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Determining B2B Market Size and Market Share
By: Geoff Vincent Founder & CEO BizCompare Inc.
Specifically: What is the size of the market that you play in? What is your current market share? The answers to these two questions are the foundation for your Marketing planning. we will present two scenarios that any CEO or marketing leader can employ to determine market size and/or market share numbers. It answers the question: What are all the general industries to which your customers belong? Approximately.Introduction You’re the CEO of as growing B2B business. what is the size of your market? The second scenario is more involved (and will cost a bit of money) but will give you much more detailed information such as: What are all the specific industries to which your customers belong? More specifically.Determining B2B Market Size and Market Share . you don’t really know the true potential for your company. what is the size of your market? What are the predominant “firmographics” for your customers (i. 2010 Page | 2 . In this white paper.e. sales.) What is the profile of your best customers? How many prospects match that profile? Let’s get started! Copyright Geoff Vincent BizCompare Inc. employees. While things have been going great. The challenge is how to answer these questions and have confidence in the numbers. etc. The first scenario is what I call the “cheap and cheerful” solution that costs nothing but time.
street address. Indentify the industry to which your customers belong. A Google search would show a result as follows: Look for search results for your customer in business directories (as highlighted above) like BizCompare. a sales administrator or any person with some smarts and eye for detail. city. state. AllBusiness or others. Presumably. When you are done. zip and phone. One customer at a time. this is an easy task so if you have an assistant. Generate a short list of some of your CURRENT customers. Manta. Next. if possible I would advise trying to use more customers in your analysis. Here’s an example for a fictitious company: Sample Company 1234 Anywhere Ave Sacramento. Example: Copyright Geoff Vincent BizCompare Inc. 2. * While I suggest a total of 40-50 customers. Objective: You want to indentify the NAICS code for each customer.Determining Industries and Market Size – The Cheap and Cheerful Method Here’s a 4 step process that won’t take you longer than a few hours to complete. I recommend you get a list of 20-25 of your largest customers and another 20-25 of your fastest growing customers*. This next step will take a few hours because you need to do some high level research on each of your customers. click on one (or more) of the business directory links and look for the company’s NAICS code. 2010 Page | 3 . Here goes: 1. This will just increase the sample size. This needs to be a list that is manageable but also large enough for some commonalities to emerge (more on that later). However. ergo the accuracy level. so you can delegate the task. You need their company name. cut & paste the customer’s name and address into Google. Put all this information in a spreadsheet. you’ll know approximately what industries you play in and the market size. California 95838. you would like to have dozens more just like them.
Now. Record the number and description in separate columns in the spreadsheet beside each customer name. 4. AllBusiness or a government site like the U. Now you have your top NAICS industry descriptions and you want to find out how many companies are in those same industries. Or You can simply go directly to these sites and search/browse for your target industry. 3. again. So I suggest that you look at 3 or more sites to Copyright Geoff Vincent BizCompare Inc. 2010 Page | 4 . indentify the DOMINANT industries by looking for industry patterns. there are bound to be some variations between sites and database. Starting with the ones that occur the most (the 20%) you now have your target industries to help fuel your growth. Both actions will deliver the same result which is to cluster companies by NAICS description.S Census Bureau. perhaps for the first time. Either way. Look for the total number of companies in your target industries. You have a couple of approaches to choose from: You can do a Google search using the industry phrase (“5614999 . You now have 40-50 of your best customers all in one spreadsheet ready for analysis.The number “561499” is the official NAICS numeric code. What is the data telling you? How many unique industries are there? What are the industries with the most occurrences? You’ll likely see a classic 80/20 rule emerge where about 80% of revenue will come from 20% of the industries. in short order. look for sites like BizCompare. Go to the NAICS description column and apply a “sort” or “filter” function. Now. you are looking at objective information telling you the specific industries to which your best customers belong. The words “All Other Business Support Services” is the official NAICS description.All Other Business Support Services”) and. Example: Note: When looking for number of companies in a specific industry. Manta. you will be presented with the number of companies for that industry. Repeat for all customers.
