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How market capacity is determined: calculation formula and assessment. Market capacity: what it is and how to determine it Potential market volume

Calculation of potential market capacity is an iterative procedure, the sequential application of several calculation methods. After estimates (forecasts) have been obtained using various methods, these results are compared. If the discrepancy between estimates does not exceed 10-12%, then the calculation of potential capacity was made correctly and you can move on to other elements of market analysis. If the discrepancy in the results exceeds 15%, then an error was made in one of the methods and any limitations or assumptions were not taken into account. Therefore, it is necessary, first of all, to clarify the calculation methodology and initial data.

Usually, to calculate the potential market capacity, it is enough to select two or three methods from three groups of methods:

1) determining the circle of potential consumers and processing the likely number of orders that can be received from them:
- analysis of statistical data for the region and identification of the need for a product based on average consumption rates (usually for consumer goods);
- determining the need for a given product by the most important wholesale consumers or based on the order portfolio;
- test marketing - modeling the initial sales of a product in the most typical (for the market generally) a small region for a short period of time (from one week to three months) and extrapolating the results to the entire market;
2) trend analysis - study of the dynamics and structure of sales of a product or analogues in the industry, region, other regions, in the country/world as a whole:
- determination of the annual (quarterly, monthly) rate and volume of growth in the number of orders (usually for three to five years) and on this basis - the total number of orders for the next period;
- building a trend (linear, exponential) and extrapolating trends from past periods to future periods of time;
3) identification and analysis of factors influencing the dynamics of market capacity (decrease or increase). In this case, the degree of change in the rate of growth (reduction) of demand or the percentage of reduction (expansion) of the potential market capacity is determined.

To carry out the necessary calculations to assess the potential capacity of the market, extensive information is needed (Table 4.1), the absence of which is usually cited by those who do not bother with this kind of analysis. Very often, sales forecasts prepared without first calculating market capacity turn out to be nothing more than a waste of time. Even a preliminary and rough assessment of capacity allows the management of an enterprise or company to make a more informed decision on the release of a particular product (whether it is worth spending time, effort and money on its engineering development, production and sales). This is especially important for new products or for products intended for new markets.

Table 4.1

Sources of primary information for calculating potential

market capacity

A source of information	Required data (what to look for)
Reports of regional and city statistical departments	Data on the demographic composition of the region’s population, the number and profile of enterprises located here, the dynamics of trade turnover for various types of products
Specialized industry publications (newspapers, magazines)	Data on the dynamics of demand, the growth in the number of orders (per year, quarter) in the industry, on the factors influencing the supply of the product on the market (what new products have appeared or will appear soon, which factories are under repair or closed, etc.), on specific factors influencing demand (possible government orders, special projects, etc.)
Business press (newspapers “RBC”, “Kommersant”, etc.)	Data on the dynamics of economic conditions, inflation rates, growth rates of the economy as a whole and individual industries, the dynamics of household incomes (including the regional aspect), the solvency of enterprises in various industries, changes in tax legislation and rules for regulating foreign economic activity, etc.

In the USA and other countries with highly developed market infrastructure, determining market capacity does not present such difficulties as in Russia.

Firstly, there are databases for almost every industry in which you can, using the Internet and a personal computer, easily and quickly obtain information about the dynamics of sales volumes of any company, any enterprise operating in a given market for at least the last five years. Based on this information, you can use various mathematical procedures to obtain trends for any type of product.

Secondly, in the United States and other Western countries there are thousands of consulting firms specializing in market research and publishing their research data more or less regularly. In any case, if you have the funds, you can always hire someone who will conduct a fairly complete study of a particular market and provide reliable results. In Russia, it is better for an entrepreneur, especially when determining the capacity of a new market, to rely on himself, on his knowledge of the specifics of the industry and trends in demand for certain types of products. This in most cases gives more reliable results than using any consulting firm.

Thirdly, hundreds of specialized marketing magazines are published in Western countries (over 500 in the USA alone), in which, taking into account industry specifics, a large amount of information is published, representing an analysis of the state of a particular market, both in product and regional terms.

Fourthly, calculating market capacity in the United States is greatly facilitated and can be effectively carried out, since there is a standard classification system for industries and sub-sectors of the national economy, each of which has its own numerical code (Standard Industrial Classification - S.I.C. Code). The US Census Bureau uses this classification to conduct censuses of US industries and prepare related statistical collections and reports (Census of Manufacturers). Each group of industries has a two-digit code (for example, 25 - “furniture industry”), the industry has a three-digit code (with the addition of another digit to the group of industries in which it belongs, for example 251 - “home furniture”). Each industry is accordingly divided into sub-industries (with a four-digit code).

