Whenever a startup comes into an existing, it needs to create a market for the products and services startup is offering. It is important to first determine your target market. This helps your start-up to optimize products, create brand awareness and reach potential customers. Market sizing is the analysis of target market.
Top-Down Approach
It involves starting with market-wide information then refining it down to the specific target market. Market wide data is available from government information / database departments, market research firms and trade associations.
Target market is considered as total available market. However some marketers differentiate between two markets one is “available” and other is “addressable”. Addressable represents total revenue potential of the market whereas available is the ground where your startup has to compete.
Let say your startup is going to provide health and fitness services to working women and you are using top-down approach. First gather data and then exclude those women who are not interested and not willing to pay premium prices. Now you have to target those women who are looking for healthy life styles and willing to pay premium prices.
Bottom-up Approach
This approach says to engage customers and distributors by arranging focus group discussions, interviews, questionnaires, and field observations. You may test your products in a pilot market.
I assume you are going to sell online education / learning courses, assignments and material. For this purpose, you have to reach students, teachers and educational institutions getting their feedbacks, opinions and expectations, This will guide you to optimize your courses.
Supply Side Approach
In this case look out your competitors, see their financial results, study their products, strategies. Add sales of competitors to establish overall market size. However, in some cases, it will be required to some kind of refinement based on estimation and assumptions. Data regarding your competitors is available from annual reports, journals, trade press releases, promotional literature and marketing materials.
In summary, before you launch your startup it is important to analyze target market and identify your potential customers.
