August 24, 2005
Today's lesson in market sizing is brought to you by the letter Tee
Posted by Mark Addison
After diving into the world of golf tees with my last blog entry and discovering that there are more than 180 different kinds of tees available to the average consumer, I was left wondering just who it is that actually buys all these tees and how there can possibly be a big eneough market to support all of these variations of what seems like such a simple product.
To answer these questions, I have used the logic-based market sizing method described in the Coyote Blog and discussed by Ken in his post about demand assessment criteria to create a model for estimating the size of the market for golf tees.
This system follows three distinct steps: define the equation in english, plug in some numbers based on estimates, and then seek sources for better data to back up or replace your estimates.
Using the golf tee example, begin by defining the annual canadian market for wooden golf tees as being equal to the number of tees used per round multiplied by the number of rounds played by canadian golfers each year. To get to this result, you can use the following formula:
Canadian Population x Percentage of Canadians that Golf x Percentage of Canadian Golfers that Use Wooden Tees x Average Number of Wooden Tees Used Per 18 Hole Round x Average Number of 18 Hole Rounds Per Year
Now that the model has been established, its time to plug in some estimated numbers and begin working towards the final goal of calculating the actual market size.
The Canadian population can be estimated at around 32 million people and I will say that 10% of Canadians play golf at least once each year. Of these, I would estimate that 95% use wooden tees and based on my personal experiences I would estimate that people generally use 4 tees per 18 hole round of golf. Finally, I will estimate that the average Canadian golfer plays 3 rounds of golf each year.
Using these estimates, the model produces a market size of 36,480,000 wooden golf tees in Canada each year.
Obviously these numbers aren't exact, but that is how the method works. The next step would be to research each component of the calculation and replace the estimates with actual values, but that will have to wait for another day.
Posted by markaddison at August 24, 2005 01:31 PM
