B2B marketers often need to know the size of their potential market, also known as the addressable market. Typically, this involves crunching numbers coming from analyst reports, market research sheets and other data. But what happens when those resources are not readily available?
While launching and marketing our iPhone app Lead Qualifier, we ran into the same problem. Specifically, we needed to know, roughly, the total number of sales and business development persons in a given country who are are also iPhone owners. Since we didn’t want to spend any dollars on expensive market research firms and reports, we had to be creative about it. Luckily, there’s a great free tool offered by LinkedIn, albeit for a different purpose, yet with a bit of imagination, it does the trick. Sure, it’s not scientifically accurate data, but it beats the normal top-down numbers one tends to come up with when there’s no hard data around.
The steps below provide the background for the research, and then a detailed description of the steps. This is pretty standard calculation for B2B marketers, the main novelty here is the availability of the raw data.
The Offering & Audience
In our case, it’s an iPhone business app for sales persons, which lets them easily and very rapidly create and share lead qualification summaries. The target audience we tried to quantify thus comprised sales persons and, by inclusion, persons in business development positions.
The Research Question
Essentially, we needed to know how many persons answer all these three criteria:
- located in the US
- are in a sales-related position
- own an iPhone device
note: if your go to market is selling to businesses and organizations and not necessarily to individuals within them, which is our approach, then the process described here may not be exactly what you need. Granted, you will still gain a view of the number of potential individuals within firms and businesses that make up the addressable market you need to reach, but you won’t get a result such as ‘X number of firms’ in your market segment.
The Research Tool
LinkedIn Ads. Specifically, the campaign creation pages within LinkedIn, where you go through a wizard to create an ad and launch it on the LinkedIn network. The great thing about this tool is that you can go through the whole targeting exercise very rapidly and of course without committing to and budget.
Here’s the process we used to answer our specific research question. Naturally you will use different values when making selections, but the concept holds.
Step 1: Finding the number of US sales persons listed on LinkedIn
- Start LinkedIn ad creation wizard. First, you will be required to sign in to your LinkedIn account. Then you will see the ‘Create Your Ad Campaign’ page.
- Follow the input instructions. Enter any information you want. You’re not actually launching an ad campaign, our goal is to get to the next step.
- You will next see the Targeting page. This is where the magic happens.
- Check the Geography box, and select North America, then click the link and check only US (sorry Canadians, this is just for simplification purposes!). See the Estimated Target Audience number on the right? should give you a number around 54M. note it down, you will use it later.
- In the Company drill down, make the relevant selections. You’re limited to ten industry segment selections across all industries, so try and be as general as you can. For example, for our particular purposes, I left it unchecked.
- In the Job Title drill down, select the ‘select categories of job titles’
- Check the Job Function box
- Check the relevant job functions. I checked the ‘Sales’ and ‘Business Development’ boxes.
- If your offering is relevant to certain ages, use the Age drill down to further finetune. I didn’t.
- Look at the top right. It should give you the Estimated Target Audience number for your selections. Mine, per the above selections, was close to 4M. A good start.
Step 2: Extrapolating the number of US sales persons
Remember the 54M number we noted in step (4) above? now we will use it. Here’s how:
- The size of the US population is 312M. However this is not the right number to use for market size calculations, because the overall population has certain segments not relevant to our context, like children. I used a number I found on wikipedia of about 206M for the age bracket 15-64, both genders. It’s the closest I could find. If you find a number matching the 21-64 bracket, do share.
- Using this population size, we see that LinkedIn has a penetration rate of 54/206 in the US, or 26%.
- Applying this rate to the 4M number I got, I get a total market size of about 16M. (remember, it’s not about being exact anyway so don’t worry and round up or down your numbers as you need.)
- I could have tuned the number further by industry categories (step 1.5 above) and arrive at a more refined number, but this will do for illustration purposes.
- Consider that LinkedIn may have an even greater penetration rate within the specific sales segment, as sales persons are generally more aware of the importance of professional networks than most other job functions. This should result in a somewhat smaller market size, but for now we’ll ignore it, to keep things simpler.
Step 3: Finding the number of US sales persons who own an iPhone
The only thing left to do is apply the iPhone penetration rate in the US to our population. If you’re marketing an app for other platforms, find their market share values and apply. If you have another type of business, decide whether and what equivalent step would be required in your case.
- According to our research, iPhone has 27% (!) market share in the US.
- Thus, 27% * 16M = ~4M
That’s it! now we know roughly the size of our addressable market in the US! I emphasized ‘roughly’ again because while it’s obviously not accurate data, it’s close enough to give the marketer a general idea, which is useful when planning and budgeting marketing activities for a given product, in a given geography and a given industry or segment. Hopefully you found it useful, if so please feel free to share and leave some feedback.
Most of this makes sense until the author multiplies by 4 (to convert from LinkedIn’s population to the rest of the US population). LinkedIn is likely to have a much higher percentage of sales people than it does of the overall population: if you’re in sales and not on LinkedIn at this point, you’re not a very good salesperson. Therefore if the 4M number is accurate, it probably only needs to scale up to ~6M or perhaps a high of 8M (meaningfully different from 16M). In addition, since we’re talking about iPhones, you would need to believe there are millions of salespeople with iPhones who are not on LinkedIn: this is even less likely since LinkedIn member tend to skew towards being more tech-sophisticated. Good idea overall, but the actual execution is slightly misleading…
Thanks for the comment, I’ve covered this nuance in the 2nd bullet note under step 2. I left it out of the sample calculation for simplification purposes.
I see this exercise and net value to be a worthy tool considering the effort cost and results. The author clearly defines the right expectations in each step.