Forecasting and Demand Measurement

Conducting marketing research and collecting marketing intelligence can help to identify marketing opportunities. The company must then measure and forecast the size, growth, and profit potential of each new opportunity. Sales forecasts prepared by marketing are used by finance to raise cash for investment and operations; by manufacturing to establish capacity and output; by purchasing to acquire the right amount of supplies; and by human resources to hire the needed workers. If the forecast is off the mark, the company will face excess or inadequate inventory. Because it’s based on estimates of demand, managers need to define what they mean by market demand.

The Measures of Market Demand

There are many productive ways to break down the market:

• • The potential market is the set of consumers with a sufficient level of interest in a market offer. However, their interest is not enough to define a market unless they also have sufficient income and access to the product.
• • The available market is the set of consumers who have interest, income, and access to a particular offer. Eligible adults constitute the qualified available market—the set of consumers who have interest, income, access, and qualifications for the market offer.
• • The target market is the part of the qualified available market the company decides to pursue.
• • The penetrated market is the set of consumers who are buying the company’s product.

These definitions are a useful tool for market planning. If the company isn’t satisfied with current sales, it can try to attract a larger percentage of buyers from its target market. It can lower the qualifications for potential buyers. It can expand its available market by opening distribution elsewhere or lowering its price, or it can reposition itself in the minds of its customers.