Sales potential

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Sales potential
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Sales potential is the estimated market share which the organisation's owner expects to earn in a specified time after the company enters the market. Depending on the evaluated profitability from sales potential, a company needs to determine whether to enter a market or not. That is why the results of sales potential are so important for an organisation.

Meaning of Sales Potential

Sales potential says how much one product can be sold. It means that instead of all the particular product category's brands, we consider a total quantity of only one specific brand. It is a process by which a company tries to predict the future market demand. In this process, all of the direct costs are included so that it is easy to estimate profits. There are few assumptions that need to be considered before sales potential forecasting the sales. Those are – growing or shrinking by certain percentage market share, location advantages, need of increasing sales force, increase in product's prices, competition, changes in technology and government regulations. Sales potential forecast may be long term as well as short term.

Sales Potential and Market Potential

Sales and Market Potential consider both the demands and needs of the customers. Market Potential is the total amount of all brands in the same category of product that could be sold. Market Potential is different from Sales potential which considers only the quantity of an exact brand instead of all that could be sold in the market [1].

Sales Potential’s advantages

There are some advantages of sales potential:

  • Sales Potential helps in determining the expected income out of the business.
  • It helps to produce at the right time the right quantity of product which is useful in reducing the company's losses.
  • The process gives a good start to the business and solves problems of decision making.
  • Also it determines an approximate amount of required both raw materials and labor force.
  • Sales Potential can improve the process of proper planning to achieve desirable targets.

Sales Potential’s disadvantages

The most important disadvantages of sales potential are:

  • The forecast of sales potential may give inexact results. It happens because of coming up of new trends and technological disruptions.
  • Because there are many alternatives which are available in the market, the buying behaviors of the consumers are irregular and can't be predictable.

Example of Sales Potential

The forecast of Coca-Cola's sales potential is a combination of social and economic parameters, historical data, seasonal variations and occasions[2]. To control monthly forecasts they have weekly reviews. They analyze submarket and regional supply and demand and before forecasting, they consider macroeconomic conditions. Mostly, the forecast is fragmented into cities, towns, and villages. They make their decisions to minimize risks and to maximize returns. Thanks to estimating sales potential Coca-Cola is able to satisfy the population's demands and get a big market share [3].

References

Footnotes

  1. Jobber D. & Lancaster G. (2009), 52-53
  2. The Financial Canadian (2017),
  3. The Financial Canadian (2017),

Author: Emilia Zapart