Market Potential & Sales

Forecasting
 Market Size Estimation

Market Potential
Estimate

Unrealized
Potential

Company Sales Industry Sales

Forecast Potential Estimate
DEFINITIONS
 Market Potential- total size of the market - the
ultimate maximum sales that an industry sector can
achieve
 Industry Sales Potential – maximum sales that is
reasonably attainable under a given set of conditions
in a given period of time – what you can achieve
 Company Sales Forecast – quantum of sales under
a given set of conditions in a given period of time –
what you probably will achieve
 Unrealized Potential- the difference between the
Market Potential & Industry Potential
Use of Market Potential
 To make entry/exit decisions
 To make resource allocation decisions – firms
are more willing to allocate resources if the
product is in the growth phases.
 Stage of PLC of product is important here
 Set objectives & evaluate performance
 As an input to forecasts
Information Sources
 Primary data – direct market surveys &
research
 Secondary data –
 Government sources
 Trade Associations
 Financial & Industry Analysts
 Internet & Media
 Past Sales data
New Product Potential
 Relative Advantage
 Compatibility
 Risk
 Overall the higher the relative advantage
(benefits) and lower the incompatibility –
lesser the risk in new product acceptance
Mature Product Potential
 The more mature a product – sales comes
from re-orders from past customers
 For FMCG - usage rate
 For consumer durables – replacements,
upgrade to acquire new product features, to
change to a new version/model
Methods of Estimating Market & Sales
Potential
 Analysis based Methods –
 Determine potential buyers/users of the
product
 Estimate Usage rate
 Estimate Area potential – geographic,
population etc.
Sales Forecasting
 To answer “what if “ questions
 Set Sales Budgets
 Basis of a Monitoring system
 Help Production Planning
 Used by financial analysts in valuation of a
company
Methods
 Judgement Based –
 Sales Extrapolation
 Opinion of sales force & experts
 Customer Based –
 Market Testing
 Market Surveys