Complete! You now have: Your dominant industry classifications Your approximate market size Next steps: You are now equipped to go to any business list provider and request quotes by providing them with the NAICS industry classifications you just researched. take an average or select a number you’re most comfortable with. Copyright Geoff Vincent BizCompare Inc.the see number of companies on each site. 2010 Page | 5 .
Eliminate dormant customers. in general. Indentify the industry to which your customers belong. a company called Melissa Data. you would LOVE to have hundreds more customers just like them. city. 2.. Let’s dive in: 1. Let’s show an example using published pricing from Melissa data: You submit 10. They will take your database and. You want to generate a list of ALL your very good present customers. but varies depending on the accuracy of the data in your list. state and 5-digit ZIP Code The average percentage match rate is 30% .Determining Industries. street address. perennial money losers (ones that you keep just for the cash flow but would otherwise “fire”) and any other customers that. Presumably. sales volume and NAICS code (all recommended). the elements you want to append and the percentage match rate they ultimately achieve.60%. for whatever reason. all in separate columns. you could live without. sales volume and NAICS code appended to as many Copyright Geoff Vincent BizCompare Inc. 2010 Page | 6 . Firmographics and “Best Customer” Profile This is a somewhat more elaborate effort and it will cost some money but it will give you substantially more detailed information to base your planning upon. etc. Generate a list of your CURRENT customers. They have a minimum order fee of $500 but they charge based on the size of the initial database you give them. source (how they came to you). For each customer. Cost: I researched one provider of this kind of service. Market Size. full address with zip code. (and internationally) with rich information on each company. sales.000 records and you want employee size.S. poor payers. These companies maintain massive databases of virtually all companies in the U. average sale (if applicable). Your list should now represent the customers that you would consider to be your best customers. This next step is the part that will cost some money because you will need to engage a data cleansing and append company. do the following: Apply an address correction software to your data (this helps with matching) Run your database against their universe of companies Endeavour to match each company in your database to the same company in their universal database based on company name. They provide data cleansing and enrichment services and will also sell lists of companies for marketing purposes. include company name. They will return your database with extra data appended to each matched record that can include employee size. Put them all in a spreadsheet. phone number and you might as well include any other data at hand like their sales rep’s name.
000 records Employees range Sales volume range NAICS code Total Cost Match rate 40% 40% 40% Appended 4. What I can tell you (and I worked for Dun & Bradstreet for 10 years) is that companies who do this kind of sensitive data work go to great lengths to handle a customer’s proprietary data with utmost care and security. I’ll show you examples of these in a moment. Frankly.records as possible. Their cost would look something like this: For 10. they have to because if there was even a whiff of data security issues. Confidentiality: You may have reservations about data security and the confidentiality of your customer information in the hands of a third party.000 Price per 1000 $60 $60 $69 Cost* $240 $240 $276 $756 * Example: 10. Using the matched data. you now want to do a few database exercises to give yourself separate views of sales volume. Also. 3. In this example. 40% is not a bad result. It is possible to achieve a much higher rate. I prefer to use the Pivot Table function in MS Excel because it’s a commonly used software and (for me) it’s not too difficult to learn. which is a profile of your best customers. Here’s a good introductory video about Pivot Tables. So it’s not absolutely necessary to have a high match rate to get your desired outcome. you can quickly see where the numbers cluster. in the world of basic data matching. perhaps as high as 75% but that would entail a much more elaborate matching process that comes with a price tag that is many multiples of the solution I’ve outlined above.000 of them will have this key firmographic info appended to it. they have maximum incentive to handle your data with extreme caution. we’re going to take data and turn it into information. The Copyright Geoff Vincent BizCompare Inc.000 x 40% x $60/M = $240 Match rate: You may wonder why only 40% or so are matched and this may seem low to you. it could do serious harm to their business. in this example.000 lines of data and collapse it into useable tables. When the raw data is organized into summarized tables. Develop the KEY firmographics of your database. In short. you would get your full database back and 4. In other words. 2010 Page | 7 . NAICS code and State. we matched 4. They achieve a match rate of 40%. This is your raw database to start the next phase of the work. How to do the analysis: There are probably a number of methods and softwares that can enable you or someone on your staff to do these analyses.000 4. However. The purpose is to take our 4. employees.000 4.000 and having that as our sample set should deliver a statistically accurate outcome.
