Marketing Circle Elasticity
In speaking with numerous entrepreneurial companies, both manufacturers and retailers, they almost always fail to realistically look at the size of the market in determining their approaches to sales and marketing. I need more fingers and toes to count the number of companies that totally overestimate the size of the existing market they are entering.
This failure to realistically look at the market is partially due to the lack of accurate, readily-available data about our market. As a result, in many situations, the overly optimistic entrepreneurs run their businesses with a very false sense of market size.
Additionally, many companies work towards higher sales levels without understanding market size and elasticity and are frustrated with their lack of sales success.
So what is “market size” and what are its attributes?
I call it MCE, or Marketing Circle Elasticity. There are two basic factors in MCE: size and elasticity.
In other words, imagine the marketplace as a circle. We need to determine both its current size and if it has elasticity.
We can certainly determine the size of the circle using current sales levels. Then you need to ask two questions. First, what percentage of this market do you control with your business? Second, can you create elasticity? In other words, can you grow the market?
From iPods to Tuners to Watches
A great example of this market control is Apple. It has approximately 75 to 80 percent of sales in the portable MP3 player market. What is, in my opinion, even more important is that Apple, with the iPod, has increased the size of the portable MP3 player market significantly. It wasn’t the first company to introduce an MP3 player; many other versions of this type of product were available before the iPod, but none was all that successful in terms of sales.