RESULT OBTAINED
Decision concept
Market size: producing a defensible estimate
What must be established
A useful analysis keeps its controls visible.
- 01
Choose a unit suited to the decision: revenue, volumes, accounts or uses.
- 02
Reconcile at least two independent estimation methods.
- 03
Present the range, the reference year and the sensitive assumptions.
Decision reference
Make the next choice more explicit.
DECISION SUPPORTED
How can the value or the volume of a market be estimated with incomplete data?
DELIVERABLE TO KEEP
A low, central and high estimate with calculations, sources and confidence level.
NEXT ELEMENT TO EXAMINE
Define the marketExplore →Choose the unit before looking for a figure
The same demand can be expressed in revenue, volumes, accounts or uses. The unit is chosen according to the decision: an investment budget is compared with a value, a production capacity with a volume. Mixing two units in the same estimate makes the range unreadable.
- Revenue for an investment decision.
- Volumes or accounts to size a capacity.
- A single unit per estimate, converted explicitly when needed.
Cross-check the top-down and bottom-up routes
The top-down route starts from a published market and applies documented filters to it; the bottom-up route multiplies a number of customers by an observed spend. Each has its biases: the first inherits a third party’s definition, the second the spending assumptions. Their gap is information, not a flaw to hide.
- Top-down: published source, scope, filters and year.
- Bottom-up: number of accounts, annual spend and usage rate.
- A gap above the threshold set in advance requires the assumptions to be revisited.
Publish a range and its assumptions
A defensible estimate gives a low, central and high value, the reference year and the two or three assumptions that move the result most. The reader can then judge its robustness without redoing the calculation and knows which evidence would shift the decision.
- Low, central and high values, with the reference year.
- The most sensitive assumptions, named.
- The evidence that would narrow the range.
20 · ORIGINAL ASSET
Reconciling a bottom-up and a top-down estimate
Worked example
Two independent methods rarely reach the same figure. The gap becomes a question to investigate, not a silent average.
Download the case as CSV ↓Bottom-up
€21,600,000Accounts × spendRelative gap0.0%Converging estimates
Top-down
€21,600,000Reported market × filterTeaching case · simulated data · no real-world market conclusion.
Resources
Reuse the method and verify its foundations.
- Market Sizing + Analysis, University of Waterloo (opens in a new tab)Presentation of the top-down and bottom-up routes and of their use depending on the available data.
- The Aqua Book, UK Government (opens in a new tab)Guidance on analytical quality: traced assumptions, uncertainty and presentation as ranges.
MOVE FROM ANALYSIS TO YOUR DECISION
Compare my markets using explicit criteria
MOVE FROM ANALYSIS TO YOUR DECISION
Compare my markets using explicit criteria
RETURN TO THE DECISION SYSTEM
See the canonical definition of marketing strategy→