XLS Eng
XLS Eng
XLS Eng
Using the Market Size and Market Share Model, Table, and Graph
The prebuilt Market Size and Market Share Excel model calculates market size and market s
upon the formulas and processes discussed above.
There are two sections in the model: an input section and an output section. In the input se
to input your model assumptions, providing values for total consumers in the potential marke
of consumers in three different target markets, the average number of units and price paid b
each of the three target markets, and the number of customers, number of units, and numbe
firms currently selling in the market.
The output section automatically calculates values for you -- do not enter anything into the y
they contain formulas. The output section calculates the market penetration indices, estimat
market size in units and dollars, estimates the size and value of the three target markets, an
customer, unit and dollar shares for three firms in the industry.
Once you become more comfortable with running market size and market share analyses, tr
Excel models.
The spreadsheet entitled Graphs contains graphs which help illustrate what market penetrat
represents. All of the Graphs automatically populate when you enter values in the input sect
model. Do not enter or change anything in the Table or Graph.
Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed t
are developed solely as the basis for class discussion and are not intended to serve as endorsements,
or illustrations of effective or ineffective management.
Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbs
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitte
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harv
Market Size and
Market Share Analysis
Quantitative Toolkit
Sample Problem
Larson is trying to estimate the market potential for Stacy's Pita Chips. She knows that the
food consumers in the U.S. market. Of these consumers, around 20% are heavy snackers
and 30% are light snackers. Market research shows Larson that heavy snackers purchase
moderate snackers purchase 8 bags of snacks annually, and light snackers purchase 3 bag
on average. Heavy snackers were very price sensitive and waited for sales or used coupon
a bag of snacks. Light snackers were price insensitive and usually paid full price, $4.99, fo
snackers sometimes bought on sale, but sometimes paid full price, so they paid $3.49 for a
Currently, only 20 million snack food consumers purchased pita chips for their snacks. Of t
heavy users, 13 million were moderate users, and 1 million were light users. Three firms cu
in the pita chip segment: Stacy's, which had 10 million consumers who purchased 90 millio
6 million consumers who purchased 63 million units, and Kirkland, which had 4 million cons
million units. In 2008, Stacy's sales were $429 million; Lay's sales were $125 million; and K
$75 million.
How big is the potential market (in consumers, units, and dollars) for salty snacks? What i
pita chips? Based on these answers, how much growth potential is there for a company lik
market penetration of pita chips in the three target markets? Which one offers the most un
Looking at the current market for pita chips, what percentage of the business is driven by h
and light users? Looking across the three target markets, how many units of pita chips do
purchase? How much, on average, does a consumer currently pay for a bag of pita chips?
Calculate the market share of the Stacy's, Lay's, and Kirkland in consumers, units, and dol
How big is their lead?
Solution
Pen and Pencil Solution
First, we will evaluate the market potential. If we want to use the market penetration
make assumptions for) two pieces of data: 1.) the total number of consumers in the
2.) the total number of consumers currently buying in the product category.
The sample problem provides us with the total number of consumers in the potential
The sample problem also provides us with the total number of consumers currently b
So, using the market penetration formula, we can calculate the percentage of potent
buying in the market to assess how much incremental growth is left to capture in the
Hence, only 13% of the potential consumers for pita chips are actually purchasing pi
portion of the potential market available for future growth.
We can then use the same formula to calculate the market penetration indices for ea
markets. First, we need to calculate how many potential consumers there are in eac
multiplying the percentage of consumers in each target market by the total consume
Then, we use the information given to us in the sample problem on how many consu
currently purchasing to plug these numbers into the market penetration formula to yi
by target market of:
So, we can see that heavy users are more heavily penentrated than moderate or ligh
untapped, but all three segments have significant room for growth.
