities for solutions that meet the need? How valuable is it? And so on. As well as, you know, what are the competing products? Are there other things that meet that need currently? And finally, is it something that really is truly unique? Or is it simply an improvement on, on an existing solution? So that would be my example of something like a, a top down approach. And then of course to both, you know, apply that, that common sense test what existing categories are out there and can we use those for comparison?

Judith:

Okay, brilliant. So a couple of things come to mind. Number one is that whenever I hear that there's a bottom up or a top down approach, my question is always, is there some merit in doing

Mandy:

both? Absolutely. Yes, I think so. If you've got the time to do it, I really think that's important. It really helps to validate that number and actually build some confidence around the numbers. It's that sort of classic triangulation approach that we use to data. Okay.

Judith:

Okay, that's brilliant. And then you said that sort of apply the sense test and what existing categories can be used for comparison. Have you got any examples of, of, you know without revealing anything, obviously, but have you got any examples of where you can use perhaps an adjacent category or a similar category? How might that work in real life?

Mandy:

So yeah, that's a, that's a good question. I mean, obviously it relies on you having some good accurate data, sales data coming in to, to the business. But so, so here's an example, we talked earlier about plant based food. So if you had the size of the non plant based version in that, that food category, if you were looking to size the plant based version, you might start to understand, well, how many vegetarian or vegan. Vegan's are there in the population that's that's of interest and then start to compare that, you know, you've got a good comparison point then to the size of that plant based version, if you've got those numbers.

Judith:

Yeah. Okay, brilliant. That's a great example. Thank you. That really helps you bring that to life.

Mandy:

Thanks, Judith. So I think it's time to go to our guest. We have a guest today who has done some work in both client side research, but also on the consultancy side and has a lot more experience, frankly, of sizing opportunities than certainly I have. So, yeah, we'll go to our guest interview.

