You want to the know the value of your target market? Your market share? You could hire a market research company to conduct surveys and count beans and all of that. Or you could thin-slice it!
Thin-slicing is a phrase I was introduced to in the book: Blink, written by Malcolm Gladwell, who also also authored The Tipping Point (which may have been the origin of the term: Viral, as it is used in marketing. If anyone knows for sure, please let me know). Anway, thin-slicing is the process of making decisions based upon limited information. He argues that for some, good decisions can be based upon very small bits of information. As long as it is the right information.
Estimate Market Share
So, let’s try that for a local service business. Let’s say you are a Roofer in Bergen County, NJ. Do you typically ask your customers… How old is the current roof? And you know you how much on average you charge for a roof, right? Good, now we only need to know one more bit of information… and we can thin-slice the market for residential roofers in Bergen County, NJ: The number of owner occupied homes in Bergen County, which I got by searching for that phrase in Google.
Now, simply divide 100 by the number of years on average that will go by before a house needs a new roof. That will give you the % of homes that will be in the market for a roof in any given year. For this example, I’ll assume a home needs a new roof every 20 years.
Then we get : 100/20 = 5; This tells us that 5% of the homes in Bergen County will need a new roof in any given year.
It’s not perfect, but I bet it’s pretty good. And again you just take 100 and divide it by the number of years that go by before a home will need that service again.
Let’s do another one with one painting: Let’s say that on average a person paints the exterior of their home once every 8 years.
Then we do; 100/8 = 12.5
So, we know that 12.5% of the homes will be in the market for exterior painting.
Now, from the census information we got earlier, we know there are 222, 237 owner-occupied homes in Bergen County.
Multiply 5% by that number and you get the number of roof jobs available in any given year: 11,111. If each job is worth on average $5,000, the market in Bergen County is:
$55,559,250; (hmmm… maybe I should have been a roofer.) So, now you know a roofing company that did $1 million in sales last year had a market share of around 1.7%. And that each point of market share is worth around $550,000.
Making Good Decisions
Now, that roofing company can start making some good decisions. Maybe they thought they were doing well with a million in sales. Now they can see how much is being left on the table. Maybe it would be worth it to expand the advertising budget… try and pick up another point or two.
Should they use direct mail?… probably not one that blankets a zip code as we now know 95% of that would go to homes that will not be in the market for roofing. But it could work if they could get a mailing list that targeted homes built 15-25 years ago. See, the quality of the decisions are starting to soar and so quickly.
Maybe search marketing is a good idea, since it is unlikely that a person will type “roofers bergen county” into a search engine unless they are in the market for one.
Thin-Slicing is Good for Many Different Businesses and Search Marketers Too!
This technique can be used for a bunch of everyday products and services… just ask “How often?”
How often does someone replace the windows in their home? replace their cell phone? remodel their kitchen? clean their carpets? replace their laptop? and on and on.
Thin-slicing the market is a good technique for search marketers to know when there isn’t a ton of demographic and market information around. It can help a client to see the potential of the market and expand their marketing budgets. And you spend your time using the information instead of gathering it. Which is already a big leap for a lot of decision making processes that I’ve witnessed. And is the biggest benefit of thin-slicing anything.