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Identifying the size of your market print Print

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It sounds obvious, but without customers you simply don’t have a business. So when you’re on the journey to start-up, you need to establish that there’s a market for the type of product or service you plan to sell.

This article takes you through how to determine market demand for your new business. It will help you find out:

  1. What type of market you’ll be operating in.
  2. How to find free info on your market.
  3. Your market size.
  4. Who your competitors are.
  5. And ultimately, whether your business idea has a market.

Often new business people will rely on gut feel to determine whether there’s a market for their product or service. While this personal perspective is helpful, to really hone in on your market it also pays to consider the question in a more structured way.

Is there demand for what you're offering?

A quick dip-stick answer to whether you’ll have customers is to see whether there’s existing demand. For example, have you made any sales already, through a different channel or hobby business? Do you have orders in advance, or have you secured any contracts? Have you trial marketed your product or service on a small scale to determine its wider demand and accessibility?

Many people whose business idea starts as a hobby often find it easier to understand demand compared to people who are starting their business from scratch. If you’re in the latter group, the next section on market research should help.

Know your market type

It’s easy to get lost in the hype of which markets are declining and which are emerging, so be sure to have a firm idea of where your opportunities lie. Ask yourself these five questions:

  1. Is the market big enough to interest me?
  2. Is the market profitable? Market potential is all in the eye of the beholder and market size can be deceptive. A business with lower overheads and larger margins will find more opportunity in a market than another with more financial demands. There might be large demand but if the margins are tight or there's the risk of an innovation usurping it, you might want to reconsider.
  3. Is the market moving in the right direction? Markets tend to run in cycles as they grow and decline. But there are opportunities in both situations. If you have the expertise to service a niche market, for example, you might be able to take advantage of a declining market in which larger competitors have lost interest.
  4. Is the market moving fast enough? Timing is everything. If you don't have the resources to wait for demand to build in a new market you should consider waiting for someone else to take the risks until the market grows.
  5. What if I’m moving into a new market? If your business is blazing a trail in a new market, take every opportunity you can to research the market thoroughly and dispel as many assumptions and uncertainties as you can. Taking a "We'll cross that bridge when we come to it" attitude can expose you to unnecessary risk, so make sure you know your stuff before you invest time and money.

Find free info on your market

You can always pay to gain access to industry reports, but here in New Zealand we’re lucky to have a wide variety of government data resources available online, free of charge.

For example, you can use the Statistics New Zealand Business Market Mapper to locate your market by age, sex, income, household or family type, and zoom in on your target market regions, areas, and suburbs.

You can also find data on market size from other government agencies that often commission white papers and reports for public consumption. Check out our useful link of government resources.

Business systems

But don't stop there. Your industry or trade association, and local Chamber of Commerce will be able to provide useful data as well. In addition, several of the larger New Zealand corporates publish research papers and economic outlooks. Check out ANZ’s Business Micro Scope and other publications from the ANZ Economics Team.

If you're looking to market overseas you're more likely to have to pay for access to market reports or consult a local expert, but still look for free information online as a first step - you might be surprised at what you discover.

You may find that the best advice comes from other business people who understand the issues you’re facing; although maybe not your direct competitors. Many business owners are happy to share their knowledge and support new businesses. If you’re thinking about starting a new bakery in your town, perhaps find a bakery owner from another similar sized town who could give you some idea of the market.

Know your competition

It’s important to know who your competitors are.

This will help you define your competitive advantage. Why should people do business with you rather than your competitors? Your competitive advantage could take many forms, for example:

  • Your product or service is superior.
  • Your product is unique.
  • You’ve identified a niche market that others have ignored. 

But more than this advantage, knowing your competitors will also help you anticipate what market share and sales volume and value to expect. If you can’t find this information from the sources listed above, other ways to find this out include:

  • Consult a credible accountant with experience in your industry.
  • Look for articles on industry media and trade press websites.
  • Check the sales literature published by your competitors. 

Next steps

If you're starting up your own business, check out the ANZ Business Start-up Package. To help you while you’re getting into business, we won’t charge monthly account or transaction fees on your ANZ Business Current account in the first year.*

Read our five steps to help you build a good marketing plan.

*Eligibility criteria and service charges apply.

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