No! Assuming �Just 0.

3 Percent of a Gazillion People� Doesn�t Make a Great Market

Published on March 30, 2016
LikeNo! Assuming �Just 0.3 Percent of a Gazillion People� Doesn�t Make a Great
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Suhasini Kirloskar
Suhasini Kirloskar
Co-Founder MarketAxis Consulting
We�re gathered to project future sales, for a new product, very cutting edge.
Someone projects a slide, saying something like

There are 21 million families in India who own a car.

Assuming that just 0.3% of them buy our supercool Airconditioner Vent Fragrance
Dispenser,
We�ve sold 63000 units!
The �just 0.3%� is said with a pitying, slightly scornful expression, implying
�can�t you pick up such a trivial challenge�? Folks around the table nod. The sales
head agrees bravely, and someone rushes off to production.

Maybe such an approach works when studying Economics, but in Marketing? I groan,
here�s another sales plan doomed to fail. Why? Wouldn�t 3 of a 1000 families want
the magic of the Fragrance Dispenser? I don�t know, but here are some things that I
do:

How are we going to get 21 million families to know about our product?
How are we going to reach it to them � physically?
Do we have the money to achieve the 2 tasks above?
Will we still make any profits if we spend that money?
And finally, the presenter usually has no rationale for assuming 0.3%. It could be
0.02% for all he or she knows, and assuming that this uniform average will be true
over the entire Indian market is sales suicide.

The ludicrousness of this approach is brought out rather nicely in this hilarious
video by the irrepressible Ali G, where he invents the Ice Cream Glove. Watch from
2 mins and 45 seconds into the video, (or from 1 minute and 30 seconds if you want
to see Donald Trump�s reaction to the business idea, added bonus)

So what kinds of sales plans make sense? Here�s what I would like to hear.

When we demonstrated the product to 100 families in hot and humid cities, 6 of them
said they would love to have one.
They also said they would be happy to pay a price of Rs. X for it.
These guys typically hang out at ABC place, visit DEF websites and shop at GHI
shops.
We can sell 5000 units in the first phase, if we target the hot and humid cities,
and build awareness and distribution targeted to our early adopters.
That�ll cost us Rs Y, and generate Rs. Z of revenue.
We�ll also learn what works, and make our future marketing more effective. For
instance, we may find a marked change in behavior among consumers who have cars
costing Rs. 10 lakh plus.
We will then have Rs. (Z � other costs � Y) of funds available with us to develop
more markets. With that, we should be able to sell another 7000 units.
While we plan on replicating the numbers, we also recognize that consumers living
in places where the climate is cool may not respond to the product in the same way.
So this approach builds sales numbers based on the realities of selling and
building new markets, and therefore helps to build realistic expectations and
operational plans.

I would love to hear from readers as to how they have generated sales projections,
especially for new products and services.