Top-down or bottom-up?

I always used to wonder why would one study just the 'revenue' to measure the market size and not the volume and its growth.

So the answer lies in the two strategies generally followed:

1. Top-down: This approach is used by most data sources to calculate the market size for a product using macro factors like GDP, purchasing power, etc. This is the first check to ensure entering the market.

2. Bottom-up: This approach is used by the companies while establishing manufacturing plants to understand the unit economics. It is here where they study the volume and price of the product.

Generally it is a good practice to do both to cross check the numbers.

Two other approaches used are regression analysis and Y-o-Y analysis.