Before examining the planning and analytical work involved in setting sales volume objectives, it is important to define three terms: market potential, sales potential, and sales forecast. Some executives use these terms synonymously, but, as the following discussion indicates, there are good reasons to distinguish among them.
1. Market Potential
A market potential is an estimate of the maximum possible sales opportunities present in a particular market segment and open to all sellers of a good or service during a stated future period. Thus, an estimate of the maximum number of low-priced mobiles that might be sold in New Delhi, India, during the calendar year 2017 by all sellers competing for this market would represent market potential in New Delhi for low-priced mobiles in 2017. A market potential indicates how much of a particular product can be sold to a particular market segment over some future period, assuming the application of appropriate marketing methods.
2. Sales Potential
A sales potential is an estimate of the maximum possible sales opportunities present in a particular market segment open to a specified company selling a good or service during a stated future period. To illustrate, an estimate of the number of low-priced mobiles that might be sold in New Delhi, during the calendar year 2017 by Samsung Mobiles would be the 2017 New Delhi sales potential for Samsung low-priced mobiles. A sales potential represents sales opportunities available to a particular manufacturer, such as to Samsung, while a market potential indicates sales opportunities available to an entire industry.
3. Sales Forecast
A sales forecast is an estimate of sales, in dollars or physical units, in a future period under a particular marketing program and an assumed set of economic and other factors outside the unit for which the forecast is made. A sales forecast may be for a single product or for an entire product line. It may be for a manufacturer’s entire marketing area, or for any subdivision of it. Such forecasts are short-term, or operating, sales forecasts rather than long-range sales forecasts, which are used for planning production capacity and for long-run financial planning. Long-range sales forecasts, although of interest, are so tentative that sales planners give them only passing attention. It is the short-term, or operating, sales forecast that is important to the sales executive. Keep in mind, then, that an operating sales forecast is a prediction of how much of a company’s particular product (or product line) can be sold during a future period under a given marketing program and an assumed set of outside factors. [1]
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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