Anyone who wants to enter a new target market with their product or service, make an investment decision, or acquire a company needs a reliable answer to a fundamental question: How large is this target area really?
Without a reliable market volume analysis, every strategic decision remains speculative, whether entering a new industry, evaluating an M&A target, or prioritizing growth projects. Companies that know the market volume of their target market can realistically assess opportunities, allocate resources effectively, and provide sound justifications for investments to stakeholders. Companies that do not know the market volume and their market share risk misinvestments or missing out on markets with real potential.
Especially in the B2B sector and in industry, reliably determining market volume is often anything but trivial. This article explains what market volume is and how it differs from market potential. Furthermore, the article provides information on the approaches, formulas, and methods used in its calculation and identifies the most common errors encountered in practice.
Market volume definition: The actual realized demand as a measure of market size
Market volume is the sum of all purchases actually made in a defined market, measured within a specified period. It describes what was actually demanded and transacted, not what would theoretically be possible. Therefore, it is the most precise metric for determining the actual size of a market.
Market volume is expressed in two forms:
- In monetary terms (in €): the sum of all sales generated in the market. Relevant for sales potential and market valuations.
- In terms of quantity (in pieces, tons, units): the sum of all units sold. Relevant for capacity and production planning.
Both figures are only meaningful if three parameters are clearly defined: product (What is being considered? – especially in the B2B sector, a clear definition of the target market is crucial), region (Which geographic market?), and time period (Which year, which quarter?). Without this definition, any market volume figure is worthless.
Distinction from related terms:
- Market size is often used synonymously with market volume, but it is not a separate technical term. It generally means the same thing: the realized revenue of a market.
- Market share relates the market volume to the revenue of an individual company. Formula: Market share (%) = Company revenue in the relevant target market ÷ Market volume × 100. Market share is therefore a derived metric. Market volume is its basis for calculation.
- Market saturation describes the degree to which the market volume already exhausts the market potential. A high degree of saturation indicates mature markets with intense competition. A low degree of saturation shows untapped growth opportunities in an industry.
Market volume and market potential: the difference is strategically crucial
Market volume and market potential are frequently confused or used synonymously in practice. However, they represent two fundamentally different key performance indicators with different strategic significance.
Market volume describes the sales value actually realized in a defined market within a specific period. It is an actual figure: What was purchased, what was sold?
Market potential, on the other hand, describes the maximum achievable demand within a defined target group under realistic market conditions. It is a target figure: What would be possible?
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| Market volume | Market potential |
|---|---|---|
| definition | Actual realized sales value | Realistically achievable demand within a defined target group |
| perspective | It's on | Target state |
| Statement | How big is the market today? | How big could the market become? |
| Data basis | Market data, industry statistics | Target group sizes, demand ratios, adoption rates |
| Strategic benefits | Assess market size and competitive intensity | Identify growth opportunities and untapped demand |
Anyone who knows both key figures can quantify the gap between today's market volume and the market potential, and that's precisely where the untapped growth opportunities lie. Especially with innovations or new technologies, for example, the market volume is often still small, but the market potential can be very large if market development is successful and the product or service effectively utilizes the market capacity.
Practical example from mechanical engineering: A manufacturer of automation solutions determines that the current market volume for its product segment in Germany is €800 million. However, market potential analysis shows that with full penetration of the relevant manufacturing companies, a potential of €2.1 billion would be achievable. The difference of €1.3 billion marks the area in which growth is possible and provides the company with a clear basis for its sales strategy and investment planning.
Practical example from medical technology : For a supplier of diagnostic equipment, the market potential may be significantly higher than the realized market volume because a relevant portion of the target group, such as hospitals or medical practices, has not yet met its needs. The difference between these two figures indicates the need for modernization and thus the concrete business potential.
For decisions such as market entry strategies , product development, or M&A, market volume alone is not sufficient. Only in combination with the market's potential does a complete picture of the market emerge.
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The market volume formula: How the calculation works in B2B practice
basic formula for calculating market volume, which initially appears quite simple, Number of buyers × purchase frequency (purchases per period) × average purchase quantity per purchase × price per unit for the product group or relevant service.
Especially in the B2B sector, purchase frequency plays a central role, for example in maintenance contracts, consumables or recurring services with defined renewal cycles.
