Demand Measurement

1. Potential Market
 Consumers have interest – Constraints of income and market access
 Product is relevant to them – Unaware of availability due to poor marketing

2. Available Market: Consumers have interest, income and market access to a particular
product.

3. Target Market: Part of available market pursued by the company.

4. Market Demand: Total volume bought by particular

 by customer group
 in time period
 in marketing environment
 under marketing program.

 Market Demand depends on:

o External marketing conditions facing the firm
o Marketing investments made by the firm

Market Demand Calculation: Is the product of the number of buyers purchasing, the amount of
units they purchase in a year, and the average retail price they pay for a unit.

(No of buyers in the market)*(Annual qty purchased by ave buyer)*(Ave price paid for unit)

Market forecast: Market demand corresponding to a certain level of marketing expenditure.

5. In case of competition from substitutes:

Market demand includes demand for all products in the category.
 Primary demand: Total volume demanded by customers for a product category
 Secondary demand: Total volume demanded by customers for a specific brand / product

Marketing expenditures will increase market demand.

 Market minimum can be achieved without any marketing spending.
 After attaining marketing potential, further mktg expenditure won’t increase demand

Larger the distance between market potential and market minimum, demand will become
sensitive to marketing expenditures.
6. Product Demand will depend on:
 Company marketing expenditures Vs Its competitors spending levels
 Effectiveness and efficiency of our marketing expenditures versus our competitors

7. Unit share & Dollar share

Unit share: Measures percentage of the unit market demand that a firm has captured
Dollar share: Measures percentage of the dollar market demand that a firm has captured
Higher share in units need not translate into higher dollar share

8. Market Penetration Index

It measures ‘percentage of consumers’ in the ‘potential market’ who are currently
purchasing a product in the category.

Formula = (Market demand) / (No of consumers in potential market)

 Low market penetration indicates room for growing primary demand

 High market penetration indicated NO room for growing primary demand

9. Product / Brand Penetration Index

It measures percentage of consumers in the particular target market who are purchasing a
product or brand.

Formula = (Product demand) / (No of consumers in target market)

 Low product penetration indices signals opportunity to grow product / brand demand
within target market.

 High product penetration indices signals NO opportunity to grow product / brand demand
within target market.