Meet & Spuds: Market Sizing

A very important step in predicted future demand for a business, product, or service is estimating market size – or the population of people you will serve or provide for. In developing our Business Plan for Meet & Spuds, my business plan group followed a basic formula for estimating the market size: (1) Determine demand; (2) Identify the Addressable Market; (3) Segregate Realistic Opportunities vs. Competition; and (4) Target a Selection of “Winnable” Market Opportunities. The theory is illustrated with the graphic below.

Before analyzing the market sizing, the group had to determine the optimal startup location for our pilot restaurant. We utilized an adapted Data Envelopment Analysis (DEA) Model for this approach. The steps for this approach were:

1.    Business partners arbitrarily selected eleven main criteria for the optimal location and rated these from most to least important. Based on the priority, each parameter was assigned a weight.

2.    Business partners arbitrarily selected seven cities around USA as potential location sites.

The seven cities selected were: (1) Boston, MA, (2) NYC, NY, (3) Chicago, IL, (4) Seattle, WA, (5) Washington, D.C., (6) Dallas, TX, and (7) Providence, RI.

3.    Collected data was populated into an adapted DEA model to help determine the optimal location. Information was collected from various sources: U.S. 2010 Census, City-Data.com, and more.

4.    Each parameter value was ranked and given a score of 1-7 based on highest = 7 and lowest = 1. These scores were multiplied by its assigned parameter weight to determine the overall ranking. The highest ranking was the first startup location preference.

The model resulted with a pilot location of Boston, MA. The next step was to determine Boston demand. NRA (National Restaurant Association) released a 2012 Restaurant Forecast that projected $631.8 billion industry for 2012. Furthermore, Projected Sales are expected to increase as follows: 2.9 % Full-service; 5.6% Social Caterers; 3.1% Eating & Drinking Places.

We targeted the Boylston St. neighborhood of Boston, MA, as our addressable market based on its central location and proximity to surrounding public transportation options, businesses, and area schools.

The group decided that our target market would be comprised of Single, Professional Males
ages 21 – 35. Since males account for 47.9% of Boston Population and the majority of Back Bay residents are ages 20 – 50 yrs, we would be able to address this market in our location.  The group also learned the following information from the 2010 Census.

FACTS ABOUT BOSTON

·         617,594 Residents
·         200,000 MALE (18 – 65 yrs)
·         33% Married Residents
·         54.1% of Workers = Residents
·         Boston saw 21.2 mi Tourist Visitors in 2011 (3.9%+)
·        We would suggest that there are at least 140,000 are single men.

The group then needed to segregate our realistic opportunities from competition. The location is populated with many other restaurants: Back Bay Restaurants (click this link to learn more). However, the niche function positions Meet & Spuds to have limited competition in terms of atmosphere and menu. We have yet to identify any social steak restaurant despite some competitiors calling themselves either Social Restaurants or Steak Restaurants. We can win over realistic opportunities through marketing and sales by creating parallels between our services & those of comparable, ‘cheaper’ restaurants to draw in initial customers.

·         Our meal is $20 with 14 oz. steak and 7 oz. potatoes.

·        Their meal is $22 with 8 oz. steak, 3 oz. potatoes, 2 oz vegetable, & salad.

Finally we can drill down to our target market size. Based on the calculations before, we estimate our target market to be 150,000 people. This figure accounts for the estimate of single men in Boston plus added fringe for tourists.

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[1] Map Image

Inbound vs. Outbound Marketing: Who Wins?

Marketing is essential to promote any sort of business, product, or service. Naturally, the marketing landscape begins to change as the general population’s abilities and paradigms shift. In today’s social-networking dominated world, companies are starting to rely more and more heavily on the tactics of inbound vs. outbound marketing for their marketing survival. But which technique is optimal? Can a company survive on inbound marketing alone?

Before answering those questions, I want to clearly describe how I understand inbound and outbound marketing. Inbound marketing relies on consumers coming TO the business (INBOUND) via interactive services. This makes me think of PULL from the customer who wants to pull information from the marketer. Inbound marketing pitches usually tend to impress or teach the consumer about the business, product, service at hand. Outbound marketing, on the other hand, relies on information going TO the customer (OUTBOUND). This is similar to the marketer PUSHING information onto the consumer in a one-side, often dry approach that is rarely well received. In doing some research on the topic, I came across the following infographic describing the differences between the two marketing styles.

 

Infographic from: http://mashable.com/2011/10/30/inbound-outbound-marketing/

It would seem as though that inbound marketing dominates in this technology driven world, but can a business survive on inbound alone? YES, but only with a receptive consumer market. If customers are looking for your business, inbound marketing will be less successful, In these cases, I personally think a combination of initial outbound marketing techniques followed by intense inbound marketing is the optimal approach.

Consumers have shifted their paradigm to be information hungry, independent, and in control of what advertising or marketing they subject themselves to. Consumers today – unlike those of the past – are more aware of the plethora of businesses offering the same services and use their own developed product knowledge (through inbound marketing) to develop opinions about these businesses. This shift in consumer paradigm can be attributed as the cause of inbound marketing’s fame. Social-networking and search engines only escalate this change as it helps consumers get better and more accurate marketing information more quickly. The theme of instant gratification has translated in consumer marketing in the form of consumer inbound marketing.

The infographic describes why outbound marketing has been unsuccessful with the images below. Even with expertly crafted outbound marketing techniques, consumer will continue to ignore sources of information that are non-value added to them.

 

Inbound does not just include social-networking sites and search engines. In fact, inbound marketing is any form of marketing where the consumer comes to you (the business). The various forms of inbound marketing include: blogs, ebooks, white pages, infographics, podcasts and other content marketing techniques.

What is so interesting to me is that with all of the advantages of inbound marketing, which companies are still using outbound techniques to gain market share?  The statistics below will have you questioning as well with inbound marketing proving financial wins as well as generating leads and revenue with a single marketing source.