How to validate market potential and demand potential ?
- One must be aware that event if one believes the market potential is high, a host of other factors must be considered to both encourage demand (i.e., adequate sales and marketing investments) and “goods delivery” etc
- Also the product must be priced appropriately such that it will deliver the promised benefit to the customers you’re focusing on
- Methods to capture market potential broadly include:
- Statistical models that takes some percentage of a segment’s size and allocates the market share estimates across segments
- Past unit sales volumes as a way to evaluate market potential
- Examine distribution channel performance, assuming you are able to track product sales through each channel
- Consider analyst perspectives, based on research reports, to determine how to characterize market potential
- Evaluate generally available government sources like census data or survey data sources like www.bea.gov
- Methods to capture demand potential broadly include:
- Determining what portion of the overall population could actually buy the product
- Identify the number of people who actually buy or use the product or product type
- Measure the “Intent to purchase” – typically done by marketing divisions
- Discover analogous product performance
- If you are able to understand the pattern of sales or market update for similar products in your company, you may be able to identify adoption patterns.
- E.g. If your company launched a similar product in past, how well did it fare against its forecasts ? What problems did it encounter ? What has been the company’s track record in capturing market share ?
- Use a competitive analogy. Although somewhat difficult to derive, there may be some available industry analyst data to determine competitor market penetration rates, volumes and other indicators for their new product introductions.
An understanding on how to validate market and demand potential.
Source: Haines, S. (n.d.). The Product Manager’s Desk Reference.