Market volume is the volume of those goods or services that are offered and purchased within a (market segment). Market capacity is the volume of purchase and sale transactions of goods or services completed in a certain territory (territorial market) or in a separate industry (industrial market).
Market volume characterized by the size of consumer demand equal to the size of product supply. At any given moment in time, the market capacity has quantitative certainty, i.e. The volume of supply and demand is expressed in value and physical indicators of the goods or services sold, and consequently, the goods or services purchased.
There is nothing simpler or more complex in marketing than determining market capacity. The task seems quite ordinary - find out how much competitors sell for a certain period, add imports and subtract exports (if any), while not forgetting to take into account the sales of your own company.
Market volume(calculated, forecast) - the value of market capacity obtained on the basis of calculation methods. Capacity measurements are variable in nature, and therefore the resulting values may vary depending on the information collection methods and calculation formulas used. The simultaneous use of several approaches increases the likelihood of obtaining accurate results and, when there is a lack of information, is practically the only acceptable alternative.
Production method determining market capacityIn theory, this method is also found under the name “based on the structural characteristics of the market.”
The total market capacity (E) will be calculated: E = P + V imp – V ex + V meas.
where P is the volume of production in the country for the period under review,
V imp and V ex are the values of the volumes of imports and exports of products, respectively,
V change skl – the amount of change in the volume of warehouse stocks at the beginning and end of the period
The essence is to calculate the market capacity by extrapolating data on its growth over the past few years or more, provided that the macro environment is stable. Thus, the market capacity of a certain period is taken as a base and multiplied by the growth coefficient.
E = E prsh * k growth,
Where E prsh is the capacity of the previous period, taken as the base,
k growth - growth coefficient (with 5% growth, the coefficient will be equal to 1.05).
It is sometimes called the "Nielsen panel method". To calculate market capacity based on a panel of sellers, using this methodology, we have the following formula
E = (∑ (Vin - V iк) + Pr i) / K n * 12/T * Ktotal, i=1, … K n,
Where Vin and V iк are the volume of warehouse stocks at the beginning and end of the study period in the i-th store
For i, sales volume in the i-th store during the study period
K n number of stores included in the panel
T period for which data is collected, expressed in months
Ktot is the total number of stores selling the product under study.
The method is applicable mainly to assess the capacity of regional markets, provided that the capacity of the entire market is known. Thus we have
Ep = E * And ps,
Where is the capacity of the regional market,
And the purchasing power index of the regional market, when calculating with weighting coefficients the shares of disposable income, retail turnover and population in relation to the country are taken into account.
(∑ (Vin - V iк) + Pr i) / K n is also called the panel index
A completely similar scheme is used to carry out calculations on the consumer panel. It is worth remembering that the “research panel index method” for the same product when using seller panel techniques must be the same as the buyer panel.
Method based on product consumption rates
This technique is used for systematically purchased and quickly consumed consumer goods (for example, toothpaste). The basis of the formula is the amount of consumption during one use of the product. Then the calculation of the capacity will take the following form
E = ∑ D i * C * T i ,
Where D i is the number of product users in the selected group,
With the volume of product consumption per use,
T i circulation frequency per year. Method of summing primary, repeat and additional sales
Part of this method is familiar through the lens of repeat sales for durable goods. In this case, a simplified approach is applied, related to the service life of a unit of goods and the total quantity of goods in use, which gives
Epovt= V*(1/ T sl) ,
Where V is the total volume of goods in use,
T is the service life of this product.
We now turn to the total market size for durable goods, using the volume of initial, repeat and additional sales. It should be remembered that the primary sales market is summed up from those who purchase products for the first time; additional sales market - those who purchase goods to add to what they already have. Hence
E = Eper + Epovt + Edop
Potential market capacity- a concept artificially introduced into marketing and not having practical significance, in connection with the definition of the concept of “market capacity”. Instead of this concept, it is correct to use the concept of potential demand or potential supply, possible under certain conditions.
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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 the successful development of a company is determining the 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 is determined, calculated in natural and monetary units, which the market consumes over a certain period of time. As for potential capacity, it is a hypothetical indicator that reflects the maximum possible level of 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 by 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. It's about about the following items:
- price fluctuations;
- mobility and elasticity of demand;
- degree of market development;
- main product characteristics;
- advertising policy;
- macroeconomic indicators;
- presence on the market of products that have similar characteristics, and 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:
- 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.
- 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.
- Time. The most common time parameter used in capacity calculations is the year. This fact is 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 skylights And roofing materials reach their peak in autumn period. Based on this, it would be unreasonable to calculate the capacity of the building materials market based on data obtained in the spring.
- Products. When starting the assessment process, it is necessary to decide on the specific products for which demand will be analyzed.
- 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 payments 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 through analysis of 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 over time.
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 indicates the expected volume of consumption of a particular product by one buyer over a certain period, and N indicates the maximum number of consumers who are willing 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 most important, if not the most important, area of work of the marketing department at any trading enterprise is the study of demand for the goods 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, input data is determined: calculation period (usually a year), region for which the indicator will be calculated (Central Russia, USA, Far East, etc.), target audience (young families, population 18+, aged people from 40 years old, women from 35 with average earnings, etc.), group of goods 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 over time. 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.