We can also use these numbers to help calculate the market penetration in units and
all three target markets. We use the information on the purchasing frequency and av
sample problem to convert number of consumers into units per year and dollars per
So, the potential market for pita chips is quite large, 1.4 billion bags per year and $4
So, the current market for pita chips is 233 million bags per year and $629 million do
Notice how the consumer, unit, and dollar market penetration rates are all mathemat
Now, we can move on to understanding the current market. The sample problem as
a pita chip consumer purchases and what the average price point paid is. We can u
market to answer this question.
So, on average, across the three segments, consumers purchase 11.65 bags of pita
Using the numbers given to us in the sample problem and the numbers we calculate
each target market is to our business by calculating the target market's share of cons
share formula:
So, heavy users account for 30% of the current consumers purchasing, 54% of the c
dollars generated in the pita chip market. Moderate users account for 65% of the cu
current units purchased, and 58% of the current dollars generated. Light users acco
1% of the current units purchased, and 2% of the current dollars generated.
Finally, we can analyze the competitive situation by calculating the market shares of
given to us in the sample problem and plugging it into the market share formula yield
So, Stacy's has 50% of the consumers, 39% share of the units sold, and 68% share
is higher than its unit share, we know that Stacy's price point is higher than the mark
Since Stacy's consumer share is higher than its unit share, we know that people who
average. Looking across the three competitors, Stacy's is the market leader with the
and dollars.
Lay's has 30% of the consumers, 27% of the units, and 20% of the dollars. Since La
know that Lay's price point is lower than the market average.
Kirkland has 20% of the consumers, 34% of the units, and 12% of the dollars. Since
share, we know that Kirkland's price point is lower than the market average. Since L
consumers, we know that people who buy Kirkland buy more units than the market a
So Stacy's has the opportunity to increase frequency of purchase among its current
increased purchase may be Stacy's premium price point.
We can calculate the average quantity purchased for a Stacy's, Lay's, and Kirkland c
This yields:
Stacy's = 90,000,000 =
10,000,000
Lay's = 63,000,000 =
6,000,000
Kirkland = 80,000,000 =
4,000,000
We can calculate the average price paid for a Stacy's, Lay's, and Kirkland product by
This yields:
Stacy's = $ 429,000,000 =
90,000,000
Lay's = $ 125,000,000 =
63,000,000
Kirkland = $ 75,000,000 =
80,000,000
Input Section
Directions: In this section, you must input values to run the model. Values must be inp
that are boxed in blue like this: in order for the model to run. The values
currently are just random numbers. If you are confused about what to enter in each cel
the red celltip for an explanation.
2.) Second, enter information about the different market segments that exist in the avai
could be heavy users/moderate users/light users or women/men or adults/children or an
purchasing information. These target market consumers represent potential prospects
customers.
percentage of ava
Target Market #1
Target Market #2
Target Market #3
# of consumers in potential market 150,
2.) Second, enter information about the different market segments that exist in the avai
could be heavy users/moderate users/light users or women/men or adults/children or an
purchasing information. These target market consumers represent potential prospects
customers.
percentage of ava
Target Market #1
Target Market #2
Target Market #3
3.) Third, enter information about the consumers who are currently purchasing in the m
that you used above.
Fourth, enter information about the firms who are currently serving existing customers i
Firm 1 Firm 2
Units Sold 90,000,000 63,
# of customers 10,000,000 6,
Output Section
Directions: In this section, the model automatically calculates the various market sizing
calculates contribution margin per unit and total revenue, total costs, and total profit at t
quantity point. Based on your expected unit sales per month input, it calculates how ma
will take you to reach your breakeven quantity. Remember, do not type anything into an
the output section that are filled in yellow like this: as they contain fo
like an explanation of the formula which is being calculated, run your mouse over the re
Note: The potential units per year and the potential dollars per year figures assume tha
purchase at the same rate and average price as existing customers in the target marke
that all consumers in the available market fall into Target Markets #1, 2, or 3.