In practice, however, the challenge, especially in the B2B sector, lies in obtaining reliable data on these individual factors. Therefore, market analysis often relies on derivations and estimates using top-down or bottom-up approaches when calculating market volume
- The top-down approach uses available overarching sources, such as general industry data for the entire sector/industry (e.g., from statistics, industry studies, or surveys of market participants and experts), as a basis. Based on this accessible and, ideally, reliable overall market data, the top-down method then makes assumptions regarding the shares of the relevant target market/sub-sector/market segment in order to derive the market volume of the relevant sub-market from the total market. Practical example mechanical engineering : If, for example, industry statistics indicate that the market for packaging machines in a specific region is worth €3 billion, expert assessments and data from secondary sources can be used to estimate the size of the market for packaging machines in the relevant sub-market "pharmaceutical packaging machines" (e.g., 10-20% of the total market volume = €300-600 million). If the company then has sales of €10 million in the relevant product market, a rough market share of 2-3% can be estimated.
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- The bottom-up approach, on the other hand, comes from the opposite direction and extrapolates from known individual values, such as the realized sales of key competitors (companies with the largest market shares) or the number of buyers in the target market and the average quantity purchased per buyer. Here, too, a model must be developed and populated with the most realistic and reliable detailed data possible. Practical example: automotive suppliers. For instance, by aggregating the sales of the top five competitors in the automotive seat sector, a rough estimate of the market volume and size can be made.
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Calculating market volume in 3 steps – from market definition to validated figure
Step 1: Define the market precisely – clearly define the product, region, and time period
A key success criterion in analyzing market sizes in the B2B sector is the clear definition of the target market under consideration. For example, it is necessary to clarify which sub-products or services and which buyer groups/target groups should be considered, and to which time period (historical, current, or forecast) the analysis of market size or potential should refer.
Step 2: Identify relevant data sources – association statistics, annual reports, primary research
The composition of the data basis determines the reliability of the market potential analysis , especially in the B2B sector. Key sources in technology and industrial markets include, depending on the specific market, data from industry associations, publications in trade journals, specialized company databases, market studies, and publications from competitors and customers (including annual reports or investor relations publications). Primary research in the form of surveys or interviews is often necessary to achieve a realistic assessment of the values. Experience shows that only the combined analysis of these source categories provides a reliable basis for determining market size, sales volume, or the market share of one's own product.
Step 3: Choose the calculation method – top-down approach/bottom-up approach and validate the results
Based on the data gathered in step 2, the market size and potential can be estimated using either a top-down or bottom-up approach. These approaches are often combined, providing multiple indicators. Comparing the results with data from larger markets, similar markets in other regions, or the sales figures of major suppliers allows the data to be validated and verified. Often, the market volume calculation results in ranges that represent the realistic corridor of revenue potential or sales volume.
This key error distorts the market volume in market analysis – and here's how to avoid it
In practice, it's clear that the uncritical use of unreliable data sources most often leads to incorrect results when determining market size, market potential, or market share. Hundreds of research providers are vying for attention, offering readily available data on virtually every B2B market segment. Unfortunately, experience shows that the data they provide is frequently unverifiable and often simply wrong. Therefore, caution is advised when selecting sources. Furthermore, using diverse sources, as described above, allows for comparison and verification of individual data points.
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Are you looking for an experienced partner for a reliable analysis of the potential in the B2B and industrial sectors?
Knowing the precise market volume is the foundation for sound growth and market entry decisions, targeted expansion of revenue and market share, and efficient marketing. A fact-based market analysis helps to realistically assess the market size for a product, better understand the potential of the product, service, or industry, and thus effectively address revenue potential. MEYER INDUSTRY RESEARCH has specialized in customized analyses of market volume, market share, market development, and revenue potential in the B2B sector for over 15 years. We understand the specific challenges and have access to key market data sources. We would be pleased to discuss your specific requirements with you.
Sources:
https://spirit.uni-trier.de/fileadmin/images/03_FLT_OnlineLab/SPIRIT_Toolbox_Marktanalyse.pdf
https://www.controllingportal.de/Fachinfo/Kennzahlen/Marktwachstum.html
https://www.uni-due.de/imperia/md/content/guide/guideline_markt_branchenanalyse_final.pdf
