Chapter II

Theoretical Background

Market Potential:
While managing a product, managers are generally interested in
obtaining as estimates opf the market size of an aggregate level (that is for
all competitive brands). Under certain assumed business

conditions in

particulars sales potential refers to the maximum possible sales opportunity

of the product marketed by a company. Where applied to geographical areass.
It means the maximym sales volume, which could be generated by buyers in
the area for the some staed period. Area potential can be expressed both in
absolute terms and as a percentage of the total market. Generally, the sales
forecast is lower than the market potential, because a company may be
constrained by resources or other places or priorities. Since most products are
similar to a no of others, consumers often engage in considerable in the
development of potentials. The decision on whether to include or exclude
closely related substitues would

ofthen have a

pronounced effect on

estimated sales potential. For example in considering the relative sales

potential for canned peas one would have to consider the possible sales of
fear frozen peas, since the two can be viewed as close subsitutes for each
other.

Market potential and sales forecasts are not the same things, although
the two are sometimes used interchangeably, Market potential typically refer
to total sales possibilities. Several different potentials may be considered
depending on what conditions are assumed one potential could have to do
with the conditions of use of example the amount of tooth paste that would
be used if all persons using toothpaste, brushed after every meal. Another
potential could be one based brushing only once a day, and so on. Thus the
word potential has specific meaning only in terms of the assumptions used
when making the calculations.
Traditionally market was a phusical place where buyers and sellers
gather to buy and sell goods.
According to Phillip Kotler, Market is An area of atmospher for a
potential exhange.
A marketer is someone who seeks a response (attention, a purchase, a
vote, a donation) from another party, called prospect, if two parties are
seeking to sell something to each other, they are called
Marketing has been described as the art of selling products Marketing
is the process of planning and executing the conception, pricing, promotion
and distribution of ideas, goods and services to create exchanges that satisfy
individual and organizational goals.

It is the limit approached by market demand as including market

expenditures approach ingininty for a given marketing environment
Methiods of measuring
Marketing potential:
Different methods were used to estimate market potential. They are known a
the:
1. Direct method
2. Correlation method
1. Direct method:
In the direct method datta on the actual product for which one wishes to
estimate the potential is used. The correlation method is used. The
correlation method makes use of data related to but different from the
product at hand for example in direct method a company used a total
including sales figures to estimates efforts are changed, the sales figure are
also likely to change. Thus this method may suggest subjective productio
based on some assumption about business conditions and competitive
activities.
2. Correlation method:
This method of measuring market potential is based on the data idea that
there is some association between sales and another variable called Factor
for example population size is a good general factor that helps in estimating
the sale potential for numerous products. As such many statistical technique
are now available to measure the degree of association between sales and the
amrket factor. For instance and automobilt company was interested in finding
out the market potential of spare parts for its vehicles market in different
regions. It is a reasonable to collection of fresh data. So as to arrive at a
genuine conclusion of there by suggest a practical solution.
The primary data for the survey were collected from the respective
target audience.

The questionnaire method was used to obtain primary data. The

questions were made simple as the brand to assume that the demand in any
area is colosely related to the no of vehicals in the area. The application of
this method based on hypothetical data.
Defining Sales Territories:
A sales manager typically tries to develop sales territories that are equal in
sales potential and in work load so that each salesman has an equal
opportunity to make slaes. A study of the literature in the field found that
four territorial characteristics were tupically used in defining territories.
Market potential was used in every case which concentration dispersion and
work land were used to less degress. Potential was found to have a positive
effect on sales in almost all instances and concentration the extract to which
potential was concentrated in a few accounts also

tended to have a positive

relationship to sales. Geographical dispersion and work land (defined as No of

accounts) where not found to be strongly related to sales, but this may be
partially the result of the fact that only proxy measures were available to
measure them.
Setting sales Quotas:
Sales quotas should be set after market potentials have fun derived and
sales territories established. The potential for each territory is then know,
but sales quotas must also consider fast sales performance changes to be
made in the amount of supporting sales effort during the coming year and
anticipated activities of competators. Quotas are usally ser for such sales
territory and for each sales representatives. They are ordinarily not the same
as potentials are even of the same relative size. One market may have twice
the potential of another but may have local competitors that look the market
potential of a consumer non-durable, data was collected from different sales
territories. Percentage distribution was used as a mesure of the relative
potential that existend in each of the territories. These percentage figures

were then used to estimate the potential for each territory.

The principle advantage of using total industry sales to measure
market potential is that the actual sales data is used which make the
method easy to operate often, it is difficult to obtain correct sales figures for
an industry. This method will fail to offer reliable estimates when the
market undergoes frequent changes. Here past sales are used to indicate
market potential. Which tacitly consume, certain sales efforts. If these sales
take so large a share that a given firm quota may be smaller than in area
which less potential.
Sales quotas set in light of sales potentials furnish a much better basis
for measuring the effeciency of sales representatives than do quotas set by
the old role of thumb.
Company sales potential:
Company sales potential is the sales limit approached by company
demand as company marketing efforts increases relative to competitors. The
absolute limit of company demand is, of course, the market potential. The
two would be equal it the company achieved 100% of the market. In most
cases, company sales potential is less than market potentials even when
company market expenditures increases considerably relative to competitors.
The reasons that each competitors has a hard core of loyal buyers who are
not very responsive to other companies effrts to woo them.
Total Marketing Potential:
Total market potential is the maximum amount of sales that might be
available to all the firms in are industry during a given period under a
given level of industry marketing effort and given environmental conditions. A
common way to estimate total market potential is as follows: Estimate that
potential no of buyers times the average quantity purchased by buyer times
the prices.
Area Market Potential:
Companies face the problem of selecting the list territories and

allocating their marketing budget optimally among these territories. Therefore,

they need to estimate the market potential of different cities, states and
nations. Two major methods of assessing area market potential are available,
the market build up method, which is used primarily by business marketers
and the multiple factor index methods, which is used primarily by consumer
marketers.
Collection of fresg data. So as to arrive at a genuine conclusion and
there by biggest a practical solution.