Note: The potential units per year and the potential dollars per year figures assume tha
purchase at the same rate and average price as existing customers in the target marke
that all consumers in the available market fall into Target Markets #1, 2, or 3.
Target Market #3 5%
Firm #2 30%
Firm #3 20%
Note: These market shares assume that firms #1, 2, 3 are the only firms in the marketp
Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed
are developed solely as the basis for class discussion and are not intended to serve as endorsements
or illustrations of effective or ineffective management.
Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hb
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmit
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Har
Market Size and
Market Share Analysis
Quantitative Toolkit
0 * 150,000,000 = 30,000,000
0 * 150,000,000 = 75,000,000
0 * 150,000,000 = 45,000,000
= 20.0%
= 17.3%
= 2.2%
arket penetration in units and dollars for the total market and for
purchasing frequency and average price point given to us in the
its per year and dollars per year estimates, as follows:
ket. The sample problem asks us to calculate how many units, on average,
rice point paid is. We can use the totals calculated above for the current
purchase 11.65 bags of pita chips per year and pay $2.70 per bag.
Units Dollars
3,000,000 = 1% $ 14,970,000 = 2%
233,000,000 $ 628,670,000
ers purchasing, 54% of the current units purchased, and 40% of the current
rs account for 65% of the current consumers purchasing, 45% of the
generated. Light users account for 5% of the current consumers purchasing,
t dollars generated.
ulating the market shares of the three competitors. Using the information
e market share formula yields:
Units Dollars
e units sold, and 68% share of the dollars sold. Since Stacy's dollar share
point is higher than the market average. Stacy is a premium priced product.
re, we know that people who buy Stacy's buy less units than the market
is the market leader with the dominant market share in consumers, units,
20% of the dollars. Since Lay's dollar share is less than its unit share, we
nd 12% of the dollars. Since Kirkland's dollar share is less than its unit
he market average. Since Lay's unit share is higher than its share of
more units than the market average.
Stacy's, Lay's, and Kirkland consumer by dividing the total units by the total customers.
ay's, and Kirkland product by dividing the total dollars by the total units.
t 150,000,000
50%
30%
t 150,000,000
50%
30%
20,000,000
8 $ 3.49
3 $ 4.99
Firm 2 Firm 3
63,000,000 80,000,000
$ 125,000,000 $ 75,000,000
6,000,000 4,000,000
13%
600,000,000 $ 2,094,000,000
135,000,000 $ 673,650,000
1,365,000,000 $ 4,021,350,000
rs per year figures assume that potential customers in each target market will
customers in the target market. The total market potential numbers assume
Markets #1, 2, or 3.
20%
600,000,000 $ 2,094,000,000
135,000,000 $ 673,650,000
1,365,000,000 $ 4,021,350,000
rs per year figures assume that potential customers in each target market will
customers in the target market. The total market potential numbers assume
Markets #1, 2, or 3.
20%
17%
2%
104,000,000 $ 362,960,000
3,000,000 $ 14,970,000
233,000,000 $ 628,670,000
45% 58%
1% 2%
100% 100%
11.7
$ 2.70
27% 20%
34% 12%
2.) Second, enter information about the different market segments that exist in the potentia
could be heavy users/moderate users/light users or women/men or adults/children or any o
purchasing information. These target market consumers represent potential prospects for t
customers.
percentage of potential ma
Target Market #1 30%
3.) Third, enter information about the consumers who are currently purchasing in the marke
that you used above.
Firm 1 Firm 2
Units Sold 16,000,000 14,000,000
Output Section
Directions: In this section, the model automatically calculates the various market sizing me
calculates the market potential. The second section calculates the current market size. Th
the current market shares of three firms. Remember, do not type anything into any of the c
are filled in yellow like this: as they contain formulas. If you would like an e
being calculated, run your mouse over the red celltip.
Note: The potential units per year and the potential dollars per year figures assume that po
purchase at the same rate and average price as existing customers in the target market. T
that all consumers in the available market fall into Target Markets #1, 2, or 3.
Note: These market shares assume that firms #1, 2, 3 are the only firms in the marketplace
First, take a look at the potential market. How large is it? How profitable is it? How well pe
target markets make up the majority of the unit volume? Of the dollar volume? Which targ
for growth based on their current market penetration indices? Overall markets and target m
may not offer a lot of room for growth -- this indicates that most of the consumers in the pot
product. Marketers facing high penetration rates have to focus their marketing strategies o
market share from other firms currently selling in the market. Overall markets and target m
may offer significant room for growth -- this indicates that most of the consumers in the pote
the product. Marketers facing low penetration rates have to focus their marketing strategie
This may require raising awareness of the need that the product fills, raising awareness tha
the roadblocks which are preventing customers from purchasing and helping customers ove
Then, take a look at the current market. Who has the bulk of the unit share, dollar share an
contributing to these firms' success? How many units are customers currently buying in a y
increase this by increasing the frequency with which customers buy or by increasing the qu
is the average price point customers are paying? Is this maximizing the firm's profitability?
that each target market is providing. This provides insight on how to allocate marketing spe
if a target market is contributing 30% of the dollars, then perhaps you should allocate 30%
market. If a target market is underpenetrated, then perhaps you should allocate more mark
on its potential growth.
Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed
are developed solely as the basis for class discussion and are not intended to serve as endorsements
or illustrations of effective or ineffective management.
Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hb
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmit
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Har
Market Size and
Market Share Analysis
Quantitative Toolkit
125,000,000
20%
50%
6,000,000
7 $ 5.99
3 $ 7.99
g existing customers in the market.
irm 2 Firm 3
14,000,000 9,000,000
$ 70,000,000 $ 54,000,000
1,000,000 3,000,000
5%
175,000,000 $ 1,048,250,000
187,500,000 $ 1,498,125,000
812,500,000 $ 6,591,875,000
ear figures assume that potential customers in each target market will
ers in the target market. The total market potential numbers assume
#1, 2, or 3.
3%
12%
3%
of units purchased per year # of dollars purchased per year
12,000,000 $ 107,880,000
21,000,000 $ 125,790,000
6,000,000 $ 47,940,000
39,000,000 $ 281,610,000
54% 45%
15% 17%
100% 100%
6.5
$ 7.22
36% 28%
23% 21%
Customers
Current Potential
Target Market #1 1,000,000 37,500,000 36,500,000
Target Market #2 3,000,000 25,000,000 22,000,000
Target Market #3 2,000,000 62,500,000 60,500,000
Total 6,000,000 125,000,000 119,000,000
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Target Market #1 Target Market #2 Target Market #3
100%
90%
80%
70%
60%
50%
40%
30%
Market Penetration: Units
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Target Market #1 Target Market #2 Target Market #3
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Target Market #1 Target Market #2 Target Market #3
Share of Customers
33%
50%
Share of Customers
33%
50%
17%
Unit Share
23%
41%
36%
Dollar Share
21%
51%
28%
Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed
are developed solely as the basis for class discussion and are not intended to serve as endorsements
or illustrations of effective or ineffective management.
Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hb
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmit
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Har
Market Share
Market Size Analysis
Quantitative Toolkit
ues you entered into the Excel model. They show you the
e three target markets.
