One of the biggest submission hurdles we see as the Edison Nation Evaluation Team is mass market appeal.
In the past, we outlined Why It is Important for Your Idea to Have Mass Market Appeal. In this InvENting 101 post, we’re going one step further and diving into how market potential is defined.
“Everybody needs one of these!”
You can have the greatest idea in the world, but without the audience to adopt it, there is no path to success. So, in order to give your idea it’s best chance at success, after completing competitive research, define your market potential.
Market potential is the total demand for a product in a given environment.
There are five main elements to determine market potential.
Market size is the total market sales potential of all companies combined.
The addressable market is the total revenue opportunity for your product. The available market is the portion of the addressable market for which you can realistically compete. This can be based on a variety of factors, including but not limited to geography, resources, capacity constraints and more.
To define your addressable market, collect data by researching market studies, journals and even government reports, all accessible online. Use this data to estimate the available market to determine which market segments you should pursue.
Here is an example provided in the Forbes article “How to Identify Your Market and Size Up Competitors:”
“Your product, for example, may be able to treat drinking water across the world and you have your eyes set on the European market. But several countries in Europe have laws limiting foreign content in municipal water systems, thus shrinking the size of your available market.”
Market Growth Rate
Market growth rate is determined by checking the facts and figures of the last five years of the industry you’re in.
Data highlighting which industries are growing and at what percentage can be found online or in newspapers. Ongoing industry trends are important as they can forecast the future of your product. For example, for many, many years, books were all the rage, but now physical books have been replaced by E-books which is causing a decline in physical book sales (though if you ask me, I still love turning pages!)
Profitability is the degree to which a business or activity yields profit or financial gain.
Determining and forecasting your profitability is important to understand your market potential. If your product is going to give low profitability, then volumes need to be high. In contrast, if the product is going to sell in low volumes, then the profit needs to be higher. An example of this is can be the sales of a large appliance, say a refrigerator, versus the same of a small kitchen gadget – measuring spoons.
As we’ve discussed in other InvENting 101 posts, you need to know and understand the competition in an industry to determine the market potential for the product you’re launching.
If the industry has high competition (the app market, for example), the entry barriers are going to be high and at the same time, establishing your product will require more of an investment.
A perfect example is large versus small businesses. In many industries, small retailers are suffering because large multinational sellers can sell more and are more well-known. It has forced small businesses to rethink their strategies to attract new customers and differentiate themselves, like offering exceptional customer service.
Product and consumer type
How frequently is your product going to be bought again?
A great example by Hitesh Bhasin in “How to determine market potential for any product or service” is soap versus refrigerators. Once you purchase a refrigerator, it is unlikely you would purchase another for several years. But in a year, how many bars of soap will you purchase? That is equivalent to 300-400 bars of soap per individual in their lifetime. Multiply that by a billion and you can understand the market potential of the soap industry.
Is your product completely new in the market?
Adoption rate is very important, particularly with new innovation. Your concept may be your life-changing, but if it is awkward to use or hard to understand, it will have a low acceptance rate which will negatively affect sales.
We certainly do not expect our community members to be experts at evaluating the market potential for a product. At a bare minimum, before submitting your idea, you should be asking yourself:
Who is my target audience?
Is that audience going to easily understand and subsequently adopt my product?
Is my product unique enough to differentiate itself from the competition?
What we hope is that this information can help you when you are looking at the mass market appeal for your product concept.