If you use S.I.C. Code, then, for example, the market capacity for a manufacturer of woodworking machines in the USA can be determined as follows. First, the four-digit code of the sub-industry in which the enterprise's products will be consumed is determined. Let’s say this is 2511 - “production of wooden furniture for the home” and 2521 - “production of wooden furniture for institutions”. Based on national statistics, which are also broken down by individual states, you can quickly and reliably determine how many sets of office furniture will be sold next year in a particular region of the country. Russia does not yet have such detailed statistics, and domestic market researchers will have to operate with more generalized data.

Lack of information cannot serve as a reason not to calculate market capacity. Even an attempt to assess market capacity using a minimum of information can help enterprise management better navigate when drawing up their production program and choosing a business direction. The problems that often arise in this regard can be illustrated with the following example.

In February 1995, in Los Angeles, the head of one of the large Russian defense enterprises from Mordovia and two consultants (one Russian, the other American) negotiated via teleconference with a representative of an American company producing electronic equipment. The discussion was about organizing joint production and marketing of a device that allows earthquake prediction, developed by conversion by Russian defense industry. The business plan presented to the American partner by our company was discussed.

The main issue of interest to the American side was the sales forecasts presented by our company. According to the business plan, it was planned to produce 2 thousand devices annually, each of which cost several thousand dollars. A representative of an American company was interested in how this figure was obtained. Sales volume of 2 thousand units. a year later he was clearly embarrassed. “We have been in this business since 1936. We manufacture and supply seismic instruments and equipment to more than 100 countries around the world,” he said. - Our company, which currently employs 40 people, has many years of contacts with government agencies in these countries. We are well aware of the state of the market, seismic zones and the whole world. Where did the need for 2 thousand pieces come from? in year. Is it that Russia is shaking so much that so many devices are needed to control seismic activity?” To the question posed, our general director answered without a shadow of embarrassment that his plant was able to produce exactly this amount (based on the availability of production capacity and personnel) annually.

A simple express analysis conducted by consultants showed that, taking into account: 1) the total number of countries exposed to the threat of earthquakes; 2) the number of regions of seismic activity in each of these countries; 3) service areas and standard service life of the device under discussion, some other data was obtained. It was discovered that the potential annual market capacity for our device is no more than 300 units - this is for all potential manufacturers. The sales forecast figure was 7 times higher than the potential market capacity. And for Russia this is almost a typical case.

The most interesting thing is that not only the American company had all the information about the market capacity, but for some reason the management of the Russian enterprise did not want to use this data. The case considered shows that references to a lack of information (although this is observed in Russian conditions) are not very convincing. Often the management of an enterprise has enough information or opportunities to obtain it. This information is not processed or collected, as a rule, due to the lack of a market research service and ignorance of methods for calculating market capacity.

Among the methods for calculating the potential market capacity available to any enterprise or firm is assessing the potential capacity of regional and national markets based on determining the circle of potential consumers.

The potential market capacity based on consumption rates can be calculated as follows:

For regional market

where GPRR is the potential market capacity of the region as a whole for the year in physical units of measurement; DNP - the share in the total population of the region of persons who under no circumstances can be consumers of the product (marginal population groups in terms of use of the product); LDDD - the share in the total population of the region of persons who have sufficient income to purchase the product; SSNPP - average daily consumption rate of the product in natural units of measurement;

For the national (interregional) market

where GPR is the potential national/interregional market for the year.

Determining market capacity by counting the number of potential buyers is usually used for consumer products (food and non-food) and for those industrial products and services for which consumption standards can be determined. Such products usually include low-value and wear-out tools, materials that are regularly used in production processes and their stock must also be regularly replenished, or services (telephone network services, etc.). It should only be noted that when calculating potential market capacity, It's about the market for your business and for all your competitors (domestic and international) offering the exact same or similar product in a given region.

The basis for calculating market capacity for a region is usually data from the regional (city) statistical office on the demographic composition of the population, its distribution by gender, age, income level, and number of families.

A set of documents on the demographic composition of the population, available in the regional statistical office of the Russian Federation as a source of data when calculating market capacity:

1) average annual population by district of the region at the beginning and end of the year (quarter); cash and permanent, broken down by rural and urban population;
2) population by cities and towns in rural areas;
3) administrative-territorial division by region (indicating the number of cities, urban-type settlements, rural settlements by region);
4) grouping of cities and urban-type settlements by population;
5) indicators of living standards of the population in the region as a whole:
- average monthly income per worker,
- average monthly salary of one worker (on average in the region and separately in sectors of material production, industry, construction, agriculture, transport, in non-material production sectors, the number of unemployed, the percentage of unemployed in the total economically active population),
- income per family member,
- cost of the consumer basket;
6) distribution of the population by level of average per capita income as a percentage of the total population;
7) the ratio of average per capita monetary incomes of the richest 10% and the poorest 10% of the population (in addition, the poverty level, consumption of basic food products per family member per month, consumption of milk and dairy products, meat and meat products, fish and fish products, eggs, butter vegetable, potatoes, vegetables and melons, fruits and berries, bakery products per family member, weekly cost of a set of 19 basic food products);
8) consolidated index of consumer and wholesale prices as a percentage of December of the previous year (separately for purchase prices for livestock, milk, eggs, energy, gasoline, coal, firewood, electricity, peat briquettes, etc.).

In most cases in Russia, the distribution of the population into urban and rural is also important (in Western countries, where the rural population makes up 1.5-2% or less of the total population, this distribution can often be neglected). In addition, it is necessary to determine the average per capita or average family consumption standards for this product (if possible, taking into account the specifics of the region, for example, the consumption of butter among residents of the Northern regions will be higher due to climatic conditions than among residents of the southern regions of Russia). The easiest way is to calculate your daily or weekly consumption. The source of information here can be either nutritional or sociological data, or selective observations, which in most cases are not difficult for a market researcher to carry out.

Based on this data, it is necessary to determine the total number of potential buyers of a particular product by performing the following simple operations:

exclude from the total population the number of people who, due to physical disabilities (age, illness, disability) cannot be consumers of this product. The situation can be the opposite: people can be potential consumers precisely because of one or another of their physical characteristics (for example, the market for diapers is formed only by young children, who are unlikely to be among the consumers of cigarettes or alcoholic beverages). The percentage (proportion) of those excluded can be determined based on data on the demographic composition of the population in the region;
Based on a comparison of data on the level of income of the population in the region (in Russia this differentiation is large) and the expected retail price of the product, determine people who can afford to buy this product based on their financial capabilities. To clarify the calculation, you can calculate how much (in percentage) the consumption of a given or similar product is in the family budget and then decide whether a family with a certain amount of income will be able to buy the offered product in a volume sufficient to satisfy its needs or, most likely, it will prefer another. Then the proportion of individuals (families) with an income level that allows them to purchase this product is calculated (based on statistical data). Other categories of the population are excluded from the analysis;
obtain the likely number of orders (the number of units of a product in physical terms that can be sold in a given region) per day or week, by multiplying the percentage of the total population of the region or the total number of individuals (families) who can act as potential consumers of this product by norms consumption.

If we are talking about drawing up an annual forecast, then the results obtained are multiplied by 360 or 52, respectively. The result can be considered the first information about the potential capacity of the regional market for a given product. They may need to be adjusted to take into account other influencing factors, such as seasonal fluctuations in demand. The application of the methodology proposed above in practice can be illustrated using the example of calculating the market capacity for some imported food products for the Far Eastern region.

In 1993, an American trading company offered to supply a Russian company from Yuzhno-Sakhalinsk with its help to Sakhalin and a number of neighboring regions of Russia the following products: 1) poultry legs; 2) chicken sausages;

3) animal oil; 4) cheddar cheese. The proposed supply volume of each product was on average up to 1500 tons per month. A company from Yuzhno-Sakhalinsk turned to Moscow consultants with a question: how many products can they actually order from an American partner for sale through their channels. It was necessary to calculate the average monthly and annual market capacity in the region for these products in order to draw up a correct supply request.

The calculation was carried out on the basis of data on the size and structure of the population of the Sakhalin region, the level of average per capita income. The population of the Sakhalin region is 0.7 million people, of which 85% are urban residents. At the same time, 75% of the population had an average per capita income (October 1994) above 100 thousand rubles. ($33) per month, including 25% - above 300 thousand rubles. ($100). These population groups were potential consumers of imported food products (from the USA), since the cost of the average consumer basket for a family of four in the Russian Federation was $120-160 per month (excluding catering, cigarettes and alcoholic beverages). Effective demand in general in other regions of the region approximately corresponded to the Sakhalin region, as well as the average per capita consumption levels of meat products - 2.5-2.8 kg per month per family member, sausages - 2-2.4 kg, animal oil - 0 .7-1.1 kg, cheese - 1 - 1.2 kg.

In table Table 4.2 presents calculation data for market capacity for selected product items for the Sakhalin region. According to the statistical department, the share of imports for the market of poultry legs and liver (in general) was taken to be 60%, chicken sausages - 4% (of total consumption of sausages), butter - 60%, cheese - 17%.

