Know Your Market and Audience: Available and Addressable Market
Launching and growing a project or startup requires not only a great idea, product and team. Knowing the dynamics of market and audience are more important than ever in this fast and exponentially changing world. In this blog series we are touching a few points about market and audience dynamics.
There is certainly no shortage of really interesting project opportunities both in the corporate and public sector as well as in the realm of startups. The question is often if, how and when a project can succeed?
- What is the net growth rate of the market and audience?
- What portion of the market is really addressable?
- How does the composition of the cohorts change over time?
- Is there enough time to accelerate and compete?
This blog series will explore these question. In this blog post we will look at the question:
What does “available, addressable market” actually mean?
There are a couple of criteria which should be on the checklist for entrepreneurs and investors:
- There are buyers who do have a need for the product and service.
- The product is able to meet the specific needs at least on par or better than the competition.
- The potential buyers are prepared to make a purchase or adopt the product
In other words: it is not enough to assume that there are billions of users in the internet and therefore this would be the addressable market. The more realistic assumption is to find out along the above mentioned criteria what the actual available and addressable audience would be.
And of course this assumption is changing over time as the market develops, matures and eventually declines. Also, the competitive forces are an important factor. If a business fails to invest in new product development and in innovation of current products it will fall behind. A competitor’s product may set a new standard in the market. Then the current product becomes simply obsolete. As a result the company is not able to address the market anymore.
As the market becomes saturated it becomes increasingly difficult to find and acquire new customers. In fact, a successful business can become its own competitor. A fast moving business may capture the market swiftly. And then the remaining, addressable market is declining at an increasing speed. This is often the case when a viral adoption of a product or service is taking place.
This simulation example illustrates this dynamic. As the business is picking up speed, it captures an increasing share of the market. Note also how the growth rate changes in a relatively short period of time. This is typical for a growth challenge. What we see in many projects is the failure to initiate new product or market development early enough.
One way to sustain the growth in the long run is to prepare a new addressable market, for example with a new product, a new regional sales team or upgrading the existing product, e.g. going from B2C to B2B.
More about this and other concepts in the “Shape Growth” Series and the Service and Software-as-a-Service depth briefing in WITTIGONIA Online Academy (http://academy.wittigonia.com).