Articles

Step-by-Step Guide to Estimate the Market Size of your App Idea

by Arun Goyal Managing Director

It's always some feeling of accomplishment whenever people come up with their app idea. They are full of enthusiasm and optimistic as the key keep on imagining how their idea can revolutionize the market.

Now, what's the next step?

This is where the business needs to tighten up their belts and do some preliminary research into whether their inspired idea is profitable or not.

Estimating market size is critical in finding out if there is sufficient demand for your product to succeed. This step comes before idea validation, and it's when you are gaining feedback from your target market that they really want the app you are building. 

How to estimate the market size of your app idea?

Despite how crucial it is to estimate the market size for your app idea, many people have no idea about how to do it. Thus, it is very crucial on the part of a fintech software development company to have good knowledge of it.

So how it needs to be done? What are its benefits? What to carry out the process of estimating the market size of an app idea? Let's uncover the answers.

Once you understand the market size, it gets easier to differentiate between addressable market and available market. The addressable market tends to be the total revenue possibility for a product or service, whereas the available market tends to be the sum of the addressable market to compete for. If you are keen on developing a product that handles and serves the customers well and it can be done by finding how different these two markets are.

Prior to estimating the market size of your app idea, you must see the business perspective. You get to learn about the current trends in the market with the market size. And with the market movement continuing in a single direction for a certain period, then you get to realize the actual demand. After a good understanding of this logic, you can succeed in determining the market size of your app idea.

Why is it necessary to assess the market size of your app idea?

A lot of time and resources is invested to develop and market an app. Certainly, you don’t want it to get unnecessarily wasted. And hence it is vital to estimate the market size of an app idea. It also helps to know the audience well as then it gets easier to execute the process of market size assessment.

With market sizing, you get an idea about the market trends. The mobile app developers get the idea of the necessary drivers of demand, as market movements often go in one direction or another for a period of time. In fact, these trends often indicate whether a substitute for your product is on the horizon that could have an impact on market size.

Take Kodak, for example. Before the late ‘90s, almost every picture was developed on Kodak film in the US. Quite evidently, its name was synonymous with photography. However, after that digital broke big, and the number of digital cameras had a massive increase, and it went from 4.5 million units in 2000 to 28.3 million units in 2007.

After having a good idea regarding why it is necessary to do the estimation, it is now time to take a step further.

These are the steps to follow to estimate the market size of an app:

Recognize your target audience

The research that is executed during the entirety of the mobile app development process and after it too, plays the key role in identifying apps target audience. Once you figure out the audience that is certain to download your app, then you can plan the design and functionality, accordingly. By knowing their preferences, it gets easier to develop a mobile app that they will just adore.

Meanwhile, when you do something that is liked by your audience you will certainly have a relatively small market, but these people that you have in this particular group are more certain to install the app and will also keep the app on their devices for a really long time. It is great to know the target audience, and it is especially helpful when you do the app marketing.

But how to identify the target audience?

It is crucial to identify the target audience for the success of any mobile application. You need to gain a lot of access to the demographic data as well as collect information from small groups. Prior to you define the type of target audience, ensure that the market doesn’t already have an app or program in the market functions similar to your app. After all, if a similar app is already present out there in the market, then your audience is less probable to install your app unless the idea is taken to a new level altogether.

Estimating the volume of target audience is vital too

After identifying the target audience, next, it is time to access the volume of the target audience. Well, you can start by looking for the enterprises having profiles which are quite similar as of your target audience. In order to quantify the market, industry databases can be used. You can exploit a number of sources to get the numbers you are searching for.

Meanwhile, you need to keep one thing in mind that if it is not a growing market, then your app idea will certainly fail to make an impact. Ensure the volume of your target audience doesn't shrink. You can use one of the best tools out there, Google Trends that shows whether the search volume related to your keywords is going up or down.

Determine the product circulation

Mobile apps play a huge role in transforming your experience regarding an already existing method. With the number of mobile apps increasing at a high pace, more and more people are using mobiles and mobile apps.The penetration rate of mobile apps can be easily determined by the rate of circulation of a product in a specific group of audience or population.

As you market a mobile app, you must find out how consumers behave while they use different apps and what are their preferences. The penetration rate of the mobile app is a function of the nature of your mobile app.

Mobile apps that have a specific purpose to serve tend to have low penetration rate. So that way you penetration rate for technology-based apps can be assumed to be 70%. However, a more generalized app will be having a high penetration rate. This metric is quite important as it leads you to an essential insight.

Calculation of market size

Next comes the calculation of the potential market size of your app. Well, all you need to do is multiply the penetration rate by the sum of target customers. Supposedly, the penetration rate is 70% and the target customers are 3000 in number, the potential market volume will be –

3,000 X 70% = 2100 

Same way, the monetary value of the market can be calculated. Simply multiply the market volume by the average value.

Apply the estimated market size

After you have implemented the above-mentioned steps, it's now time to maximize the impact of the data. It requires some additional efforts. Check out each assumption made by you during the first estimate. Then see if any changes can be made to those assumptions. The scenarios can be calculated by best case and worst case, as well as the estimated scenario. It is important to monitor that the initial assumptions are accurate and also check in case they need to be modified.

There is completely no use of market size estimate if you don't apply it. With the help of the size and characteristics of the market, your financial planner can easily determine how to market his services in the best way possible. Even though market sizing appears to be a tedious job, ultimately, it brings a lot of value to your planning and marketing endeavors.

Bottom Line!

It is important to recognize the target audience and their volume in order to estimate the market size for an app idea. It plays a crucial role in making your app a success. At the same time, try your best to understand your users as it will have a major impact on mobile app development as well as on advertising methods. You can hire iOS app developers for your next project with Octal IT Solution.


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About Arun Goyal Advanced     Managing Director

96 connections, 1 recommendations, 277 honor points.
Joined APSense since, December 17th, 2013, From Jaipur, India.

Created on Apr 9th 2024 05:00. Viewed 81 times.

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