80% 1. Employees and NAICS code. Grand Total 19 19 43 4000 Customer % 4.$20MM $20MM . Your sweet spot are all companies within this sales volume range. Please note that you are the one who identifies the sweet spots.35% 10.$500MM $500MM .499 500 . This is where your best judgment comes into play.43% 1. Let’s do an example using our 4. 2010 Page | 8 .$1 Bill.07% 100% Over 76% of your customers have sales volume between $500.47% 0. Number of Employees: Employee Range 1-9 10 . Your sweet spot are all companies within this employee range.000 matched database scenario.00% 4.000 or more Customer # 1501 886 614 425 312 57 40 165 Customer % 37. Grand Total 4000 100% Copyright Geoff Vincent BizCompare Inc.$50MM $50MM .999 1. Over $1 Bill.94% 5.47% 1.24 25 .52% 34.$10MM $10MM .$100MM $100MM .000 and $20 million.49 50 .clusters for any given firmographic element are what I call the “Sweet Spot” and all of the sweet spots combined provide a “Best Customer Profile”.92% 3.$5MM $5MM .99 100 -199 200 .53% 22. You’ll use Pivot Tables to develop summarized tables for Sales Volume.63% 7. The pivot table function does not do this for you.72% 0.$500M $500M .$200MM Customers # 181 1390 1142 313 231 278 237 149 $200MM .76% 6.75% 28.82% 5.13% Almost 86% of your customers have between 1 and 99 employees.15% 15.$1MM $1MM . Here’s a view of the tables you should build using the Pivot Table function: Sales Volume: Sales Volume $1 .56% 7.
50% 2.63% 1.63% 7.45% 1.13% 5.70% 28.38% 2.18% 5.48% 1.93% 1.38% 11. this can show either a) regional strengths to build on OR b) a missing opportunity to expand into under penetrated States.23% 23. Copyright Geoff Vincent BizCompare Inc.73% 6.05% 1.78% 3.88% 3.65% 6.28% 2.98% 5.50% Your customers are derived from 153 different industries but only 19 NAICS industries make up 76% of all customers.38% 2. 2010 Page | 9 .38% 1.40% 4. Your sweet spot are all companies within these 19 industries.65% 4.90% 100% Optional information: With more than 70 percent of customers coming from just 10 States. Customers by State: State NY Customer # 454 Customer % 11.Top Industries (by NAICS): NAICS Code 561421 561422 561439 56144 56145 561491 561492 561499 56151 561591 561599 561611 561612 561613 561621 56171 56172 56174 56179 NAICS Description Telephone Answering Services Telemarketing Bureaus and Other Contact Centers Other Business Service Centers (including Copy Shops) Collection Agencies Credit Bureaus Repossession Services Court Reporting and Stenotype Services All Other Business Support Services Travel Agencies Convention and Visitors Bureaus All Other Travel Arrangement and Reservation Services Investigation Services Security Guards and Patrol Services Armored Car Services Security Systems Services (except Locksmiths) Exterminating and Pest Control Services Janitorial Services Carpet and Upholstery Cleaning Services Other Services to Buildings and Dwellings All others (134 NAICS codes) Total Customer # 695 445 325 216 191 155 135 100 95 91 88 82 79 77 65 59 58 55 49 940 4000 Customer % 17.98% 1.38% 8.20% 2.35% IN PA FL TX CA OR OH NH NV Others Grand Total 375 345 306 269 247 239 226 195 188 1156 4000 9.88% 4.13% 8.
