Convaid Strategically Sizing the Market

Convaid  is the market leader in collapsible pediatric wheelchairs.  Convaid manufactures its premium-quality wheelchairs in its Torrance, California facility and ships to distributors throughout the world.

Goals of this Engagement

GeoStrategies was engaged to help Convaid understand the size of the annual pediatric wheelchair market in the US.  Our job was to help them understand annual wheelchair sales at the state and territory level, to assist the company in strategic growth decisions – specifically, where to invest in the next phase of growth.

GeoStrategies was referred into this project by one of our strategic partners, William Hawfield of TheBoardGroup.com.  Bill currently sits on the board of directors at Convaid.

HawfieldBox

Which Method to Calculate Market Size?

top down

There are two methods to creating a market sizing model: Bottom-Up and Top-Down. Using the ultra-detailed bottom-up method requires primary research – phone calls and electronic surveys of customers, prospects, or distributors.  The result is a rich, rounded, deep and useful model that is typically used for private equity diligence work.  If budget is limited, and the use of the finished result is for internal strategic guidance, then a more basic, top-down approach will be sufficient.

The Top-Down Approach

three things

With this approach, we need just three things:  Market Size, Market Demand, and Market Demand Adjusters.

STEP 1: MARKET SIZE  – The first goal is to determine the size of the market (total annual market sales) from a reputable source.  In the case of Convaid, we made a few phone calls to Medicaid and were able to determine the annual wholesale dollars spent on pediatric wheelchairs.  For this case study, we’ll use the number $200M to maintain confidentiality for Convaid.  For many companies, finding this initial number is their concept of strategic market sizing, but without additional work, neither strategy nor tactics can be implemented.200mSTEP 2: MARKET DEMAND –  Some products enjoy universal demand, such as mattresses. It doesn’t matter the age, ethnicity, geography, income, or labor category of a person;  everyone needs a mattress.  For universal demand projects, all that is needed to geographically “scatter” annual “Total Market Size” is population.  It’s that simple.

DEMAND

Other products, such as snow mobiles, do not enjoy universal demand.  Knowing where population densities are is not enough to scatter “Total Market Size” estimates.  No matter how many people live in a place like San Diego, market potential for snow mobiles is 0% of the national total.  Geography greatly effects demand.

STEP 3: MARKET DEMAND ADJUSTERS – If product demand does not directly follow population, a set of “adjusters” will need to be applied.  This can be tricky, and great care needs to be used to get this correctly.  While estimating demand for universal products can be done by a skilled staffer at a company, applying demand adjusters can be quite difficult, and without experience in applying them effectively, can result in misleading data.

adjusters

For Convaid, we determined that population would be a great baseline indicator of market demand (assuming that in general, the incidence rate of pediatric ambulatory needs would be fairly consistent overall in most categories of children).  However, we decided to make slight adjustments geographically, based on data from Cornell University.  You can see below, that while 13.4% of children, age 5 – 15 are in California, after adjusting for the data from Cornell, we estimate that 12.2% of NATIONAL DEMAND  for pediatric wheelchairs is in California.

adjustments

So as a result of this top down approach, we can confidently estimate that $24.4M per year is spent in California on Pediatric Wheelchair sales.  By adding Convaid’s annual revenue, we were able to estimate market share and “lost revenue” in every state.  For more information on how we help our clients estimate “lost revenue”, click here to view an additional case study.

california

Final Results

Because of this study, the Board at Convaid was able to help guide the company in its next round of strategic growth.  The study identified three key geographic areas for additional investment in sales and marketing and temporarily withheld investment in a direction that was being contemplated.

money

For more information on this case study, or on how we can help your company estimate strategic market potential, contact GeoStrategies at (800) 738-4GEO.

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