The Market Potential Analysis Framework

A great idea doesn’t automatically translate into market success. Just ask the developers of Anthem, a AAA game that cost over $200 million to create but failed to find its audience. Or consider Stardew Valley, developed on a shoestring budget, which has sold over 30 million copies.

The difference often comes down to understanding market potential before investing significant resources. Whether you’re developing a game, launching a product, or starting a company, you need to know if there’s a viable market for what you’re creating.

What is Market Potential?

Market potential is the total revenue you could generate based on the number of customers who might be interested in your product or service. To determine market potential, multiply your market size by your unit price:

Market Potential = Market Size × Unit Price

For example, if you’re developing a mobile puzzle game priced at $4.99, and there are 500 million mobile puzzle game players worldwide, your theoretical market potential would be:

500 million × $4.99 = $2.495 billion

However, this basic calculation is just the starting point. Real market potential requires a more nuanced analysis.

Why Market Potential Analysis Matters

Consider these real industry examples:

Cyberpunk 2077 spent $316 million on development, targeting the entire RPG market

Fall Guys spent under $10 million, targeting a specific segment of party game players

Among Us had almost no initial budget but found massive market potential in social gaming

The difference between success and failure often comes down to understanding your true market potential before major investment. This is where the Market Potential Analysis Framework comes in.

The Market Potential Analysis Framework

Through studying successful and failed game launches, we’ve developed a five-step framework for analyzing market potential. This framework helps you move from theoretical market size to realistic market potential.

Step 1: Create Your Initial Concept

Start by defining your basic product concept and initial assumptions.

Hypothetical Example: Mobile Puzzle Game “MindBuster”

Product: Adaptive difficulty puzzle game

Initial Target: Mobile gamers aged 25-45

Price Point: $4.99

Similar Products: Candy Crush, Two Dots

Step 2: Conduct Market Research

Now, validate your assumptions with data.

Key Research Areas:

• Total market size data
• Current market share distribution
• Market growth rate trends
• Competition analysis
• Price sensitivity studies

Real Example: Vampire Survivors

Initial market size: 25M roguelike players

Price point: $4.99

Market growth: 15% annually

Competition: 200+ similar titles

First-year sales: 2.5M units

Step 3: Identify Your Target Market

Define who will actually buy your product.

Market Segmentation Example:

Primary Market:

• Core mobile gamers
• Daily commuters
• Puzzle enthusiasts
• Premium app purchasers

Secondary Market:

• Casual gamers
• Brain training enthusiasts
• Time-killer seekers

Step 4: Refine Based on Customer Insights

Adjust your potential based on real data.

Refinement Factors:

• Platform preferences
• Purchase patterns
• Price sensitivity
• Usage behaviors
• Competitive loyalty

Example Calculation:

Initial Market: 500M mobile puzzle players

Platform preference (iOS/Android): 65%

Premium purchase history: 15%

Price point acceptance: 40%

Refined potential market: 19.5M players

Step 5: Define Your Value Proposition

Create a clear statement of market fit.

Example Value Proposition: “MindBuster offers adaptive-difficulty puzzles that perfectly balance challenge and achievement for busy professionals seeking mental stimulation during their daily breaks.”

Common Market Potential Analysis Pitfalls

Overestimating Market Share

Industry Average: 1-3% for new entrants

Reality: 70% capture <0.5%

Ignoring Market Growth Rate

Example: Battle Royale games grew 200% annually during peak

Current trend: Casual mobile games growing at 8% annually

Miscalculating Target Market

Common error: Counting total gamers instead of specific segment

Solution: Focus on demonstrated buying behaviors

Frequently Asked Questions

Q: What’s the difference between market size and market potential?

A: Market size is the total number of potential customers, while market potential is the maximum revenue possible from those customers.

Q: How is sales potential different from market potential?

A: Market potential is the total possible market value, while sales potential is your expected share of that market.

Q: What’s the difference between target market and potential market?

A: Potential market includes everyone who might buy your product, while target market is the specific segment you’re focusing on.

Implementation Guidelines

To use this framework effectively:

• Start with the basic formula
• Apply the five-step framework
• Validate with market research
• Adjust based on comparable products
• Monitor and refine regularly

From Analysis to Action

Understanding market potential isn’t just about finding a big enough market — it’s about finding the right market for your specific product. Use this framework to:

• Calculate realistic potential
• Define your target market
• Understand total demand
• Project achievable market share
• Guide development decisions

Remember: Market potential analysis should be revisited regularly as markets evolve and customer preferences change. The most successful companies treat this as an ongoing process, not a one-time exercise.