Units Dollars
Current Potential Current Potential
12,000,000 450,000,000 438,000,000 $ 107,880,000 $ 4,045,500,000 3,937,620,000
21,000,000 175,000,000 154,000,000 $ 125,790,000 $ 1,048,250,000 922,460,000
6,000,000 187,500,000 181,500,000 $ 47,940,000 $ 1,498,125,000 1,450,185,000
39,000,000 812,500,000 773,500,000 $ 281,610,000 $ 6,591,875,000 6,310,265,000
Market Potential
Market Penetration
Market Potential
Market Penetration
Market Penetration: Units
Market Potential
Market Penetration
Market Potential
Market Penetration
ues you entered into the Excel model. They show you the
hare of Customers
33% Firm #1
Firm #2
Firm #3
hare of Customers
33% Firm #1
Firm #2
Firm #3
17%
Unit Share
%
Firm #1
41%
Firm #2
Firm #3
6%
Dollar Share
%
Firm #1
51% Firm #2
% Firm #3
School of Management) developed this toolkit. HBS Toolkits
intended to serve as endorsements, sources of primary data,
These online quantitative toolkits were designed to help facilitate the quantitative analyses th
marketing decision making. There are five toolkits, each focusing on a particular type of qua
Situation Analysis
Breakeven Analysis
Customer Lifetime Value Analysis
Market Size and Market Share Analysis
Pricing and Profitability Analysis
Toolkit Contents
Each toolkit contains an Introduction which explains the analytical concept, explores how it
making, and shows in words, mathematical formulas, and concrete examples how to calcula
should carefully review the Introduction so that you are familiar with the analysis, how it is ca
when it is used in marketing. The Introduction is contained in the first spreadsheet within the
The second spreadsheet within each toolkit contains a Sample Problem, which guides you
concept, shows you the solution using pen and paper methods, and then shows you how to
Excel model to yield the solution.
Once you have grasped the analytical concept, you are ready to explore the
accompany each toolkit. These models are designed to do the calculations for you. Each m
In the Input Section, you will need to input various pieces of data to be analyzed.
put into each of the cells in the Input Section in order for the model to run. For ex
be asked to input the price of the product, the variable costs of the product, the fix
the acquisition cost of a customer, the total number of customer in a market, etc.
model's "assumptions" which drive the calculations and are usually found in the ca
Once all of the input values are inputted, the model is ready to go to work. Prebu
Output Section automatically calculate key components of the quantitative analy
of the output sections calculate Total Revenue, Total Costs, and Total Profits. Eac
Sections calculates the final answer; for example, the Breakeven Analysis toolkit's
breakeven quantity, the Customer Lifetime Value Analysis toolkits' model calculate
It is important that you do not enter values into the Output Section of the model, a
formulas that run the analysis. Cells containing prebuilt formulas are colored ye
always avoid changing anything in a yellow cell.
Note: the values contained in the Excel model Input Section are random values. You should
before using the tool to solve a problem.
The Prebuilt Excel Spreadsheet Models are contained in the third spreadsheet within the too
Some of the toolkits contain Graphs and Tables which help illuminate the analytical concep
your answers in context. The Graphs and Tables automatically create themselves once data
You should avoid entering anything into the Graphs and Tables spreadsheet, as this may ove
that create the Graphs and Tables. The Graphs and Tables spreadsheets are contained in th
Excel Spreadsheet Models within the toolkit.
The final spreadsheet in each toolkit is this Toolkit Help page. You may refer to this guide if
understanding how to use the toolkit.
Important Note: All of the toolkits contain a prebuilt Excel model. Any changes you make to
once you save the file. To maintain the integrity of the prebuilt model, save the toolkit to you
are ready to run an analysis, open the toolkit file and immediately save it with another name
calculate your results.
Print
The Output Section, graphs, and tables can be printed by highlighting the desired print area.
The red celltip marker looks like this (see below); run your mouse over it to see how it works
Professor Thomas Steenburgh and Professor Jill Avery (Simmons School of Management) developed t
are developed solely as the basis for class discussion and are not intended to serve as endorsements,
or illustrations of effective or ineffective management.
Copyright 2010 President and Fellows of Harvard College. To order copies or request permission to
1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbs
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitte
means --electronic, mechanical, photocopying, recording or otherwise -- without the permission of Harv
Quantitative Toolkit
How-To Guide
ate the quantitative analyses that you will use to guide your
sing on a particular type of quantitative analysis: