Sales Potential and Sales Forecasting

Sales potentials, as defined earlier, are quantitative estimates of the max­imum possible sales opportunities present in particular market segments open to a specified company selling a good or service during a stated future period. They are derived from market potentials after analyses of historical market share relationships and adjustments for changes in com­panies’ and competitors’ selling strategies and practices.

A firm’s sales potential and its sales forecast are not usually identi­cal—in most instances, the sales potential is larger than the sales forecast. There are several reasons for this: some companies do not have sufficient production capacity to capitalize on the full sales potential; other firms have not yet developed distributive networks capable of reaching every potential customer; others do not attempt to realize their total sales poten­tials because of limited financial resources; and still others, being more profit oriented than sales oriented, seek to maximize profitable sales and not possible sales. The estimate for sales potential indicates how much a company could sell if it had all the necessary resources and desired to use them. The sales forecast is a related but different estimate—it indicates how much a company with a given amount of resources can sell if it imple­ments a particular marketing program.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.

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