Should Market Analysis Be Bottom-Up Or Top-Down?

< p > we have developed a new product named < a target= "_blank" href= "http://www.91se91.com/" > clothing /a >, and want to bring it to the market. We need to make a market analysis for our business.

Which prediction method is better: top-down analysis or bottom-up analysis is better? < /p >

< p > to understand the size of the market and understand that your ability to penetrate the market is the most important: if your market is too small, no matter how creative your product is and how competitive your price is, you can't make money.

Top-down and bottom-up analysis are two basic ways to assess that market.

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The P > top-down analysis is calculated by determining the whole market and evaluating your share in that market.

A typical top-down analysis may be like this: "well...

I'm going to sell a widget that everyone can use, because there are 300 thousand people in our area, so even if I get 5% of the people in this market, I will make 15000 single businesses.

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< p > it sounds a bit vague? It sounds optimistic. This is the way that top-down analysis usually takes. It's like the old sales forecast we heard in hundreds of product promotion meetings every year. "2% of 1 billion dollars is 20 million!" /p.

< p > bottom-up analysis is done by estimating the potential sales to determine the total sales.

Bottom-up analysis evaluates where the product can be sold, the sales of similar products and the share of available sales available to you.

Although it takes more energy to do so, the results are usually more accurate.

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< p > below is the way that bottom-up analysis may work in real life.

Let's assume that you have just developed a prototype of a bicycle inflator, and you want to make sure that your pump has a market - a profitable market that will enable real business to continue to develop.

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< p > let's take a look at these steps: < /p >

Where are the sales of P? 1. gas pumps? Obviously, most of them are sold on bicycle companies, but some major retailers and online stores also sell them.

Now you decide to focus on the bicycle industry, because the shelf space occupying WAL-MART or Target is at least impossible at the beginning.

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< p > 2. how many bicycle shops are there in the United States? Let's suppose that you don't want to try to sell overseas.

According to some surveys, you find that there are about 4100 bicycle shops here.

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< p > 3. how many of these bike shops are willing to store your inflator? That's the tricky part.

Talk to more bicycle companies as far as possible to see if they are willing to sell your inflator.

For example, if you talk to 100 businessmen, if 30 businesses claim they will sell your inflator, you need to take a conservative attitude to cut it down to half.

Although a boss may agree in principle today, they may not pass tomorrow.

And according to the natural law, you may not be able to spread your products to every willing business.

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< p > then infer.

If 30 of the 100 shopkeepers say they are willing to accept your product, then you have to cut this figure by half. Then it is reasonable to assume that the 15% bicycle company may really be willing to accept your product.

4100 multiplied by 15% equals 615, so your inflator may be sold in about 600 bike shops, less than a href= "http://www.91se91.com/news/index_s.asp".

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< p > 4., historically, how many pumps have been sold in each store in a year? This is a good question, but a better question is, "how many cars can a bicycle company sell in a year, such as our products?" your inflator is a high-end and unique inflator that can limit your market.

Always compare with the same thing.

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< p > for example, the bicycle shops you talked to say that they sell 200 inflator on an average.

Very good -- but how many can you sell to each store? The answer is not 200.

Every shop has all kinds of inflator.

So you have to take a conservative attitude, assuming that you can sell 30 pumps to each store every year.

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< p > this math problem is very simple: the 615 bicycle shops multiplied by 30 inflator in each store equals 18450 inflator.

The difficult thing is to collect data so that you can do mathematical problems.

The more difficult thing is to have confidence in that data.

Although I keep using the word "conservative", the hypothesis we just made is still very optimistic.

You have to let each store store your pump.

You have to get a share of the sales of the existing high-end inflator.

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< p > some sensitive factors: double the number to prevent the result from exceeding your expectations, cut the number in half to prevent things from being as planned.

Together with your selling power to every bicycle company, connecting with every bicycle company, especially since most of them are independent, will require you to pay the time and money you may not have (of course, you can try to sell your inflator through distributors; here is an introductory suggestion to find distributors and cooperate with them).

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< p > the key to estimating the size of your market is to be objective and to make an honest and fair assessment of how feasible your product or service is.

In most cases, bottom-up analysis is more moderate, but it doesn't matter.

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< p > always wear realistic expectations for a target= "_blank" href= "http://www.91se91.com/" > dress < /a > business activities - so at least for sale, the only surprise will be pleasant surprises.

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