Name: 

A market consists of people who have the willingness to buy, the purchasing power, and the authority to buy a given product or service for themselves or their family.  Knowing the size of a market and whether or not it is growing helps marketers determine whether to develop a product entry for that market or to invest further in a product offering they already have.

Market Size

It is difficult to determine the actual size of any market because it is hard to find out who has the willingness, purchasing power, and authority to buy a specific product or service.  Sometimes we can develop rough estimates based on related information from available sources.  For example, if Statistics Canada data indicates that 1,245,000 babies were born in Canada during 2002, that figure could be used as an estimate of the size of the market for small-sized diapers for 2003. 

However, since the above method does not result in very accurate market size estimates, many companies purchase data from professional organizations that exist to meet the information needs of marketers. Two such organizations in Canada are:


Once marketers have market size information for the product or services categories they are interested in, they analyze it to understand market trends and to forecast what is likely to happen in the future.  A key calculation is market growth rate.  The formula for market growth rate is:

     Market size estimate for one year
=   percentage change versus year-ago.  
For example, if 20 million people in Canada drank soft drinks in 2002 compared to 19.5 million people in 2001, how much did the soft drink market grow in Canada in 2002?  The answer is +2.6%.  This is calculated by dividing 20 million people by 19.5 million people, which equals 1.0256.  The 1.0256 figure means that 20 million people is 102.6% of 19.5 million people, or 2.6% more people than the previous year.  Therefore, we say that the market grew +2.6%.  

The next four questions are designed to give you practice with using the market growth rate formula and with conducting a simple trend analysis.

If 5,850,000 people bought a new car in 2002 compared to 5,513,000 people in 2001, what was the growth rate of the new car market in 2002?

If  5,513,000 people bought a new car in 2001 compared to 5,444,000 in 2000, what was the growth rate of the new car market in 2001?

If 5,444,000 bought a new car in 2000 compared to 5,281,000 in 1999, what was the growth rate of the new car market in 2000?

According to your answers to questions 1–3, is the new car market in Canada growing, stable, or in decline?

Of course, market growth rates are not always positive.  Markets can decrease in size for a variety of reasons.  To calculate a negative market growth rate, follow the formula of dividing the market size for one year by the market size for the prior year, but subtract your answer from 100.  For example, if the numbers in the above soft drink example were reversed, and 19.5 million people purchased soft drinks in Canada in 2002 compared to 20 million in 2001, how much did the soft drink market decline in 2002?  The answer is  –2.5%.  This is calculated by dividing 19.5 million people by 20 million people, which equals 0.975.  The 0.975 figure means that the 19.5 million people who drank soft drinks in 2002 is 97.5% of the 20 million people who drank soft drinks in 2001. It is 2.5% fewer people relative to the previous year.  Therefore, we say that the market declined -2.5%.  

Calculate the following market declines.

If the sales of packaged rice totalled $4,060,768 in 2002, which was below rice category sales of $4,408,000 in 2001, how much did the rice market decline in 2002?

If 251,000 people took out a mortgage on their house in 2002 for home improvement and renovation purposes, compared to 256,000 such mortgages in 2001, how much did the market for home improvement loans decline in 2002?

The next two questions require multiple calculations of positive and negative growth rates and some forecasting of future trends based on these calculations.

If 3,250,000 cases of detergent were sold through grocery stores, drug stores, and mass merchandisers in 2002 compared to 3,125,000 cases in 2001 and 2,976,000 cases in 2000, how much did the detergent market grow in each of the past two years? What does this suggest will happen with detergent market sales in 2003?

Complete the following chart.  What does this information suggest will happen with potato chip market sales for the next 3 years.

	1999	2000	2001	2002
Annual Potato Chip Market sales (in cases)	5,256,000	5,534,555	5,435,000	5,643,777
Market growth rate	N/A*			+3.8%

* N/A since no data is provided for 1998