The calculation formula used was as follows:

Where Xj- market capacity for each position; N - total population of the region; N w - level of per capita consumption for a given product item; D/l - the share of imports for a given product item; Dgn - share of the urban population (85% of the total); D rs - the share of the main regional markets (the largest but the trade turnover of the region's regions is 71%).

Thus, during 1995, the total sales volume for selected product items (the monthly average figure is multiplied by 12) should not have exceeded: for poultry legs - 6696 tons, liver - 744 tons (distribution of the "meat and poultry" group into legs and liver in a ratio of 9:1), sausages - 396 tons, animal butter - 2124 tons, cheese - 864 tons.

Table 4.2

Calculation of market capacity by type of food products for the Sakhalin region on average per month for 1995 (t/month)

The main problem when calculating market capacity using this method is determining the object for which consumption rates are calculated. The market capacity for one or several similar products produced or supplied by a company to the market of a certain region is one thing; the market capacity for a retail store of any profile selling a wide range of goods is another thing. How to calculate the market capacity for this business?

Let's try to illustrate this using the example of a grocery store. The potential capacity of such a market will consist of all consumers living in a given city or district of a large city or regularly present in institutions of this city or district (employees of government organizations and private firms, hotel guests, transit passengers of train stations, etc.) located in a certain radius (for example, 20-30 minutes walk) from the store location (let the total number of these potential consumers per day be 10 thousand people). There may be other food stores, small wholesale markets, catering establishments and other competitors in the specified territory. As an indicator on the basis of which consumption norms can be determined, the average purchase value (in rubles) made once by one visitor (for example, 60 rubles) can be chosen. In addition, you need to know how often the average consumer shops (for example, 2 times a week). More accurate data can be obtained by knowing the specifics of a particular store, the population of the city, the location of the store and other information necessary for marketing.

Accordingly, the market capacity per month can be determined as follows: the total number of potential consumers (10,000 people) is multiplied by the average purchase (60 rubles) and the total number of visits per month (8 times). In our example, the market capacity for a grocery store will be no more than 4.8 million rubles. This is the total turnover of all food retail enterprises in the region for a month. This indicator of market capacity should be compared with indicators calculated using other methods.

Another method for assessing the potential market capacity, available to any company, is to calculate the market capacity by basis for identifying the most important wholesale customers or order portfolio. To do this, it is necessary, first of all, to compile a list of such consumers of the products of your enterprise or company. The list can have from 30 to 50 consumer groups (in various categories in accordance with the classification used by a particular company, for example, groups of legal entities and individuals).

The potential market capacity in this case per year will be:

Where P - number of identified consumer groups; GPR - potential market for the year; PRSG - the potential number of orders for a group of consumers from the list on an annual basis:

where SNP is the average rate of product consumption for consumers of this group (per month, week, year); K is the coefficient of reduction of the average consumption rate.

This method is used to calculate the potential market size of industrial or dual-use products that (such as computer programs) can be purchased by both individuals and legal entities. In any case, if there is a likelihood that this product will be used by individuals and their share is sufficient, then they can be taken into account in the calculations.

The basis for the calculation will be statistical data on enterprises in the relevant sectors of the national economy available in the regional (city) statistical department. Based on information about the size of enterprises (for example, the number of employees, sales volume, etc.), their economic profile (whether there is consumption of a specific product), other information is generated that allows us to judge which enterprises may be potential consumers of the product and to what extent each of them can use this product (if necessary, the individuals or groups thereof).

Based on the results obtained, it is necessary to determine the total number of potential buyers of a particular product by performing the following actions:

make a list of all groups of potential consumers and calculate the number of each of them according to statistical data for the region. There is no need to classify these consumer groups in any special way. The main thing is to take into account all or the main groups of potential consumers. The list is compiled on the basis of expert assessments, through analysis;
determine for each group of consumers the average consumption rate depending on the size of the enterprise (for example, if there is information about the consumption rates of the product per 100 employees at the consumer enterprise), the degree of wear and tear of previously purchased analogues and the volume of replacement, new purchases, production volumes (if there is information on the consumption rates of a specific product per 100 units of production of the consumer enterprise). Finally, a survey can be conducted (by telephone, through personal contacts) of managers of potential consumer enterprises;
summarize the data of each consumer in the group (if there are few of them) or multiply the average rate of product consumption per consumer from each group of probable consumers by the total number of such consumers in the group. As a result, you can get the likely number of orders from the considered group of consumers from the list for the corresponding period of time;
bring data on orders for all groups of potential consumers to one time dimension (for example, if for the first group there is information by month, for the second group - by the number of orders per week, and it is necessary to calculate the market capacity for the year, then the estimates for the first group are multiplied by 12, and for the second - by 52);
summarize estimates given over time for all consumer groups. In this way, the potential market capacity for the corresponding time period can be obtained.

In the conditions of working on the traditional market of standardized products, the calculation of its capacity using the method of summing up orders of potential consumers can be illustrated by the example of an enterprise producing woodworking machines. Let's say we have to calculate the capacity of the regional market for it, say, in one of the Non-Black Earth regions.

First of all, it is necessary to identify the main potential consumers of this product in the selected region, excluding individual buyers, since the woodworking machine is too large and expensive to purchase for individual use, for a home workshop. Due to the relatively high cost, this machine is not of interest to consumers such as hospitals, small private workshops, workshops at house management and regional economic institutions, and farms. The sales market for it can only be industrial enterprises (naturally, those that deal with wood processing), construction organizations, small enterprises of various forms of ownership, and timber industry enterprises.

The management of the supplier company can collect data on enterprises and organizations in the region that could perform woodwork. Then the general market for the enterprise’s products is determined according to the identified circle of consumers, i.e. the total number of machines that, in principle, can be purchased by selected groups of consumers, taking into account the fact that there should be a corresponding number of woodworking machines per thousand employees. Considering that the construction industry is one of the fastest growing in our country, the company can count on the interest of all identified groups of potential consumers in purchasing its product.

To calculate the market capacity, it is now necessary to survey the administration of enterprises that use machine tools to find out their intentions regarding the purchase of new equipment. Next, the woodworking machine manufacturer must determine the approximate number of machines that can be used in each sub-industry. Here, data on the level of investment in each of these sub-sectors, the dynamics of sales volume, and the share of investments in the total sales volume of the sub-sector may be useful.

Let’s say a manufacturing enterprise has determined that 10 units of woodworking equipment it produces can be used to produce products in a sub-industry worth $1 million. Based on the projected growth rate of sales in this sub-industry in a specific region of the country, it will be possible to calculate the need for woodworking machines and, accordingly, the capacity of the regional market.

An important element in assessing the potential market capacity is trend analysis, or analysis of the dynamics and structure of sales volumes (turnover). This is a calculation of market capacity in order to determine one’s market share and draw up a sales forecast (in physical and value terms) for the company as a whole and for individual products (services) and regions. It pursues the following goals:

comparison of sales forecasts compiled using various calculation methods, identifying the causes of discrepancies, adjusting and clarifying the results, assessing the reliability of the forecast;
searching for ways to increase sales volumes;
identification of types of products and services with falling (growing) demand;
identifying regions with falling (growing) demand.

Data on the dynamics of trade turnover for many items are also available in city (regional) statistical departments. The problem is that in statistical reports the information is presented in current prices (in rubles). To calculate the potential market capacity, it is necessary to have data in monetary units of measurement that eliminate inflation (for example, in US dollars). The most accessible way to convert current ruble prices into constant ones is to divide sales volumes at current prices in rubles by the average dollar exchange rate for the corresponding period. After this, you can begin to calculate growth rates.

A set of documents and data groups from the field of sales dynamics management for calculating market capacity:

1) retail turnover, including catering establishments for the main types of trading organizations for the year;
2) retail turnover, including catering establishments in the regions of the region, for the year;
3) the structure of retail turnover, including catering enterprises, for the year;
4) sales of cultural, household and household goods by trading organizations for the year;
5) the structure of sales of goods through thrift stores for the year;
6) the structure of inventory in the retail network and in the warehouses of trading organizations at the beginning of the year;
7) distribution costs for trade enterprises of all forms of ownership;
8) the number of retail trade enterprises of all forms of ownership in urban and rural areas at the beginning of the year;
9) retail trade network by district (number of enterprises at the end of the year);
10) network of catering establishments by region (at the end of the year);
11) warehouse network of trading enterprises of all forms of ownership at the beginning of the year.

The main result of analyzing past trends should be answers to questions; 1) What will be the increase in demand for this product for the next period (month, quarter, year)? 2) What part (based on the previously established trade turnover structure) can the supplier company count on?

After calculating market capacity using the previously given methods, it is necessary to adjust sales volumes using identifying and analyzing factors influencing the dynamics of market capacity. Analysis of influencing factors - identifying what can affect the dynamics of sales volumes in the direction of decrease or increase. In this case, the degree of change in demand growth or the percentage of reduction (expansion) of the potential market is determined. During the analysis, the following questions will be answered:

What new competing types of products (services) may appear?
What are competitors' plans for this product or sales region?
What major investment project is planned in the region of its sales that will expand the demand for this product?
How can you assess the climate for business development in the region? (does it contribute to the intensive creation of new enterprises and new jobs?)
What is the effective demand in the region? Is it higher or lower than other regions or the industry as a whole?
What is the impact of the regulatory (legislative) framework in the region on the development of all types of business activities?

The management of an enterprise or company must also pose and receive answers to the following questions: Is the demand for your enterprise's products subject to seasonal fluctuations? If “yes,” then in which months (quarters) of the year do demand peaks occur? What is the magnitude of demand fluctuations?

Taking into account influencing factors is an iterative (multi-stage) procedure for successively narrowing (expanding) the potential market capacity by multiplying the basic (initial) capacity by the appropriate coefficients. Influencing factors can be downward or upward. It is assumed that factors that reduce the market capacity for a given enterprise (for example, competition) are less than one by the corresponding percentage. Factors that increase market capacity, on the contrary, are greater than one.

where PR (basic) is the potential market capacity before taking into account the influence factor; KS1 is the coefficient of reduction in market capacity (calculated as a percentage) to the basic market capacity, taking into account the first influencing factor, if it is reducing; PR1 - potential market capacity taking into account the first influencing factor.

The potential market capacity, taking into account the first influencing factor, will be

where PR (basic) is the potential market capacity before taking into account the influence factor; KU2 is the coefficient of increase in market capacity (calculated as a percentage) to the base market capacity, taking into account the second influencing factor, if it is increasing; PR2 - potential market capacity taking into account the second influencing factor.

The calculation is made based on all influencing factors. The PR with the highest serial number will be the probable potential market capacity.

This technique can be illustrated using the example of the above-mentioned case with an assessment of the potential market capacity for the supply of imported food products in the Far Eastern region.

First of all, it was found that the average degree of saturation of the food market in the region is slightly lower than the average for the Russian Federation and amounted to 60-70%. This created good prospects for working in this market with weak competition throughout 1995 due to the general trend for the Russian market of slow (from 8 to 14 months) saturation of unsatisfied demand. As expected, the share of imported food in the market of the region, covering the Sakhalin, Kamchatka and Magadan regions, should have increased for the following reasons:

the rise in transport tariffs (especially railway tariffs), which impede large purchases and supplies of food from regions of the Russian Federation with overproduction of agricultural products;
reductions (direct or as a result of inflationary depreciation) or difficulties in obtaining timely concessional loans or grants from the federal budget in 1995;
a general decline in the production of certain types of food in the Russian Federation (butter, cheese, poultry products) due to a reduction in livestock in 1992-1994, non-receipt of subsidies from the state budget, a crisis of non-payments to processing enterprises in the fall of 1994 and a reduction in their working capital;
further destruction of the centralized supply system for the regions of the North.

The growth rate of per capita income of the region's population made it possible at the same time to estimate the growth of effective demand for food (taking into account the trends of 1992-1994) in 1995 by 10-13%.

The forecast for the capacity of the food products market for 1995 amounted to $19 million, on average per month (growth rate - 11%) - without taking into account changes in the structure of general trade turnover, where the share of food products has so far tended to grow. The growth rate of trade turnover of food products in 1992-1994. were higher than the overall increase in trade turnover (13% compared to 11%). The share of food products in total trade turnover increased from 62.9% in 1992 to 66.5% in 1994, and in 1995 it would have been no less than 67%.

Options for potential market capacity (most likely, optimistic and pessimistic) will be calculated based on these data. The most accurate data on the volume of sales of food products for 1995 could be obtained on the basis of data on the dynamics and structure of trade turnover in the region. If we take the share of imports from the United States in the market for poultry legs, animal oil, and cheese to be 60%, then the share of liver (which, according to consumption standards, is not more than 1/10 of the sales volume of legs) should not exceed 5-6%. The same (5-6%) of the sales volume of sausage products would be the share of imports from the United States for the position “chicken sausages”. Taking into account these data, as well as taking into account the sale of 50% of the total volume of food products of the supplier company in other areas, forecasts were made on the dynamics of market capacity, presented in table. 4.3. In total, according to this forecast, in 1995 it is possible to purchase 16.7 thousand tons of food for sale in three regions of the region. The total sales volume should be $46 million, or 163.1 billion rubles. (at the exchange rate at the end of 1994).

Table 43

Forecast of market capacity of some food products for 1995, taking into account influencing factors (t)

product

Ham

animal

Calculation of the potential market capacity and assessment of emerging trends are the “starting point” for all other market research activities. As experience in such work is gained, specialized databases are created and replenished that allow tracking, selecting and processing the information necessary for the activities of an enterprise or company, calculating market capacity and related tools become part of the daily work of the market research service. If a company takes on the task of assessing market capacity for the first time (which often happens when drawing up an international business plan for some investment project or restructuring of production), many problems and difficulties arise. The following is a set of activities and recommendations that allow you to begin performing such a task.

