What's your market potential?

2-min read

In an increasingly competitive funding environment, how to be taken seriously by investors starts with accurately and honestly predicting your brand’s market potential.

The market potential of a brand should be within the context of the addressable market. 
 
Evaluate yours using these three approaches:

1. Bottom Up

2. Top Down

3. Household Penetration

Bottom Up
This is the most accurate and trusted way to predict your market potential because it is based on your current performance. 

• Show latest period velocities (units / store / week)

• List out number of future stores

• Apply velocities

For D2C

• Show growth rate

  • New customer acquisition rate

  • Retention Rate (% repeat)

• Project out

 
Top Down

You’ve seen this concentric circle before. You want to show total category as the biggest circle, then a segment within that category next, and your sub-segment at the core. These should correlate to what Nielsen or IRI has coded as categories and segments.
 
But our products don’t fit any category – we’re totally new
 
A lot of brands want to say they are creating a category where none exists. While a new category may be created in the future, for now, syndicated data will code you somewhere that currently exists – which should be where you are being merchandized (on the physical or virtual shelf). Go with that. This approach supports your bottom up projections. 
 
You can get category data from primary sources 

• Nielsen, SPINS, or IRI for in-store

• Stackline or Junglescout for Amazon

or secondary sources 

• Market intelligence reports like Mintel

• Trade publications like Food Navigator

• Industry groups like Good Food Institute

 
Household Penetration

Household penetration refers to an approximation of the percent of total households that are users. It is an extrapolation based on panel data. You don’t have to get fancy Nielsen panel data to get usage and consumption rates. Commodity groups track volumes (shipments) and have studies on total household penetration, consumer purchases per month, and per capita consumption rates. Talk to your suppliers and get connected to their commodity reports.
 
Once you have a realistic market potential, next you want a growth strategy tied to the capital amount you are asking for in your fund raise.

More on this next week.

All my best,

Jennifer

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