The main objective of market research is to determine market capacity.
Market capacity is the existing or potential volume of sales of a product over a certain period of time.
The capacity of the commodity market is understood as the possible volume of sales of goods (specific products of the enterprise) at a given level and ratio different prices. Market capacity is characterized by the size of population demand and the amount of product supply. At each moment of time, the market has quantitative and qualitative certainty, i.e. its volume is expressed in value and physical indicators of the goods sold, and consequently, the goods purchased.
To determine the capacity of national commodity markets when preparing and conducting expert operations, the concept of “visible” consumption of goods is used, i.e. own production goods in the country minus exports and adding imports of similar goods.
Or = Vв + Vi - Ve
Or - market volume
Vв - production volume
Vi - volume of imports
Ve - export volume
Market capacity is measured in physical and/or monetary terms.
It is necessary to distinguish between two levels of market capacity:
1. potential
2. real.
The actual market capacity is the first level.
Potential capacity denotes the maximum possible sales volume in a market situation when all potential clients purchase goods based on maximum level their consumption. Real Capacity assessed as the achievement of actual or projected sales volume of the analyzed product.(2)
Methodology for studying market capacity
The practice of marketing research shows that data on the market capacity of certain goods and the share occupied by individual manufacturers are currently of great interest to the manufacturers themselves. They are necessary both to expand the position of a company that already has a strong position in the market, and to penetrate the market of a new company or brand.
The need for such information has already been formed: today there are many organizations that conduct this kind of marketing research. However, after reading reports and articles on such studies, numerous questions arise both about the methodology of conducting and about writing the reports. Therefore, I would like to raise the question of the correctness of using certain methods to study market capacity and the most common, in our opinion, errors. We think that this kind of discussion will be interesting and useful to specialists working in this field.
Studying market capacity or market demand involves determining the sales volume in a designated market certain brand a product or a set of product brands for a specific period of time. (3)
The study of these parameters is usually carried out in five main areas:
1. analysis of secondary information;
2. production and sales of products;
3. costs and consumer behavior;
4. calculation of capacity based on consumption rates for a given type of product;
5. determination of capacity based on “reduction” of sales volumes (when the known market capacity in one region is the basis for calculating market capacity in another region by adjusting it using reduction factors).
Consider:
1. Analysis of secondary information . Includes an analysis of all documentation that may contain information about the market we are interested in and may be useful in marketing activities: statistical data, data from governing bodies, market reviews, specialized magazines and articles, Internet data, etc. However, the information obtained by such method, most often turns out to be incomplete, quite difficult to use when practical application and often of dubious reliability. (4)
2. Market research from the standpoint of production and sales of products. Includes research into manufacturing, wholesale and retail. Information obtained from this source allows us to determine real sales volumes and representation of manufacturers and brands. Given that the number of sellers is smaller than the number of buyers, such research is often carried out more quickly and costs less than consumer research. The problem is how accurate the information provided by manufacturers or sellers will be, and how representative the surveyed sample of sellers will be population(to the entire mass of those operating on the market retail outlets, selling products).
3. Costs and consumer behavior. We study either the costs that consumers made for the products we are interested in over a certain period of time, or the frequency of purchases and volumes of purchased products together with the average retail selling price, or the consumption rates of a given product. At the same time, the study allows us to raise a wide layer of materials relating to the behavior and motivation of consumers: their attitude towards a particular brand, the volume of a one-time purchase, the frequency of purchasing a product, the expected price of a product, the degree of brand distinctiveness, brand loyalty, motivation for choosing a particular brand goods, etc. The question of the accuracy of such information is how accurately and truthfully buyers will reproduce their consumption data.
4. Calculation of capacity based on consumption rates for a given type of product . This approach is used, as a rule, for food products, raw materials and Supplies. The statistical basis for calculations is the annual consumption rates per capita and the total population. Thus, the final capacity figure is obtained by multiplying the consumption rate per inhabitant by the value of the total population.
5. Determination of market capacity based on “reduction” of sales volumes. A similar calculation method is used mainly by companies with significant experience in individual geographic markets. The calculations use data on the actual volume of product sales in one region and factors that determine sales. Using the latter, the coefficients of bringing sales of one region to another are determined (coefficients of bringing the population, average wages, urbanization, prices, consumption patterns, etc.).
Conducting research on manufacturers and sellers of products in order to obtain market data is quite common for a marketing company, but errors can occur here too.
As experience shows, one of the most common mistakes is failure to ensure representativeness of the sample.
Identification of cause-and-effect relationships in the market under study is carried out on the basis of systematization and analysis of data. Systematization of data consists of constructing grouped and analytical tables, time series of analyzed indicators, graphs, diagrams, etc. This is the preparatory stage of information analysis for its quantitative and qualitative assessment.
Processing and analysis is carried out using known methods, namely grouping, index and graphical methods, construction and analysis of time series. Cause-and-effect relationships and dependencies are established as a result of correlation and regression analysis of time series.
Ultimately describing the cause-and-effect relationships caused by the interaction various factors, will allow us to build a development model in the market and determine its capacity.
