(2.2) Myth 2: Market knowledge should be 100% accurate

Since in most cases the size of a market cannot be measured with complete accuracy, it means that in most cases we will have to use a model of some sort in order to perform this task. Such models will be more or less accurate according to the specific market we are in, or, to be more precise, on the availability and the nature of the ‘keys’ we will use in the model.

If, for instance, we would want to size the potential for private energy consumption in a country, we could make a calculation based on:

1. The number of households in that country (a number we can track and predict with relatively high exactitude);
2. The average number of persons in a household (a number we can track accurately in the past, but for which we will have to make some assumptions to take its future evolution into account);
3. The average energy spending per household, broken down in spending that is household specific, like house-heating, and person-specific, like the energy consumed for personal care (these numbers will already be harder to track or to predict);
4. Last but not least, we will have to take into account the probability and the impact of exceptional circumstances, like extreme weather conditions (we might be able to track the historic impact of these, which, in combination with the likeliness of extreme weather, could provide us with a probability range of private energy consumption).

This –simplified- example shows that we will almost always have to cope with both reliable data and uncertain figures. Things can quickly become complicated though. Just compare the previous example –sizing the market for private energy consumption- with sizing the market for sun protection products or Chinese ready-made meals, you will quickly find yourself dealing with many more uncertain factors to take into account. Obviously, the more uncertain elements you put in your model, the less accurate the ultimate outcome will be.

But should you really matter?

I know this will make a lot of corporate decision takers feel uncomfortable, but the answer to this question is: no!

Fact is, virtually all decisions will be taken somewhere in the middle of the cost-accuracy curve we showed earlier:

To demonstrate this: let’s say your company is active throughout Europe and you are soon to launch a brand new product peripheral to your current product portfolio. Your resources are limited however: you only have one business developer and two sales managers to support the launch of this product, and your marketing budget is rather limited as well. Ultimately you will have to answer this critical question: which markets should I focus my resources on in order to maximize my return?

We will develop this case in more details in the second chapter. The point we want to make here is that your choice to focus on country A rather than on any other country, will in most cases be made surprisingly early in the intelligence gathering process: