2024年3月1日发(作者：初学cad制图)

Estimating Market Potential:

Is There a Market?

The Business Development FilesEstimating Market Potential:

Is There a Market?Karen Mundy, Department of Agricultural and Applied Economics, Virginia TechS. Gary Bullen, Department of Agricultural and Resource Economics, N.C. State UniversityAdapted from material by Kent Wolfe, Department of Agricultural and Applied Economics,

University of GeorgiaPart 1. What the Agent Needs to KnowYour clients have decided the price they want, the

geographic location of the market, their possible

customers, and who and where the competition is. Next,

they must calculate the portion of the market they can

reasonably expect to capture. Market potential is an

estimate of the amount of money your clients can expect

to make from the product or service they plan to market.

Their estimate will only be as good as the information

they use and the assumptions they make. There are seven

steps to estimating market potential (they have already

completed the first four steps).The market potential is the number of potential buyers, an

average selling price and an estimate of usage for a specific

period of time. The general formula for this estimation is

simple:Estimating Market Potential

MP = N × MS × P × Q

Where:

MP = market potential

N = total number of potential consumers

MS = market share—percent of consumers

buying from you

P = average selling price

Q = average annual consumption

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Define the market segment (target market).Define the geographic boundaries of the market.

Define the competition.

Define the market size.

Estimate market share.

Determine the average annual consumption.

Estimate an average selling price.

Step 5, estimating the market share or potential, will allow

your clients to determine if their markets will support their

businesses by covering their costs and paying them a salary.

Generally, the market potential is the highest estimated net

revenue that they will realize from their enterprise. In the

second meeting, you covered estimating a price. When they

estimate market potential and use the price they calculated,

they will see if they have covered their costs. One way for

your clients to use their market potential analysis is to

change their assumptions and see if they can still cover

their costs. They can either lower their expectations of the

number of people who will buy from them, or they can

raise their prices. Writing down the assumptions they use

to estimate their market potential and the changes they

make to those assumptions is essential.

To illustrate the concepts discussed, we use the agritourism

example of a farmer wanting to add a corn maze and

educational tour.

Define the market segment

Your clients have identified the target market of the

customers who are most likely to buy from them. The

target market was generally described using demographic

variables: gender, age, education and income. The market

is also described using psychographic variables: lifestyle,

interests and belief system variables. A client might have

more than one target market. The most important piece

of information from identifying the market is how many

potential customers fit the target market description based

on the variables a client chooses:

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Estimating Market Potential: Is There a Market?■

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age

marital statushousehold income

genderrace/ethnicityeducationThe Business Development FilesDefine the market size

Once a client has defined the market area, target market

and total number of people in that market, he calculates

the number of potential customers for the business.

The total market will typically be adjusted downward to

consider those who will not buy from your client. From the

total people in the target market, the client estimates the

percentage of consumers who would use the products or

services.

Example—AgritourismAssume the farm is already an agritourism operation.

Your client wants to offer a corn maze as well as

something educational. The client decides to target

children in kindergarten through third grade. The target

market area is Wake County, which has 45,700 children

between 5 and 9 years of age. Therefore, N (number of

potential customers) = 45,700. They found this number

in the 2000 U.S. Census.

However, not all children under 9 will visit any

agricultural facility. The client’s next step is to adjust

the 45,700 to get a more accurate estimate of the

actual market potential. A survey of elementary school

teachers showed that 60 percent of kindergarten through

third-grade teachers are willing and able to take an

agriculturally related field trip.

As a result, the 45,700 kindergarten through third

graders needs to be multipled by 60 percent. This

calculation results in an adjusted market potential of

27,420 potential students.

Number of Potential Consumers = 45,700 × 0.60 =

27,420

Because not everyone in the defined market area will be a

customer, each client needs to compare the target market

profile to the population in the market area (see Bullen,

2006). Market areas are defined in several ways. Some

methods require easy-to-collect data, whereas others

require more complex data and the services of a marketing

professional.

Define the geographic boundaries of their market

Your clients have defined their market areas by geography,

ring analysis or radius, trade area or drive-time. Most

likely, they used geography, the simplest form of defining a

market area. It defines the market area by using landmarks

or some jurisdictional boundary, such as

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neighborhoods (based on U.S. Census block data)

zip codescity or county boundariesMetropolitan Statistical Areas (MSA) state

(multi-state) bordersDefine their competition

The next piece a client needs is information about the

competition. Continuing the agritourism example, your

client finds out who the competitors are in the market and

what they are offering.

Example—AgritourismAssume your client finds three other farms with corn

mazes. One has a petting zoo and pumpkin cannon

included in the admission price. The other two farms

offer the corn maze as one of several activities, including

pick-your-own pumpkins and apples, hay rides and

a haunted house—each priced separately. Your client

decides to offer the corn maze and an educational tour

of the farm. Each participant will get a small bag of

apples at the end of the tour. The tour includes a hay-

ride around the farm with stops at various picture

signs that point out production practices used and

crops grown.

Determine the average annual consumption.

Next, your clients determine how often their target

market segment would use their product or service. This

figure will have a significant impact on the estimated

market potential. For instance, is a product purchased

frequently, occasionally or infrequently? Obviously, the

more frequently the product is purchased, the larger the

market potential. An abundant amount of consumption

information is available from the government as well

as industry trade associations. For example, the USDA

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Estimating Market Potential: Is There a Market?collects volumes of disappearance (consumption) data for

many commodities and converts it into per-capita annual

usage (consumption) estimates.

The quantity of product your clients are selling would

vary based on the product being sold. For example, if a

client sells honey, the same customer may buy it five times

in a season. If, however, a client is selling hayrides, most

customers will buy only one in a e—AgritourismThe client offers educational hay rides and a corn maze

and assumes that students would come only once with

their classes. If the client offers the same package on

weekends or for special events like birthday parties,

some students might come two or three times.

Usage would be how often these school groups will take

an agriculturally based field trip within a school year.

The survey of elementary school teachers indicated that

each teacher plans to take only one agriculturally based

field trip this year. Therefore, use “1” as the estimate

of use:

Q (quantity used) = 1

The Business Development FilesExample—Agritourism

Assume three existing agritourism operations are in a

client’s market area. What percent of the total market

might your client be able to acquire? Because data on

agritourism in the area are not collected, your client

won’t be able to come up with an accurate number.

However, for planning purposes, you can “guesstimate”

a market share. In this example, it is the number of units

sold—the number of students going on the farm tour—that is being calculated.

First, your client assumes that each of the competing

farms in the market area has an equal share of the

potential market, or 33.3 percent of the 45,700 children

between ages 5 and 9. Next, the client assumes that if

he enters this market, he will take an equal part of each

existing operation’s business. The goal is to capture

25 percent of the total potential market. To calculate

the market share for each of the competitors, use this

formula:

Market share = 100% ÷ number of competing businessesMarket share = 100 ÷ 3Market share = 33.3% for each of the existing

agritourism businessesTo assume your client will get 25.0 percent of the

market (assuming they divide the existing market

evenly four ways) is probably unrealistic since the

business is new, and the competitors have existing

customer bases. Your client can easily change the

assumptions. For example, he assumes that he can

capture 3.3 percent from each of the three existing

operations. The client would then have

10 percent of the total potential market.

Using the total population of 45,700, your client

estimates that only 60% of those children would

probably be able to go on a field trip. When completing

the calculation, the client finds only about 27,420

(45,700 × 0.60 = 27,420) would actually go on an

agricultural field trip. Your client decides to use this

lower number (27,420) and 10 percent for the market

share for the first year. Your client finds he will have

about 2,742 (27,420 × 0.10 = 2,742) children. This

market potential number potential will help your

client determine if the plan is feasible.

