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.
More from this Section
Inventory refers to a company’s merchandise, raw materials, and products waiting to ...
- Evaluation plan
Evaluation plan is the system whereby the site is continually evaluated after it is created ...
- Competitive frame of reference
Competitive frame of reference defines which other brands a brand competes with and therefore ...
- Automatic customization
Automatic customization means tailoring of the content presented to the user based on ...
- Wholesale merchants
Wholesale merchants– sell primarily to retailers and provides a full range of services. ...