Market potential is the valuation of the sales revenue from all the supplying channels in a market. The potential of the market is the population who is interested in the product or service which is being made or offered by an organisation. In other words, it is the potential money-making capability of a firm if it capitalises on all advantages and everything goes its way.
It is a subset of the entire population where market potential is the population and all of whom may be potential consumers of the product or – alternatively – the service. Put another way, market potential is the maximum population which would be interested in the product and/or service and gives a good insight into the growth possibility as well.
The number of potential consumers is defined by the size of the population and the number of known consumers the product has. Therefore, it is vital for sales managers to keep in mind that there are two types of consumers that make up the potential consumers of the market – potential customers and actual customers.
Evaluating New Market Potential
When sales managers do their evaluations of new markets, many of them focus on actual consumers because they are the ones who actively engage in purchasing products or services. However, for sales managers to have a good picture of the opportunities or threats that might occur from the market, it is important to focus on potential consumers as changes in the number of potential consumers could affect the number of actual consumers.
The total number of potential consumers might shift due to changes in the following aspects of consumers’ purchasing behaviour:
- Economic preference – The amount that the market can afford to spend on a product or service.
- Benefit preference – The perception that the market has towards a product or service and what satisfaction they could gain from it.
- Practicality preference – The practical difference the consumers perceive that the product could make to their lives.