A Full Market Sizing Example

While I’ve written a good deal about market sizing, I thought an actual example might be helpful.  So let’s see if we can figure out the market size for board games.  It’s a small enough market that public data probably isn’t overwhelmingly available, and there are some interesting considerations in terms of customer and product segments.

First, let’s clearly define the market.  We’ll include traditional games like chess and checkers, mainstream games (e.g., Monopoly), and specialty games.  Role-playing games will be excluded.  Traditional playing cards will also be excluded, as will newer card games like Magic.  To start with, we’ll look at the US in depth.  An international estimate will be harder since it would be difficult to gauge cultural attitudes towards board games and pricing differences.

Public data

Let’s see what numbers are already available on the web (US market unless otherwise noted), starting with a quick search on “board games” “market size”.

  • Various figures attributed to NPD Group, including $802 million in 2006 and $870 million in 2002
    • Sources mention that Hasbro has 51% of the market.  SEC filings for Hasbro and Mattel will also be important sources to look into.
  • According to the Toy Industry Association, the “games/puzzles” category totaled $2.4 billion in 2009
    • This seems a bit high compared to the specific board game numbers since puzzles and card games are unlikely to make up 2/3 of this category.

As you can see, published figures tend to vary even among reputable sources, but $800 million will be a good sanity check against our analysis of the US market.

Top down sizing

To start with, let’s think about basic customer segments.  The biggest would be families with kids, and the other important one would be adults (think of having friends over to play Pictionary).  Note that households are probably the best unit of analysis here rather than individuals because most people buy board games for the household.  Based on Census data, there are 112.4 million households in the US, of which 34.9 million have children.

From there, my quick back-of-the-envelope sizing is going to rely heavily on some assumptions.  For a real analysis, you would want to verify these with consumer research, talking to people in the industry, or simply talking to your friends to get a minimal sample.

You can see my sizing spreadsheet here, and I’ll go through the overall approach below:

  • Start with households.
  • Break into families and non-families because they will have different purchasing habits.
    • To be more sophisticated, you could also break non-families into casual buyers and game enthusiasts, who would purchase much more.
  • Narrow down to the percent of families that would own games.  Some households simply won’t have any due to low income or other pastimes.
  • Look at games owned and game lifetime – this is a way to back into annual game purchases.  Simply assuming a number of games purchased per year is more prone to being wildly off.
  • Based on those figures, get annual games purchased.
  • I estimated cost per unit pretty loosely based on looking up game prices on Amazon in each category.  In reality, there would be a range of prices to consider, especially for games like chess and backgammon where some sets can be very expensive, but for simplicity I ignored that aspect.
  • Multiply annual purchases by average price to get total annual revenue.

This approach comes out to $930 million or so, which is roughly in line with the published figures.  Not bad, although I want to reiterate that a market sizing done for a business plan or consulting project needs much more verification than what I’ve gone through.

Bottom up sizing

Ok, let’s take a look at a bottom up sizing now.  We’ll start listing significant firms in the industry and see what we can make of overall market revenue based on those.

This is where you can see the potential pain of bottom up sizing comes in.  If you’re doing it using competitors, you have to find all the relevant companies, break out product line and geographic revenue appropriately, and then determine how much of the market may be unaccounted for based on entities you missed.

In this case, I just did a short version, where I estimated US (technically North America) revenue for Hasbro, Mattel, Ravensburger, and a couple of other companies.  There are many other board game companies out there, perhaps hundreds, although I’ve only listed a few.  As a result, I applied a 30% fudge factor for the rest of the market.  If I were being more diligent, I would want to explicitly account for each company with some kind of estimate and try to avoid a fudge factor of over about 10%.

As it turns out, the bottom up sizing comes out to $870 million – at the manufacturer.  Then we need to add in retail channel margin to make this estimate match up with the top-down one, which is based on consumer spending.  With a retail markup of 50%, the total estimate comes out to $1,305.  The markup is another area where you would want to do more research in a real market sizing.  Some sales would be direct from the manufacturer with little to no markup, some channels would have negotiated different markups, and so on.

The bottom up estimate ends up being significantly higher than the top-down one.  You should go into any market sizing exercise expecting your numbers not to match up correctly.  It’s almost inevitable that you will have to work through some issues with how different sources define the market, the accuracy of your top down estimates, and so on.  So don’t be shocked if the numbers don’t work out at first – it happens to everyone.  In this case, the biggest culprits are probably incorrect assumptions about purchasing frequency and neglecting to include additional market segments (maybe schools are significant board game buyers, for example).

Also be wary of fiddling with your assumptions based on trying to make the numbers come out looking “right.”  My view is that everyone does it to some extent, either intentionally or unintentionally, but be skeptical in deciding whether your numbers pass your own smell test.

Overall estimate

Averaging the two different approaches, I come up with an overall market size figure of $1,116 million for the US board game market.  This result is higher than published sources, but I’m inclined to accept it as a first cut.  Note that if you were much more confident in one analysis than the other, you would weight that result more heavily in coming to an overall estimate.

Next steps

If I were doing this analysis for work purposes, I would try harder to size different segments (e.g., families, adult casual, adult enthusiast, schools, etc.), both for greater accuracy and because those segments would be more relevant to business strategy than the overall market.  It’s likely that no product would play equally well in each segment, so you would want to think about positioning, distribution channels, promotion, and so on separately for each segment.  For a simple family game, you might ignore the adult enthusiast segment entirely because they would be looking for something different.  To beat a dead horse, you would also want to validate all of these crazy assumptions with actual research.  Of course, a real market sizing would often take several weeks instead of an afternoon.

Is this a helpful example?  What would you do differently if you were sizing the market?


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  • Kashish Sharma

    A very nice take on market sizing. Just an additional manifestation of this exercise while checking for market entry decisions. Use Top Down, say A1 and Bottom Up approach results- say A2, in case the values differ significantly: question if there is a scope to gain the subtracted value ie. A1 – A2.

  • http://www.brekiri.com/blog/ Greg4

    I'm not completely sure I understand your point, but it sounds like you're saying that one should question the top-down market size if it's significantly bigger than the bottom-up. I'd say yes. It may be that you need to define your addressable market more strictly. However, both of these numbers are inexact. The bottom-up will never be completely exhaustive, so it may understate the size of the market.

  • Vence Chong6

    I find this market sizing measure useful for me… I do think that the figure estimated are quite accurate from my own search so far.. thanks for the tips

  • http://www.thetoxicologisttoday.blogspot.com Pudget

    Amazing article, just what i needed! Thanks a lot!!

  • Rohit Raja

    Nice example: thanks

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