Which factors influence the market potential

Market potential

The market potential indicates the absorption capacity of a market. It is the totality of the possible sales quantities for a certain product or a product group. It represents the upper limit for the market volume.

At best, the amount that can be sold over a period of time in the overall market. As a hypothetical quantity, it eludes observation. It can be seen as an expression of the absolute absorption capacity of the relevant market under given conditions and thus as the upper limit of the market volume. To determine the market potential, indicators are used, such as purchasing power indices, population size or consumption expenditure or frequency, which may be linked to one another. In the consumer goods sector, e.g. the cross-sectional analysis, purchase share method or representative surveys are used to determine the market potential of consumer goods. The latter are also suitable for consumer goods. However, the replacement requirement must be taken into account here, which in turn depends on the average (economic or technical) service life. The market potential of capital goods, especially capital goods, is determined by the potential of the downstream user levels (derivative demand), which in turn are influenced by (inter) national economic and technological developments. Literature: Cox, E., Industrial Marketing Research, New York et al. 1979. Hill, W., Marketing, Vol. 1, 6th edition, Bern, Stuttgart 1988.

[s.a. Sales potential] The market potential (MP) indicates how many units of a product could be sold in total if all potential customers had the necessary funds (purchasing power) and a need to buy existed. It shows the absolute absorption capacity of the market, i.e. its saturation limit (see Meffert, 2000, p. 171). Therefore, the market potential is used as a benchmark for determining the market volume (MV). By determining the degree of market saturation (MV / MP x 100), it can be estimated whether there are any growth opportunities in the market. The market potential can only be fully realized under optimal market development conditions. Since the MP is a fictitious, unobservable quantity, indicators such as purchasing power and population size are often used to determine it. Depending on the type of product, different methods are used to determine the MP.

In consumer goods market research, the cross-sectional analysis and the international comparison method can be used for consumer goods. The cross-sectional analysis first determines the quantities consumed per capita in the various income brackets, and then determines the MP under the assumption that all households had income of the highest income bracket.

With the international comparison method, the gross national product (GNP) of different countries is compared under the assumption of an analogous development of GNP and the consumption volume of a certain product. The basic idea is that the development in one's own country with a time lag follows the development in a more developed country with an already higher GNP.

In the case of long-term consumer goods, the market is saturated when the conceivable maximum stock of one product in every household is reached. For these goods, the replacement requirement must also be calculated taking into account the average service life (see Hill / Rieser, 1993, p. 116).

In the case of capital goods, the market potential is determined by general economic development, technological development, the potential of downstream branches of the economy and the structure of foreign trade. The »Census Method«, for example, is a suitable method, according to which the MP is derived by adding the individual potentials of all possible customers. The individual buyers are asked to estimate their potential needs. The "Market Survey Method" is based on a random sample (sampling procedure). A key figure is determined that establishes the connection between sales in a customer group and a statistical variable. This key figure is then transferred to all potential customers (cf. Cox, 1979, p. 157ff.).

corresponds to the latent (realistically maximum) absorption capacity of a market. It is assumed that the market capacity cannot be fully used, but remains a dregs of those who refuse to buy. See also sales potential, sales volume, market volume.



(in pieces or €)
The market potential is defined as the possible absorption capacity of a market for a product or service.
= maximum sales volume that can be achieved on a market or maximum turnover that can be achieved
The market potential thus indicates how many units of a product can be sold on a market or how much sales can be achieved in this market if all households with the necessary purchasing power would buy the respective product and the optimal form of market cultivation is found.
example
A tick vaccine is about to be approved in Germany. The vaccine was introduced in the United States four years ago. One in 20 Americans now has this tick vaccine injected. Since the relevant market conditions in the USA can basically be compared with those in Germany, the selling pharmaceutical manufacturer assumes a market potential in Germany of 4 million packs per year with a population of 80 million.
source
The following sources can be used to determine the market potential:
· Industry magazines
· Association statistics
· Trade Shows
· The Federal Statistical Office and the State Statistical Offices
· Publications from market research institutes
· Expert analyzes as well as own estimates
It may be useful to draw analogy conclusions on the basis of other countries (as in the previous example).
interpretation
In contrast to the market volume, the market potential is future-oriented and describes the maximum amount that can be sold in this market
can. The market potential therefore provides an initial indication of the absorption capacity of a market.
Measures to influence
The entire spectrum of marketing activities can be used to influence the market potential:
· Product or assortment policy in which new products are developed or added to the assortment
· Price policy, in which new groups of consumers are tapped by lowering the price
· Distribution policy in which new sales channels are used
· Communication policy in which latent needs are awakened in the consumer
Limits
The market potential says nothing about the extent of market saturation. For this reason, it is useful to relate the market volume (= sales realized by all providers per unit of time) to the market potential. In this way, the market saturation level is obtained, which can range from 0 to 100%. The closer you get to 100%, the sooner the state of market saturation is reached.

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