A rough action plan for assessing potential market capacity.

1. Make a list of new products that require calculation of potential market capacity (if your company is introducing innovation in the market or developing an investment project).
2. Make a list of sales regions that your company needs to develop (if your company sells previously manufactured products in new markets).
3. Make a list of potential consumers of the products of your enterprise or company, randomly select the main groups and categories of potential consumers, evaluate them quantitatively (the number of future orders for your products over a certain period of time - month, year).
4. Identify sources of information needed to calculate potential market size. Expertly assess the degree of their availability and reliability using the following form.

Assessment of the quality of primary information (on a five-point scale, O - the lowest, 5 - the highest)

5. Determine the dynamics of sales volumes (sales) for this product in the selected region over the last 2-4 years (broken down by quarters, months - the more detailed, the better).
6. Calculate the average growth rate of sales volumes for the entire observation period.
7. Is demand subject to seasonal fluctuations? If yes, then in what months/quarters of the year do demand peaks occur? What is the magnitude of demand fluctuations?
8. Make a list of other possible factors influencing sales dynamics (market capacity). Assess the degree of their influence on market capacity.
9. Determine the narrowing (expansion) of the potential sales market based on all influencing factors.
10. Compare the enterprise capacity that is supposed to be used to produce products with data on the capacity of the potential market. If it turns out that the expected number of orders is lower than what can be produced or sold, make adjustments to the production program.

Several years ago, from the lips of one of the heads of a large food enterprise (invited to lead in Rostov-on-Don from Moscow), I heard a phrase that struck me with its “non-standardity”. He literally said the following: “The rubber market is as much as we produce, so much we will sell!” However... it was not possible to sell exactly as much as they produced, and it was sent back to Moscow as it did not live up to the hopes of the business owners.

And really, how can one say that the market is “rubber”? Any sane person understands that in a “certain territory” you cannot sell more than is bought there. It is this sales volume that is market capacity.

If we turn to business terminology, then in the marketing understanding - market capacity is the total effective demand of buyers for a certain product at the current price level. However, there are other definitions that are similar in essence.

Why do you need to know what market capacity a particular product or group of products has and what share the enterprise occupies in the market (as a rule, they calculate the market capacity and/or the position of the organization in this market)? First of all, in order to correctly assess the situation and dynamics of changes in the market and, accordingly, make the only correct management decisions, which in the future will affect the viability of this enterprise or the product it produces (sells). Of course, this doesn’t always work out, but nevertheless... you have to try.

In other words, market capacity is one of the key characteristics of any market, even without deep and detailed information about this indicator, “entering it” in pursuit of bold and ambitious plans would not be entirely correct.

Key indicators of market capacity.

1. How is market capacity measured?

As a rule, market capacity is measured in physical and/or monetary terms. In this case, it is necessary to “outline” the territory in which the capacity will be calculated. As a rule, this is a city, district or region, i.e. geographically defined territory.

The year is usually chosen as a time parameter. Why exactly a year? Because many goods and services have a seasonality factor – ice cream, for example.

Example 1

Note:
As we can see, this assessment of market capacity is given only in physical terms.

Example 2
According to our calculations, the market capacity of crushed stone and lime screenings in the Kuguevsky district is:

2. Changes in market capacity over time.

Market capacity tends to increase, decrease, or remain unchanged. As a rule, this information is very important, as mentioned earlier, for making certain management decisions.

An example of changes in market capacity over time (by year)

It is clear that growth or decline is due to certain factors. Which ones? In this particular case, the expected growth in consumption is associated with an increase in funding for road construction and repair.

3. The influence of macroeconomic and other indicators.

Market capacity depends on the market need for a given product or service, as well as other factors. These factors include:

the degree of development of this market;
the appearance on the market of similar or other goods with similar properties (characteristics);
elasticity of demand;
price level;
changes in macroeconomic indicators;
product quality;
efficiency of market promotion and advertising costs;
other factors.

How do macroeconomic indicators affect market capacity? Yes, very simple! Let's look at this using the real estate market as an example. If you look closely at the main economic and social indicators of the Rostov region in January-December 2004, you can see that the real disposable income of the population increased by 10.5% by January-December 2003.

If there is more money, they usually either spend it or put it aside. What can you spend the money on or where can you invest it? The issue is relevant and requires a serious, balanced approach. The main factors for assessing “where?”: profitability-risk.

And if previously the dollar was a favorite means for “snugging in” banknotes due to its stable growth, then recently it has not been growing, and sometimes even… is falling. But do you need to invest money somewhere? There aren't many options. Banks? Interest rates on deposits are unfortunately low. Where else? To real estate! Here is the rapid rise in prices, due to sharply increased demand, and this is in addition to the general rise in prices associated with increased costs, wages, etc.

