HOW DO YOU ESTIMATE THE CURRENT MARKET DEMAND?
Before you get into the actual process, get to know these following terms related to Demand:
Potential Market: they are the set of consumers with a sufficient level of interest to buy your product. They may or may not have sufficient financial resources to afford the product.
Available Market: they are the set of customers who have interest, income, and access to a particular offer. It constitutes the set of the qualified available market.
Target Market: they are the part of the qualified market, which the company is interested in selling the product.
Penetrated Market: they are the set of consumers who are buying the company’s product. They are the existing customers for the company.
Market Demand: it is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment.
We all know that the higher the demand, the higher is the sales. And that is what brings you revenues and profits to the company. The following are the methods, through which one can estimate the current demand for the product.
TOTAL MARKET POTENTIAL: It is the maximum sales available to all firms in an industry during a given period of time, under a given level of industry marketing effort and other environmental conditions. It is calculated by multiplying the potential number of buyers and the average quantity each purchase and then by the price.
Here the task is to estimates the number of buyers which is actually difficult. This can be done by eliminating the unwanted group numbers, which is known as a ratio-chain method. This method is carried out by multiplying a base number by several adjusting percentages.
AREA MARKET POTENTIAL: It involves two methods which are mentioned as follows
MARKET BUILD-UP METHOD: If your business is a Business to Business market, then this is the best method to estimate your current market demand adopting selective distribution. For this, you should first identify all the potential buyers in that particular market and then estimate their potential purchases, which would give you the current demand.
MULTIPLE FACTOR INDEX METHOD: If your business is a Business to Customer market, then this is the best method to estimate your current market demand adopting intensive distribution. Since it consists of a very large number of customers it is a little difficult to estimate. Hence, one can estimate the factors that influence buying behavior and give them specific weights and then rate them.
INDUSTRY & SALES MARKET: A company needs to know the sales taking place in the industry whole, that represents that of its competitors too. This data can be collected from the industry trade association, though individual sales of the company may not be revealed. Through this, the growth of the company Vs the growth of the industry can be compared and the relative standing of the company can be evaluated and the required procedures for the development can be implemented.