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Definition

Total Market Potential

Total Market Potential is the maximum sales available to all firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. 

A common way to estimate total market potential is to multiply the potential number of buyers by the average quantity of each purchase, times the price.

 

Total market potential = Potential number of buyers × Average quantity purchased by a buyer × The price

 

For example, if there are 5 million potential buyers of a particular product in the market and the average buyer buys 10 units of the product each year at a price of $5 per unit.

So, the total market potential of that product = 5,000,000×10×5= 250,000,000.

The total market potential of a product can be stated either by units or dollars (currency). So the total market potential of the given example can be stated as both $250 million in sales per year (sales value) or 25 million units each year (sales volume).

Use of this Term in Sentences 

  • It is important to assess the possible consumer base, competition, and existing environmental variables that may have an impact on total market potential.
  • It is crucial for a new company to analyze and understand the total market potential of its product.

 

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