So, I'm here with our guest for this episode. please tell us who you are and a little bit about yourself. Well, thanks, Mandy. My name's Simon Norton. I guess the thing, I mean, about me, I'm slightly maybe defining myself by my career, but a career that's nearly 30 years in consumer products across snack food, pet care, food. Alcoholic beverage, non alcoholic beverage sometime in industry, sometime in consulting covering strategy, marketing, finance, supply chain, a whole load of different things across which you can do of course, if you've spent 30 years doing it. Fantastic. You are absolutely the right person then to be asking about our topic for this episode, which is market sizing or opportunity sizing. And, Simon, what what sort of experience do you have with that particular topic? And can you maybe share with us an example just to illustrate how you would approach something like market sizing? Well, I've approached it from a whole lot of different ways. I've approached it. As I said before, in my introduction, I've, you know, maybe when I was in supply chain, I was very much in the mode of trying to make the opportunity sizing as accurate as possible, and maybe conservative. When I was in marketing, maybe I wanted to inflate it and make it make my opportunity look bigger than it than it than it might have been. And yeah, I've done it from all those different functions. And in terms of how I've gone about it I would certainly say there's art and the science to it. There are many ways of doing it. And you know, it's something I started doing back in my twenties. I was forecasting sales of existing products and forecasting sales of new products. And I guess that was the, you know, where I would start. I was quite simply looking at the levers of, of sales. I was looking at data that we would buy in. I was looking at rate of sale data. I was looking at distribution data and I was doing some benchmarking. And That, that is a good place as any to start you can benchmark against products that exist today. And and, you know, it's very easy to explain the methodology that you've applied there. That's one simple way of doing it. I've done other more complicated ways of doing it. I've approached it through a lens of say, consumer segmentation data. Where I have you know, interviewed a representative sample of people. I've expanded that data set to be representative of annual sales across multiple categories. And I've looked at identifying really niche opportunities by layering need upon need upon occasion upon activity to try and really home in on a very niche space. So two different ways of doing it there, I guess. One, the high level benchmarking, secondly, down to, trying to identify individual consumers in an individual occasion to, to, to identify the size of the price for something. That's really interesting. Just earlier in the, in the podcast episode, Judith and I were talking about that top down and bottom up approach and how sometimes by taking both, you can kind of triangulate your data as well and make sure that you're applying that common sense view to see if they, they both end up in the same kind of place. Well, you've taken words out of my mouth really there, Mandy, because triangulation I think is a key word. And I would certainly advocate for giving a range. When one gives a size of the price for something you know, if you're, if you're giving it to a decimal place or to to a, to a single unit of in, in terms of the size of this thing people tend to get rather hooked up on the accuracy or not of what you've provided. If you're able to provide a range and triangulate to that range, I'll have to use this method to come up with this number. I've used this method to come up with the other number. So I think it's between these two numbers. and the. easier to understand by the users of that data, the better that said, some people don't really want to understand the method. They want to say, you give me the number. That's great. It's given me all I need. Now I'll run away and I'll build my business case off that number which is, you know, which is quite dangerous. So I would certainly advocate for how allowing the having the users of that number, understand how you've arrived at it and the accuracy or otherwise That's, that's great. That's really clear. Thank you. One thing our listeners are always keen to understand, though, is where things can go wrong when approaching any business issue particularly with regards to communication between, say, the business leaders and stakeholders and its agency partners. In your view, what, what can go wrong or what usually does go wrong? And what's the best way to avoid that? I think. A very common problem that we have here and I've seen this, I've, I've commissioned research. I've, I've been a consultant. I've been on both sides of that conversation. So I think, I think a key thing there is leaving nothing misunderstood and, if I put my consulting hat on, I would say that's all about. Scope, scope management and clearly laying out what you are, what is in scope and what is out of scope. And that is scope in terms of what you are delivering, scope in terms of the macro aims of a particular piece, scope in terms of the deliverables themselves at the depth and breadth of those things. A high level business case you might write in some in, in a in a scoping document. What does that actually mean? The more clear you can be the better. So I think scope is the number one thing that I would bring out there. over communicate. If you like clearly, there are changes often as you go through a piece of work. So wouldn't it be nice if we could do the following thing? That's really interesting. Me. Could you do that as well? So change management. Or, or, or change control, I should say, is, is, is a, is a really important part of scoping as well. Now I, I was taught early on in my consulting career that you should get into a practice of having your client understand change control. It may be that there is no cost impact to that change that they're requesting, but you should still be in the process of, right, well, I'm going to submit a change control document that says, we've discussed this, I'm now going to do this, and, and that is a, That is an addendum to your scoping document. And and ideally you would start by educating your client by handing these in quite regularly and saying, well, you've asked for this. I'm going to do it. And these are initially start being for free because there's no material impact on your delivery. Just so that when they ask for something that is going to materially impact it, you can say, well, actually that is going to cost more money. So. Here's that. Here's that change control piece that goes along with that. So scoping and change control. Absolutely important from my perspective and in my experience. Second thing I would say in terms of what can go wrong is sort of ways of working. Sometimes. So you know, that should also be clear with with the client. And is the client expecting you on the site with them? How many people are they expecting to you to have to need from their team to deliver the piece of work? Are you going to disappear off and come back and pull a rabbit out of the hat four weeks later? So those those ways of working those touch points. And again, in my experience. Over communicating regular touch points, you know, if it's if it's if it's a month long piece of work certainly every week, if not, maybe every half week, you should be talking to the client status. How's it going? Is everything, you know, is the state is all still green? And that's and that sort of thing. Yeah, and as I say, the expectations that you have of the client, you know, the data delivery you know, what you're going to do with that, when you're going to come back to them. So even treating things like the data requests that you're going to make of them. As often is the case up front, that is a deliverable itself. Here is my data request. I want to send that to you four weeks in advance. It gives you the time to do that. And then I've got everything and I can do the work that I need. So factoring that into your into your project planning. That data request. I've been on the receiving end of that. And actually it's amazing how that can come as a real surprise within the client organization that suddenly you're, you're asked for an order. awful lot of data. Of course you are, because that's how you get to more robust and accurate forecasts. I think that's right. I think that's right, Mandy. And I think because what can Often land on your desk is a laundry list of things that are required and it's certainly worth challenging back to your your consulting or your research partners to say, well, why do you need that? There's quite often it can be a proforma that's just, just been taken from the last project of the similar type has been done. It can send. All your people off searching for data, which isn't necessarily required. So, so agreeing that up front and having some conversation back and forth as to what is required and why is useful. Fantastic, Simon. Finally, it would be great if you have one or maybe two pieces of advice for our listeners about approaching opportunity sizing. I think I've touched on a few of these already. So excuse me while I repeat myself. But first of all is, you know, taking the data. I've been guilty of this in my life where I've taken data completely at face value, and I haven't validated that data. I've been in situations where we've brought in point of sale data and we spent a lot of time validating it. So I think the first thing I would certainly recommend is you know, whether you know, you might be using these, these household name organizations. To provide you with data, which you take at face value do validate it. A lot of it is, you know, particularly if you're in a, say in a, in an undersampled, underrepresented part of the market a, a case in point from my own experience would be. be impulse sales of confectionery. For example you know, you're not going to get the same degree of confidence in the number. So validating the numbers that you're provided with and, and applying factors to those, to make sure that you're, you're comfortable with them. So that would be the first point I would make. The second point would be something I've already mentioned, which is around triangulation of the data. If you've got multiple ways to arrive at the number, top down, bottom up, what have you then so much, the better. And I think what that often will mean is that you provide a range of low to high for a particular opportunity sizing piece or a market sizing piece that you're doing. So, triangulating and giving a range. And and last but not least, well, while it, Might fall on deaf ears. Be absolutely clear in the assumptions that you're making. Document those and and your method as well. You know, your your client, your internal stakeholder or whatever it might be should want to know how you you've gone about it. And also. When you're when you finally move on to bigger and better things yourself and the next incumbent in your role picks up the baton and needs to understand what you've done, then absolutely having the sort of the workings shown and the assumptions documented is is definitely something to do. Thanks so much for that advice, Simon. Thank you. And another great guest interview with Simon there. Um, so interesting and so interesting to have somebody with a really, um, sort of consultant mentality onto the podcast as well, because, you know, this podcast is all about bringing together people from different backgrounds, um, and to have a consultant in is, is really, really helpful because, you know, his thinking's very different actually, but we can, we can learn an awful lot. One of the key things that came out for me was, um, you know, this idea of being very, very clear about what you're sizing. And I think, you know, he's given me a mantra that, that I think I'm going to use in my entire life. which is leave nothing misunderstood. I thought that was absolutely brilliant. And, just really, um, beyond insights into everything, this is really how we should conduct our lives really, because there's so much room for misunderstanding and miscommunication. And if we can eradicate that, I think we'll all be a lot happier. and actually, particularly, the other piece of advice I just thought was so incredibly useful on, you know, he talked about it very much from a consultancy perspective, this idea of being very formal around controlling the change, controlling change management, you know, to the extent of issuing change documents. Um, and I think, possibly in insights, we don't necessarily have to be quite so, so formal, um, about it, but actually that sort of practice. of being very in control of change management and the scope because, you know, we all know scope creep is a terrible, terrible thing and it can happen so easily. The reality is things do change that, that is the nature of big business issues. Thing that you should, one should expect that things will change, but what's, what's nice from Simon's advice is that you, you know, you can and you should keep control of that change and just make sure everyone's clear, um, what has changed and all. how that will affect your approach. Exactly. And this is a change that we can do for you without, without charging you any extra. And unfortunately this is a change that you will have to pay more for. Yeah. And, and it may not even be charged more in terms of money. I mean, it can be take more time or need more people or resource or need more resource of any, any way, any form. Yes, exactly. That's a very, very good point. Yeah, brilliant. So, oh, like bit of a tough subject tackled very well, I think. And I hope so. I've learned a lot and I hope, I hope all of our listeners, I hope you've learned a lot as well from that. And, um, look out for our next and final podcast, which will be coming up quite soon. And it's about communication. So that's a really good one. Great. Well, thanks very much for listening, everyone. And see you soon, Judith. Yeah, see you soon. Bye.