>

How is market capacity measured? Three ways to calculate market capacity. What and how to calculate

Attention!

The VVS company provides exclusively analytical services and does not consult on theoretical issues of marketing fundamentals(calculation of capacity, pricing methods, etc.)

This article is for informational purposes only!

WITH full list You can familiarize yourself with our services.

In contact with

Classmates

Effective trade on a national scale or in a particular region would be impossible without effective management risks. The most important quantity characterizing the level of demand for a product or service in a selected niche, determined by the nature of the product, target audience and geographical boundaries, is called market capacity. This concept occupies an important place in the planning and forecasting procedures of a company. Correct calculation of market capacity will help to model the situation regarding the degree of probable influence of the enterprise in its segment of economic relations and formulate a business plan. This is a key concept for both the marketing department and the entire organization as a whole. Data on the value of this indicator are widely used when making management decisions of the company, help determine the strategy of action, and also play a vital role in increasing the scale of activity.

Why do companies calculate market capacity?

To capture a new market segment, at the first stages of business planning, an organization needs to calculate its capacity. With its help, you can easily assess the degree of benefit that an organization can acquire by engaging in a particular business activity.

The essence of this calculation is to determine the projected sales value. As a rule, information for 12 months is taken for calculation. In order to carry out such analytics correctly, it is necessary to take into account the number of companies already operating in a given segment in a specific area, as well as the degree of satisfaction of demand for a similar product or service in the market niche. Without taking into account these indicators, for any organization, the production of a new product will obviously become unprofitable.

In the process of analyzing market capacity, you can determine both the existing value and the possible one. In this case, the second indicator must be greater than the first. As a rule, the calculation possible volumes sales are made in rubles or tons.

When the value of the existing market capacity is established, the scale of production, procurement and sales is calculated, the size of the customer base, penetration indicators, etc. are determined. For this analysis, you should refer to statistical data, marketing research of your organization, information from open sources, reporting, as well as insider information when analyzing competitors. The probable market capacity is a prognostic category, the value of which is determined by the methods of extrapolation and expert assessment.

Potential sales value carries enormous weight in the adoption process management decision about the penetration of an organization into a certain niche of economic relations. As a rule, when calculating the probable market capacity, indicators of its existing size and the potential of the company in its segment are summed up.

A large difference between possible and actual data indicates the potential profitability of working in a particular niche. On the contrary, if during the calculation it was established that this discrepancy is small, then the market is in a state of stagnation. Most likely, in conditions of fierce competition, effective activity in this segment will be impossible, or the resources spent on this project will be incomparable with the profit that it can bring.

Calculating market capacity has the following positive consequences.

    Calculating the value existing on this moment time of market capacity, an organization can with a high probability determine its place in the system of economic relations, as well as the relative share of sales occupied by competitors. Moreover, studying the position of rivals is no less important than clarifying your market positions.

    By analyzing trends in capacity changes, it becomes possible to relatively accurately plan sales and, as a result, formulate an up-to-date marketing strategy enterprises.

    By using mechanisms for calculating market capacity, the organization increases the degree of accuracy of forecasts regarding future sales volumes of goods and services, as well as the level of effectiveness of advertising campaigns.

Calculation of market capacity and its types

As a rule, three types of market capacity are calculated.

Actual

Existing market capacity is a value characterized by the volume of real demand for a product or service, as well as the purchasing power of the target audience of this product. The determination of this indicator is based on existing information.

Available

Calculating the market capacity of this type is a narrowing of the number of potential buyers to those who would be satisfied with the terms of the transaction with our company and truly interested in our unique selling proposition. When determining this indicator, an important factor is the availability of resources and working capital in an organization to cover the demand for a given product or service.

With this calculation of market capacity, the company limits its sales volumes to the value of the target audience, while cutting off buyers who do not meet certain criteria.

Potential

Probable market capacity – characterizes the share in common system implementation that the organization can take at its most high degree efforts regarding product promotion and high customer demand for this product or service. The concept of potential market capacity refers to the maximum value that can realistically be achieved using all available resources of the organization.

This is an indicator that characterizes the situation in which an enterprise occupying a certain niche is most likely to use its marketing capabilities in such a way that consumers know and buy goods and purchase services of that particular brand or brand.

Types of market capacity are calculated in rubles, pieces, kilograms, etc. Regardless of the unit of measurement, this indicator is one of the fundamental ones in determining the degree of actual and potential influence of a company in the overall system of economic relations.

In contact with

Classmates

© VladVneshServis LLC 2009-2019. All rights reserved.

Successful sales within a country or region inevitably involve an analysis of possible risks. One of the most relevant indicators that allows you to determine the potential sales volume of a product in a new segment for a company is the capacity of the selected market.

The essence of the term

One of the main tasks that is necessary for successful development companies - determining market capacity. Without this indicator, it is difficult to establish how promising the activities of a particular enterprise are.

Determining market capacity comes down to identifying the potential volume of goods sold within a specific period of time (in most cases, a year is taken into account). At the same time, forming a position according to which any sales are possible, regardless of the number of competitors and market saturation, is quite reckless.

It is also worth noting that it is necessary to determine the capacity of the market that is relevant to the enterprise, using money or tons as units of account. Capacity indicator can be measured in two categories: real and potential.

In the first case, the actual quantity of services or goods, calculated in natural and monetary units, that the market consumes over a certain period of time is determined. As for potential capacity, it is a hypothetical indicator that reflects the maximum possible level the volume of goods and services that can be sold, say, in a year.

Indicators of potential turnover are important, since they allow one to objectively determine the prospects for integration into a certain market or a specific segment of it. The potential in a designated area of ​​activity can be calculated using the following formula: potential market capacity + real = market potential of the enterprise.

The higher the identified potential, the more attractive the market can be considered. In turn, when the difference between the two values ​​is minimal, this indicates market stabilization and lack of growth. If we also take into account the impact of competing companies, then with the fact of price pressure on margins, the successful activity of an enterprise in this market segment is under obvious threat.

Why is real market capacity measured?

This indicator is relevant for several reasons:

1. By identifying the real volume, the enterprise’s share in the desired market segment is determined. The same scheme is used to constantly monitor the company's position. The same data should be obtained regarding key competitors.

2. By analyzing trends in capacity changes, relatively accurate sales planning becomes possible and, as a result, the formation of an up-to-date marketing strategy for the company.

Market capacity is determined various methods, each of which involves research with different costs and amounts of resources used. Moreover, the more expensive the technique, the more accurate the result will be obtained in the end.

Factors influencing the capacity indicator

An indicator such as the capacity of the market for services and goods can be defined as an element that is quite stable for the vast majority of industries in Russia. Throughout the year it can change by 10-15%. It is worth understanding what factors can influence the capacity indicator. We are talking about the following elements:

  • price fluctuations;
  • mobility and elasticity of demand;
  • degree of market development;
  • main product characteristics;
  • advertising policy;
  • macroeconomic indicators;
  • presence on the market of products with similar characteristics, etc.

How is the capacity indicator assessed?

It is impossible to single out any assessment method as universal. The selection of specific analysis tools is determined by the specifics of the enterprise's activities.

If we consider a similar process in the Russian business sphere, it is worth noting that companies do not always have enough money for high-quality research, and besides, decisions are often made too quickly. In this case, the assessment of market capacity is made through the use of ready-made research, which is secondary information.

If we consider the most popular criteria that are used in the assessment process, it is worth highlighting the following indicators:

  • volume of consumption;
  • structural characteristics;
  • indirect methods;
  • volume of sales;
  • volume of production.

At the same time, when forming an analysis scheme, it is necessary to take into account the features of promoting goods from manufacturer to consumer. To obtain an extremely objective result, it makes sense to combine several methods.

Parameters that are taken into account when assessing

When calculating market capacity, the following indicators are taken into account:

  1. Territory. It is important to clearly define the boundaries within which the research will be carried out. This may be a country, region, district or city, in other words, an area where the company plans to be active. To assess the capacity indicator in such large market areas as a region or a country, it makes sense to use government statistics. As for small territories, in this case you can get by with field research, since market statistics are not kept in most cases.
  2. Prices. Market volume can be measured in monetary and physical units. But first it is necessary to determine the prices (wholesale or retail) on which the research will be based.
  3. Time. The most common time parameter used in capacity calculations is the year. This fact explained by the ability to analyze various seasonal changes in demand and their impact on market volume. An example is a segment such as building materials, the sale of which in the vast majority of cases is subject to a specific cycle. For example, sales of skylights and roofing materials reach their peak in the fall. Based on this, it would be unreasonable to calculate the capacity of the building materials market based on data obtained in the spring.
  4. Products. When starting the assessment process, it is necessary to decide on the specific products for which demand will be analyzed.
  5. Segments. It is worth considering the fact that the market often consists of segments that are heterogeneous, so their size must be determined separately. If we take the sealant market as an example, here we can distinguish a fairly noticeable division into professional products and for ordinary people. And the important fact is that the behavior of buyers within these segments differs, and significantly. Even products for professionals can be divided into sub-segments: products aimed at industrial manufacturers and construction organizations. In this case, the capacity of the product market is first measured in each segment and subsegment, and then summed up.

A systematic approach is important when estimating the size of specific markets because they are constantly changing.

Bottom-up evaluation principle

This technique involves making calculations from the consumer or target audience. In this case, in order to calculate the market capacity, the following formula is used:

EP = CHA*NP*Ced.

At the same time, EP is an indicator of market capacity, NA indicates the size of the audience, NP reflects the consumption standards of a particular product, and Tsed is the cost of a unit of production.

The calculations are based on statistical data.

Top-down principle

In this case, information on the production of goods or data obtained from the manufacturer itself is used as the basis for calculations. With this scheme, the market capacity indicator will be equal to the sum everyone retail sales those companies that are engaged in production within the same profile. If the abundance of market players does not allow us to analyze all of them, the indicators of the largest enterprises are taken into account, the total share of which reaches 80-90%.

As for data sources, in this case information from public records or information obtained as a result of a survey is used.

Evaluation through sales analysis

When using this scheme, market capacity is assessed by analyzing the largest retail chains. Data from actual consumer receipts are used as a source of information. Based on this information, a representative sample is made, and the results obtained are extrapolated to the country. At the same time, it will not be possible to determine the reaction of representatives of the target audience. But it will be possible to track actual sales in dynamics.

Calculation based on structural characteristics

This scheme is relevant when it is necessary to assess market capacity across a country or a specific region. Information for analysis is taken from regional and state statistics. And in order to calculate market capacity, the following formula is used:

V = P + I - E + (He - Ok) + (Zn - Zk).

IN in this case P is the volume of production, I is import, E is export, It means the volume of balances at the beginning of the period, Ok indicates the volume of balances at the end of the period, Zn is the amount of inventory at the beginning of the period, Zk is inventory at the end of the period.

Calculation based on consumption volumes

This technique is based on the analysis of the consumer approach. We are talking about determining the number of buyers and forecasting the average level of consumption. This calculation helps to obtain an objective answer to the question of how many goods the market is capable of absorbing over a specific period of time.

In this case, the calculation of market capacity (V) is as follows: V = K*N.

In this formula, K means the expected volume of consumption of a particular product by one buyer over a certain period, and N indicates maximum amount consumers who are ready to purchase the product during the same period.

If we take into account consumer products, then it is worth applying to them the calculation of rational consumption standards, the subsistence level and minimum consumer budgets for different categories of the population.

Results

Based on the information presented above, we can conclude that any company operating within the CIS needs to determine the capacity of the Russian markets, which are considered as a real prospect new activity. Without such calculations, the company has no guarantee that the launched product will be in expected demand.

The essence of determining market capacity

Note 1

Market capacity is characterized by the size of population demand and the amount product offers and is measured both in physical and monetary terms. Knowing the market capacity is important because it plays a major role in determining the firm's production program.

Renowned experts on market problems under capacity commodity market most often understood:

  • the amount of real demand in a certain period with a fixed volume of supply of goods and the level of prices for them.
  • the quantity of goods that can be sold on a fixed market for a specific period and under specific conditions.
  • the volume of goods that are sold on the market during a certain time.
  • volume of production in a given space for a certain period of time.

Methods for calculating market capacity

Exists whole line methods for calculating this indicator. Generalization and systematization of methods for calculating market capacity in modern scientific literature allow us to identify several groups of methods for determining market capacity, namely:

  • comparison method with the previous period;
  • sales volume accounting methodology;
  • methodology for taking into account the characteristics of a product with reference to the parameters of a well-known enterprise;
  • methodology for accounting for consumption and consumption rates;
  • methodology for accounting production volumes.

How to calculate market capacity

Thus, the capacity of the national market can be calculated by determining the volume of its consumption using the formula:

Market capacity = size of national production + Import volume – Export volume + Inventories

Note 2

You can also determine the market capacity of a region, economic group, etc.

The simplest way to determine the possible market capacity of a particular type of product is to sum up the expected needs of actual and potential consumers of this product based on the results of market segmentation.

The market capacity does not remain unchanged; it depends to a certain extent on the economic situation (that is, the situation on the market regarding demand, supply, changes in prices and inventories, the state of the main competitors, etc.). When the market situation decreases, market capacity decreases; when it increases, it increases. The market capacity of a particular product depends on various factors. General factors affecting the sale of consumer goods include the price level, number and material well-being population, its level, etc. At the same time, product consumption has its own differences, and the main factors that predetermine it are fashion and other consumption features related to the range of goods, level and availability, etc. The total market capacity of a product can be calculated using the formula:

$Capacity\market = P \cdot K \cdot C$

where P is the number of buyers of a certain product; K is the number of purchases made by the average buyer; P is the average price per unit of product.

To determine the capacity of the territorial market for a product, the method of calculating purchasing power indices (multifactor index) is used. This is described by the formula:

$B_i=aY_i+bR_i+cP_i$

where $B_i$ is the share of region $i$ in the total purchasing power of the population; $Y_i$ is the share of region i in the net (without taxes) personal income of the country’s population; $R_i$ is the share of region $i$ in total sales in the country; $P_i$ is the share of region i in the total population of the country; $a$, $b$ and $c$ are coefficients determined for each group of goods.

Note 3

In the case of calculating a multifactor index, they are respectively 0.5; 0.3 and 0.2, but may vary depending on the type of product.

When planning to introduce a new product to the market and calculating market capacity, it is necessary to take into account the direction of use of the product, durability, frequency of purchases and other characteristics characteristic of a particular product.

Based on this, you can calculate the maximum potential, most probable and minimum market capacity for new products. The size of the market capacity of products that have no analogues is determined only by the size of the probable market capacity. When calculating the most likely market capacity of new products, the availability of analogues/substitutes on the market and the frequency of their purchases are taken into account. For this purpose, the sales history of substitute goods is analyzed, marketing research, focus groups and other studies.

The most important, if not the most important, area of ​​work of the marketing department at any trading company is to study the demand for the goods being sold. To do this, an indicator such as market capacity is often calculated. With its help, you can predict whether customers will accept the proposed product or not, and thus significantly reduce the risk of losing capital when launching a new product or service.

What is market capacity?

This term means the total sales volume of certain products in a particular region during the billing period. In other words, market capacity is the demand for a specific category of goods, which is expressed in the purchasing power of the target audience or population of the country. This indicator can be calculated both in physical terms (pieces, kilograms, liters) and in monetary terms (rubles, hryvnias, dollars). Market capacity is of the following types: actual, potential and available. In the first case, this indicator is determined based on the current level of development of demand for a service or product. The potential value estimates the maximum possible sales volume. Available capacity is the size of the market that a company can currently target based on the resources at its disposal.

How to determine market capacity?

First, the input data is determined: the calculation period (usually a year), the region for which the indicator will be calculated (Central Russia, USA, Far East etc.), target audience (young families, population 18+, people over 40 years old, women over 35 with average earnings, etc.), product group and unit of calculation. It is customary to distinguish the following main methods for assessing market capacity:

1. “Bottom-up”

In this case, the calculation is made from the target audience or consumer. The formula can be written as follows:

EP = CHA * NP * Tsed, where

EP - market capacity,

NA - audience size (target),

NP - consumption rate of the selected product,

Tsed - cost per unit of production.

Statistics data are used for calculations.

2. "Top-down"

The basis for calculations is data on the production of goods or information from the manufacturer. In this case, the indicator is equal to the sum of retail sales of all companies producing similar products. If it is impossible to cover all firms, choose the largest ones, the total share of which is approximately 80-90%. The data is taken from public reporting or a survey.

3. Estimation based on actual sales

In this case, the largest chain stores are selected, with which an agreement is concluded to provide data on real consumer receipts. Based on them, a representative sample is made and then the results are extrapolated to the territory of the country. In this case, it will not be possible to identify the target audience, but you can track real sales in dynamics. Regardless of the choice of method, it is advisable to be guided by the following rule: if the target market is divided into several submarkets, then it is sometimes convenient to determine the market capacity for each such segment and then add the results to find the total value.