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B2B Calculations: Market Volume Estimation -

B2B calculations: market volume estimation


You plan to diversify own business, to exit on new markets, to launch new product line, to improve goods you manufacture or services you provide. Good goals. But do you know market volume, otherwise, is there a probability for your plans being successfully realized? Keep reading to learn how and what for it is necessary to estimate market parameters.

Market volume and its general capacity are important as objective information about market which urged to save company’s management from unjustified expenses and unreasonable hopes, i.e. from “expensive” mistakes. Market estimation is a job for professional marketing researches agencies working on b2b market These agencies can conduct researches of home appliances market in CIS’ countries and electrical equipment in the European Union. Professionalism and principle of diversified approach consists of possibility to estimate any market is necessary. However, to estimate the market you are interested in is possible independently, knowing certain parameters and methods.

Case study in B2B:

Autumn season is considered as successful period for «home supplies», it can be kitchen accessories, chandeliers, fixtures, home furniture and other utensils, ware, bedding and etc. Therefore this category (wholesale goods) has been chosen for practical case study.

Make a reservation (probably, for b2b companies this term will be excessive), market capacity is maximum possible value of certain goods and service (or groups of the goods, services) which all companies during certain time period (a year) under certain conditions can sale. Market volume is an indicator of real sales which all companies under existing conditions have for 1 year. In short terms, the first one is expectable, theoretical and the second one is real market parameter. Market capacity is used, more likely, for market prospects prediction. In given business case market volume will be estimated.

Initial data for estimation:

Wholesale b2b products: let it be kitchen ware. An analysis can be spent either for each product group (for example, ware and bedding) or for each good separately. In the second case estimation will be more exact.

Wholesale price. Market volume is measured in monetary expression. For b2b sector it is wholesale prices for chosen goods.

Where to take information? From competitors’ price lists. Wholesale prices in most of the cases are in opened access for the potential client. With a sales volume expression it is more difficult. In order to find such information about competitors you may need to read their press releases. It is possible to base on own business experience and try to define a mid-annual sales volume.

Territorial coverage of a market is not less important parameter than the first one. If you have interest in regional market, get acquainted with all companies presented on it. If your company plans an exit on new market (Russian, German and etc.) define its borders and existing participants. Territorial coverage is defined proceeding from company’s purposes: to estimate existing or new, regional or world market.

Time period: a year or a season. The choice also depends on company’s plans. It can be an estimation of entering new market efficiency during a certain season or definition of the best time to launch new product on the market.

It is possible to divide the market into segments: hypermarkets with home supplies; retailers and etc.

Volume market estimation:

So, you need to know market volume in the following cases:

business diversification
product’s modernization
new product launching
new project launching
to enter commodity markets
There are many direct and indirect approaches to the estimation, but the most popular and easy are the following:

using the secondary information;
using official statistical data about volumes of output.
It is necessary to note the following feature: ones markets are well studied, opened and clear for the analysis, the other ones (for example, sector of business services) are more specialized, so information about these markets is not enough for objective estimation.

Market volume should be estimated regularly because it varies from time to time. Increase or reduction of the market size (volume) depends on a number of factors: macroeconomic changes, new technologies occurrence, consumers’ life style changes, manufacturers’ marketing efforts and many other influencing on the market.

It makes sense to analyze the scheme of advancement of a product to the consumer during working out of the program for market volume estimation. It is expedient to combine some (two or three) methods, because any of offered below methods can not show an objective market picture. If the divergence of estimations does not exceed 10-12 % level it means all calculations were made correctly. If results disperse more than on 15 % start to search for errors. Perhaps, it is necessary to specify methodology of calculations or the initial data.

Indirect estimation’s methods

At a lack of statistical (i. e. objective) data or absence of resources on marketing researches company can apply indirect methods of market volume estimation. Try to put into practice the following methods:

By analogy. The market size (volume) defines by other (similar) market parameters. Let’s admit, the volume of world ware market is equal to X, the volume of world porcelain ware market is equal to Y. We also know the volume of English ware market (Z), than the volume of English porcelain ware market (W) can be estimated under this formula: W=Z*(Y/X). Another example considers regional features: sizes of one regional market can be defined from its volumes in the other regions, taking into account “regional” factors: population and demographic characteristics, life level, GNP, rate of inflation and the other ones.

By adjacent markets parameters. For example, the size of “chocolate” market can be defined taking into account a size of packaging and paper market. To make this estimation more reliable it is necessary to receive information about manufacturers and types produced packing.

Standard consumption. This method is based on summarized consumption of this product per 1 customer (it can be wholesale buyer), increased by a number of consumers. If for the certain goods consumption’s norms are established.

Extrapolation. The sizes of the present market can be defined by last years parameters (if a mid-annual market growth is well known). Read more about how to raise your sales up.


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