Market Research vs Market Size
- noha79
- Jun 2
- 3 min read
A quick and simple guide that explains the main differences between market research and market size to help you understand more about market research and market size. At the end of the article, you'll find a quick comparison to help you better understand the differences, as well as a short quiz to test your understanding of the information you've gathered.
What is Market Research?
Market research is a systematic process that aims to collect, analyze, and interpret information about the market, including the environment surrounding a product or service, target customers, purchasing behavior, and competitors.
What are the Types of Market Research?
1. Primary Research:
Conducted to collect new data directly from the source:
Personal interviews
Questionnaires
Focus groups
Product testing
2. Secondary Research:
Relies on pre-existing data:
Industry reports
Government data
Market articles and analyses
Statistical databases
What are the types of Data in Market Research?
Qualitative: Interviews, focus groups, observations
Quantitative: Surveys, statistics, data analysis
What are the Main Objectives of Market Research?
Market research aims to understand the market and the surrounding environment. Here are the most important:
Understanding who the customers are (demographics, habits, values)
What are their needs? How can they be met?
What are their pain points?
Who are the competitors? What are their strengths and weaknesses?
What are the factors that influence the purchasing decision? (Price? Quality? Service?)
Main outputs of Market Research
The main outputs of market research are graphic reports that help you:
Accurately define your target market (customer persona)
Develop appropriate products
Develop an effective marketing plan
And make pricing and distribution decisions
What is Market Size?
Market size is a numerical measure that reflects the economic potential of a specific market. It's also known as "how much you could earn if you captured a certain share of the market."
How to Calculate Market Size?
Top-Down Approach
It starts with the overall industry (top) and gradually filters down (bottom):
Example: Food market = $10 billion, plant-based products represent 10% ⇒ Plant-based products market size = $1 billion
Bottom-Up Approach
It is based on the company's own operational data:
Projected number of customers x Average price x Annual purchase frequency = Serviceable Available Market (SAM)
Market Size Key Terms
Abbreviation | Full Name | Definition | Size | Purpose | Key Characteristics |
TAM | Total Addressable Market | The theoretical total possible market of all customers who could use your product or service worldwide. | Largest | Measure of Total Market Potential | - Theoretical and optimistic - Does not consider geographic or capacity limitations - Used to estimate the largest opportunity. |
SAM | Serviceable Available Market | The market that can actually be served within the TAM based on your capabilities and target area. | Smaller than TAM | Defining the actual addressable market. | - More realistic - Considers geography, language, and infrastructure - Shows the current available market. |
SOM | Serviceable Obtainable Market | The portion of the SAM that you can actually earn based on your budget, capabilities, and operational plan. | Smaller than SAM | Realistic revenue forecasting and financial plans | - Most realistic - Reflects your projected market share - Used to forecast revenue and attract investors. |
Main outputs of Market Size
The main outcomes of market size are reports that help you:
Know how profitable the market is
Determine the size of the opportunity
Making investment and financing decisions
Setting realistic sales targets
In conclusion
A quick summary of the key differences between market research and market size
Market Research | Market Size |
Helps you know who you should sell to | Helps you know how much you will earn or generate from this project |
Answers: "What does the market want?" and "Who is the customer?" | Answers: "Is the market big enough?" |
Qualitative and Quantitative research | Purely Quantitative |
After reading this article, you'll be ready to take this quick and fun quiz on market research and market size.