2010 Page | 10 . This is the firmographic profile of this company’s best customers: Sales Volume: Employee Size: Top Industries: $500M .Our final analytical step is to combine all of these “Sweet Spots” into one profile. You simply go to a business list provider..$20MM 1 . give them the firmographic profile of your company’s best customers and ask for a count of all companies that match that profile. Determining Market Size and Market Share.this is the market size.99 561421 561422 561439 56144 56145 561491 561492 561499 56151 561591 561599 561611 561612 561613 561621 56171 56172 56174 56179 Telephone Answering Services Telemarketing Bureaus and Other Contact Centers Other Business Service Centers (including Copy Shops) Collection Agencies Credit Bureaus Repossession Services Court Reporting and Stenotype Services All Other Business Support Services Travel Agencies Convention and Visitors Bureaus All Other Travel Arrangement and Reservation Services Investigation Services Security Guards and Patrol Services Armored Car Services Security Systems Services (except Locksmiths) Exterminating and Pest Control Services Janitorial Services Carpet and Upholstery Cleaning Services Other Services to Buildings and Dwellings You now have statistically reliable data that tells you: Your best industries Your best customers by size for sales volume and number of employees Your best geographic markets 4.. Equipped with the firmographic profile of your best customers. Easy! Copyright Geoff Vincent BizCompare Inc. you now want to determine how many other companies match that same profile . This last task is easy and should not cost any money to accomplish.
adjust that number down by 20% to 25% (to broadly reflect sales volume and employees). All the very best. Please proceed using our own best judgment on what company you might like to engage with this kind of project. However. Use the resulting number and divide by the market size and you now have your market share. Lastly. In other words. then you can take the resulting number and divide by the market size and you now have your market share. you may have a business growth strategy that specifically targets companies that fall outside these ranges. If you have an analyst who can do this data manipulation. Copyright Geoff Vincent BizCompare Inc. My one suggestion would be to test these secondary ranges and analyze the results before going full steam ahead with expensive acquisition programs. either of the solutions above will provide good estimates of size and/or share but are not a substitute for an intensive. These are the niches that your current sales and marketing efforts would indicate to be your best bets for new customer acquisition.000) that have all three of the firmographic characteristics in common. that is not to say that one shouldn’t target prospects that fall outside these ranges. robust market size and share exercise but which could easily be a five or even six figure investment. The so called “sweet spot” ranges for sales and employees are intended to show the best ranges to target. we would ideally want to identify the number of customers (of the 4. 2010 Page | 11 . I would be satisfied with simply taking the number of customers who match by industry code. In fact. A few final thoughts about this approach: The methodologies described above are intended for use by small or medium size companies who require good estimates of market size and market share but do not have the resources to hire staff or organizations that do this for a living (and charge significant fees for their services).Determination of market share: In this example. I currently do not have any kind of commercial relationship with Melissa Data and have not personally experienced their abilities regarding data cleansing and append services. In the absence of this analytical skill set.
com site is a business information portal that features over 100 industry research reports and 1.About the Author: Geoff Vincent is the founder and CEO of BizCompare Inc. Geoff can be followed at his blog and on Twitter. lead generation.bizcompare. which owns and operates www. Quick links: BizCompare home page Browse our 19 industrial categories to drill down to 108 specific industries See a sample industry research report See a sample company profile Copyright Geoff Vincent BizCompare Inc. Geoff’s background includes a plethora of senior marketing and management positions at leading B2B companies including American Express. Popular uses for the site include market research.com: The Bizcompare. 2010 Page | 12 . competitor analysis and B2B marketing planning. FedEx. About BizCompare.5 million company profiles focused on the business services vertical. CCH and Dun & Bradstreet.com. The site displays key firmographic information in insightful graphs so one can compare companies to their peer group for greater context.
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