[MUSIC] Hi, welcome back. In the last lecture we discuss how to grow your offering. The focus of this lecture Is to learn how to calculate the demand for your problem. Why is this important? Because understanding what will be your marketed demand should be the basis of any part of the development decision. Thus, I want you to leave this lecture knowing how to calculate the volume and the value of your potential product. With the assumption that it will be bought by a specific group of clients in a specific period under the expected market conditions and with the help of your marketing plan. The simplest form of effort is calculation is market volume is equal to the number of buyers times the quantity of your product acquired per buyer in a given period. Market value is market volume times the average price per unit. If you're like most people you don't have the time or the resources to conduct an extensive, qualitative research to calculate the number of buyers or the quantity they will buy in a given period. That is where the art and the science of demand calculation comes in. In this day of information overflow, you should use existing available data and your creativity to use analogies that might lead into a result that is close enough to the real market. Let's do a simple exercise. Let's calculate the market of female shavers in your country for next year. You might want to pause the video to think about it before listening to the potential ways of solving this puzzle. Ideally we would have a number of women who shave but it is unlikely that this is readily available information. Therefore you can begin by asking your female friends or colleagues if they shave or if they know someone who shaves and interview them to find out their habits. You would be surprised at how information you can collect to develop your hypothesis. For example, how many times per week they shave. How many times do they use their shavers before throwing it away. When did they began shaving? Do they think that will shave throughout their lifetimes? How much do they pay for their average shaver? Once you've collected enough information, you can begin putting together the pieces of this puzzle. Let's begin with volume, market volume is equal to the number of buyer times the quantity acquired in a given period. The number of buyers, we could calculate from inferring how many of your female friends shave. If you ask ten and only two shave, a simplistic way to say that 20% of the female population in the age range of shaving by shavers. Notice that from the information collected we know at which age your friends began shaving. So we need to take that factor into account, thus we will calculate our first variable. Number of buyers in the total market is equal to the number of women in your country from age x to y times a percentage of your friends who shave. We could also consider other factors, such as population growth for next year. If you recall, our second variable was the quantity of your product acquired in a given period. We will begin by simply calculating the amount of product for the total market, not only of your product in a given period. Let's assume that they use one shaver for x amount of shaves and they shave once a week. Then the 52 weeks in a year divided by the number of shaves per shaver is equal to how many shavers per person buys every year. Again we could also consider other factors such as, if they shave more in a different seasons. Are there other variables which have an impact on how many times they shave, like fashion? Do they buy and stock shavers at home? How many shavers do they but every time? Or if they alternate shaving with wax, etc., etc. Thus we have solved our two variables and we now have market volume. In order to calculate market value, we multiply the above number by the average price paid per shaver. Again, we could also consider factors like how many time does your friend buy on discount or bundles, etc. The tricky part comes now because you need to find out what percentage of that market could be yours. In the absence of any data, simply run scenarios. If you can capture 1% of that market it would represent 1% of the volume, or value numbers we've just discussed. If you want to improve your odds, you should try to find out the market share of your potential competitors. Because it will provide you with a reference in which part of the market is invaluable to you. You could talk to retailers to find out or if your business is only online, look at visits or downloads of competitor products and make some assumptions. I can almost hear you saying that your product has no competition because, it is irruptive, a new product in a new category. I suggest that you use the information you can collect about the customer need that you will satisfy. Before the iPhone other smart phones existed. In calculated its match we could have made assumptions for the preexisting target. Or we can even draw conclusions from looking at web surfing patterns or time spent on emails. I have had other students mention that instant messaging was also disruptive. Again, you could make assumptions based on text messaging in every country and the trend in pricing. I don't want to over complicate things for you because some of these topics will be covered in other books in this certificate. I encourage you to spend some time calculating and continuously improving your market demand. Since this is the basis to support any investment in product development. How would you calculate the market demand for lemonade business in your neighborhood? I provided some ideas which might help. Now that we have defined our product strategy and calculator our market demand, I know your ready to develop and launch your new product. That is the topic of our next lesson, see you there. [MUSIC]