Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester
Estimating Market Opportunity Size
1
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 2
Forecasting: source of uncertainty
The art of prophecy is verydifficult – especially withrespect to the future.
-- Mark Twain
It is far better to foresee even without certainty thannot to foresee at all.
-- Henri Poincare,Mathematician
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester
How do we estimate the size of market opportunity?
3
Logical Reduction Approach
Potential Target Market
Available Target Market
Attainable Target Market
Penetrated Target Market
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 4
ATAR Forecasting Model: The Chain Ratio Method
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester
Estimating online grocery shopping
5
Number of households 126.22 million
% of households with Internet access 87%Awareness 50%
Will order groceries online if available 25%
Discount of survey intentions 50%
Grocery purchases per household per year $5300
ØMarket forecast: $ ???
Example
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 6
Forecasting
The new product forecasting directive:
To accept that error will exist and work to develop the best, most meaningful forecast possible, coupled with an understanding of what underlies the forecast and its associated consequences.
Your forecast is going to be wrong.
Forecasting: Assumptions and Risks
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 7
_Develop critical assumptions._Pessimistic, likely, and optimistic scenarios needed._Describe different scenarios and develop and plausible stories of the future. _Identify a range of outcomes._Forecasting requires a combination of data and judgment.
Forecasting: Assumptions and Risks
New Product Forecasting: An Applied Perspective, K. Kahn (2006)
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 8
The marketing plan: Financials
_Revenue• Sales• Price
_Cost• Direct cost• Indirect cost
Marketing PlanAssignment
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 9
Questions to Consider: forecasting sales
• What is the revenue source of your new product?• How do you define your target market?• How are the likely interest of target customers?• How can your new product create new customers? • How can your new product increase purchases of
existing customers?• Who are your competitors?• What should be the price of your product?
Marketing PlanAssignment
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 10
Marketing PlanAssignment
Questions to Consider: forecasting sales
• What factors may influence market demand? How do these lead to different scenarios? • Competition• Social environment• Economic environment• Technological environment
Launching Your Concept
University of IllinoisAt ChicagoInterdisciplinary ProductDevelopment
Innovation CenterSpring Semester 11
Marketing PlanAssignment
Identify market research needed
• Secondary research • Demographics
- e.g., SimplyAnalytics• Usage behavior
• Primary research