Customer Module

How to Estimate market potential

Key Terms in market Forecasting

Potential market Available market Target market

Penetrated market
Market demand ( Primary & Secondary) Market Minimum Market Potential Product Demand

Understanding 'Markets'

POTENTIAL MARKET AVAILABLE MARKET TARGET MARKET

PENETRATED MARKET

To estimate market for TV sets in India

Step 1: No: of households in India ( potential Market) Step 2. Below Poverty Line Households Step 3: Constraint of Income ( low income groups households) , access & interest. ( Available market)

Step4 : Market to which the company offers the product. ( Target market)
Step 5: Those who actually purchase the TV Set ( penetrated market)

Tools for Estimating Market Demand

Qualitative Methods

Quantitative Methods

Tools for Estimating Market Demand

Qualitative Methods

Opinion Surveys ( buyers & Salespersons)

Delphi Technique
( Opinion of Panel of experts in the industry)

Tools for Estimating Market Demand

Quantitative Methods
Time Series Analysis

Correlation Method

Exponential Smoothing

Market Build up

Market Build-up Method (1/ 2)

1. Market Demand =

(# buyers in a market) x
(annual quantity purchased by a buyer) x (average price paid for a unit)

From market demand. we calculate product demand

2. Product Demand in Rupees = Product Demand in units x Avg. price point of the firm

From market and product demand we calculate Market Share

Product Demand in Units Market Demand in Units

Unit Share

Rupee Share

Product Demand in Rupees Market Demand in Rupees

Product Demand can be affected by

The firm's level of marketing expenditure vs. competitors

Its effectiveness & efficiency of marketing expenditure vs. competitors

This is determined across the graph

Relationship between Demand and Marketing Expenditure

Category Marketing Expenditure Market demand in Rupees = Market Demand in units x Avg. retail price point in the market

Penetration Index
Primary Penetration Index Market Penetration Index Market Demand # consumers in potential market

Product Penetration Index

Product Demand # consumers in target market

Secondary penetration Index

Demand for Toned Milk Of Mother Dairy In Urban Households of Delhi during a year

Estimating the demand for toned milk in Delhi for a given year
1. First, define the scope of the problem is consumer or institutional consumption? It is assumed that only milk consumed by households is being considered, and not milk purchased by institutions such as schools, restaurants, etc. or milk used to make other products like cheese 2. What is the number of households in Delhi and estimated milk consumption per household? According to Government estimates, there are 28.82 Lakhs households, out of them 2.94 lakh Rural and 25.88 lakhs Urban. It is assumed that only urban households are being considered 3. Households with children probably consume 14 or more liters of milk per week, but other households probably consume around 5-7 liters since few adults drink milk as a beverage. If we averaged these two types of households together, the typical household consumes 10 liters of milk per week. 4. With 25.88 lakh urban households, there would be 258.8 lakh liters per week consumed in the city.

Estimating the demand

5. There are many different varieties of milk. Consumers can purchase full cream, toned or double-toned milk. Well make an assumption that 20% of the market is toned. 20% of 258.8 lakh litres equals 51.76 lakh liters of toned milk consumed in a week. Multiplying this by 52 gives us around 27 crore liters of toned consumed during the year. 6. To multiply this with average retail price per unit (Rs.23), we would conclude that toned milk is a Rs.619 crore market 7. To estimate product demand of mother diary (secondary demand) which has 60% share then product demand in units is 16.2 crores ( 27 crore * 60 percent)

8. The product demand in Rupees is 16.2 crores multiplied by Rs 26 which is 421 crore market .
However, a market sizing done for a business plan or consulting project needs much more verification than what the above approach

Group Assignment

Fair & Care, an Indian cosmetic company has been around for last 20 years predominantly into skin care products with a good brand following amongst women. However, market trends show a gradual shift towards emergence of the male skin care products. At the same time one wonders whether Indian men are ready for skin cares. This is the dilemma in the mind of Dr Harikrishnan, General Manager, Fair & Care.

Measuring Markets
Can we make an attempt to calculate the market for Men Fairness Cream?
Demand for Mens Fairness Cream Of Fair & Care In Urban Households of India during a year assuming the market share of Fair & care to be 40%