Calculations for Estimating Market Share

Market share is the percentage of a market (either in

number of units sold or revenue) accounted for by each

business. It provides important insight into how much of

the total potential market a client might capture. If the

market share is not large enough to support the business,

the client has a problem. Also, if the number of units

needed for the business to break even financially is known,

the client can determine what share of the market must

be captured to achieve this break-even point. Your clients

need to be careful not to estimate an unrealistic market

share. The result could spell financial problems.

Estimating market share is difficult because of the lack

of information. Some trade associations or market

research publications and stories will supply some basic

market share information, but finding directly applicable

information for each client’s business may be impossible.

Your clients should estimate various scenarios based on

what information they have. Remind your clients to write

down the assumptions they use so that they can go back

later and revise based on new information.

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Estimating Market Potential: Is There a Market?Your client has the following information to use in

calculating the market potential for an agritourism

operation:

N Total number of consumers(based on Wake County

census): 45,700

MS Market share (based on teacher survey results

times the client’s estimate of how much of the

market can be captured from the competition):

0.06*P Average selling price (based on cost of production):

$8.00

Q Average annual consumption (number of visits

per student based on teachers’ survey): 1

MP = N × MS × P × Q

MP = 45,700 × 0.06 × $8.00 × 1

MP = $21,963

*To calculate the percent of consumers buying from a

client, multiply the percentage of consumers who are

potential customers by the percentage of the market the

client expects to capture from competitors. In the example,

this calculation would be 0.6 × 0.1 = 0.06

Any market potential estimate is only as good as the

assumptions a client makes and the data used. Your

clients are better off estimating on the low side and setting

their prices to cover their costs. If an estimate of market

potential is low, the client will show a profit above his or

her costs. If, however, the estimate is too high, your client

may find it difficult to pay the bills at the end of the season.

The Business Development Files33

Estimating Market Potential: Is There a Market?Part 2. Market Potential Worksheet

Ask your clients to complete this worksheet at home.1. Total number of people within the target market areaThe Business Development Files2. Consumption (How often is the product consumed, and how much of the product

is consumed?)

3. Competition (number of competitors)

4. Calculate the market share:

How many people matching your demographics live within the defined market area?

Market Area

County 1

County 2

Total number of people

Number of People (target market)

How much of the product is consumed by your target customers?

Market Area

1. Market area 1

2. Market area 2

Total all market areas

Consumption or usage (pounds)

Who is your competition?

Competitor

Competitor 1

Competitor 2

What product is offered?Price

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Estimating Market Potential: Is There a Market?What percent of total potential customers go to the competition?

Competitor

Competitor 1

Competitor 2

Total all competitors

Number of

customers

The Business Development FilesPercentage Market share

of market (customers × percentage)

7. Total the information:

Numbers you need to estimate your market potential:

Total number of potential customers (N)Total consumption (Q)

Total market share (MS)Your price per customer (P)

Estimating Market Potential: MP = N × MS × P × Q

Where:

MP = market potential

N = total number customers

MS = market share

P = average selling price

Q = average annual consumption (usage, number of times individual would attend)

Your numbers

MP = N × MS ×P × QN = ______MS = ______P = ______Q = ______MP =

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Estimating Market Potential: Is There a Market?The Business Development FilesReferencesBullen, Gary. 2006. Direct Answers for Direct Marketers.

Marketing Resource CD developed as part of

Southern Region Sustainable Agriculture Research

and Education (SARE) grant. Raleigh: N.C. State

University, Department of Agricultural and Resource

Economics. Contact gary_bullen@.

McConnon, J. 1996. Estimating Retail Market Potential.

Bulletin #3012. Home-Based Business Fact Sheet series.

Orono: University of Maine Cooperative Extension.

Online: /onlinepubs/htmpubs/fe, K. 2006. September. Estimating Market Potential

Check-List. Center Report 06-08. Athens, Ga.: Center

for Agribusiness and Economic Development, The

University of Georgia. Online: /publications/2006/pdf/36