If they appear alternative possibilities investments of funds with a higher return than banks offer and a low level of risk, naturally cash flows will flow there. A certain time lag will pass and the outflow of money from the real estate sector may cause a decline in prices in this sector of the economy. But this is not expected in the near future.

How is market capacity calculated?

As a rule, analytical articles provide one or another market capacity, but do not provide any justification for the “specific” figures given. Most eminent Russian and foreign Authors, in their monographs, quite cleverly avoid specific examples and calculations.

For example, I don’t understand why the same internationally recognized F. Kotler in “Fundamentals of Marketing” pays practically no attention to such a problem as “market capacity” and “calculation of market capacity.”

I would like to immediately clarify the fact that the estimated market capacity is “an estimated or predicted value” and nothing more. Why is this so? Because this value is calculated on the basis of certain assumptions and generalizations of various facts that took place in the past, but not in the future. However, it often happens that calculated and real indicators of market capacity differ.

Mathematically, market capacity can be expressed as follows:

E = M x C; Where:

E - market capacity in physical or monetary terms (units/year, rub./year);

M - quantity of goods sold per year (units);

C - cost of goods (rub.)

There are various approaches and methods for calculating market capacity, I will list some of them:

Expert approach to determining market capacity;

Economic and mathematical modeling of market capacity;

A method for calculating market capacity based on statistical data, as well as a number of other methods.

Within the framework of this article, it is not possible to dwell in detail on this or that technique, because each has its own advantages and disadvantages. However, in the Author’s opinion, there is no “universal methodology or approach”; therefore, the methodology for calculating market capacity for a specific product or service must be selected individually.

The methodology for calculating the capacity of the tobacco products market, developed and tested by the Author at the end of 1999, gave the following results: at a dollar exchange rate of 27 rubles. - the annual market capacity of Rostov-on-Don and the Rostov region in monetary terms was $64.1 million/year. I repeat that this is a calculated value. What was she actually like? Donskaya Tabaka marketers could probably answer this question.

Carrying out calculations, you can get results with a fairly large scatter. Let's assume that in physical terms we reached certain numbers, but... data on the capacity of the cigarette market was calculated at wholesale prices. If all this is recalculated at retail prices, the result will change upward.

An example of calculating the capacity of the pig meat market in Rostov-on-Don

Meat consumption per capita, according to the State Statistics Committee, is at least 49 kg/year per capita, with a recommended norm of 74-75 kg/year.

The population of Rostov-on-Don is 1,080,000 people.

Meat market capacity in Rostov-on-Don in physical terms, kg/year.

Estimated capacity of the pork market in Rostov-on-Don in physical terms, kg/year.

We accept the cost of 1 kg. pig meat - 100 rub. Consequently, the pig meat market capacity in price terms is about 1.535 billion rubles/year.

It should be borne in mind that any calculation of market capacity has its own characteristics, and sometimes requires the introduction of certain correction factors, and the above methodology for calculating the capacity of the pig meat market is absolutely inapplicable to the Republic of Tatarstan, because Due to religious peculiarities, the structure of meat consumption there is somewhat different. That is why the choice of methodology and approach must be treated with care and attention.

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 of 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 of goods in the country minus exports and with the addition of 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 customers purchase goods based on the maximum level of 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 of a certain brand of product or a set of brands of product 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. capacity calculation based on consumption rates of this type goods;

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 in practical applications and often of dubious degree of reliability. (4)

2. Market research from the standpoint of production and sales of products. Includes research into manufacturing, wholesale and retail enterprises. 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 of the general population (the entire mass of retail outlets operating on the market 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 consumables. 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 for converting sales from one region to another are determined (coefficients for adjusting 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, charts, etc. This is the preparatory stage of information analysis for its quantitative and qualitative assessment.

Processing and analysis is carried out using well-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, a description of the cause-and-effect relationships caused by the interaction of various factors will make it possible to build a model of development in the market and determine its capacity.

By market capacity we mean the volume of a product (service) that can be sold on the market over a certain period of time (usually a year).

Market capacity shows how much of a product the market can consume in a specific period of time under specific conditions, i.e., under a certain price for the product, the economic situation in the country, market conditions and the marketing efforts of sellers. As specific conditions change, the market capacity also changes. The market capacity and the dynamics of its changes enable the seller to preliminarily assess whether a given market is promising for him or not.

It is necessary to distinguish between potential capacity and real (actual) capacity.

The potential market capacity takes into account the presence of latent demand for a product and therefore may differ from the real one.

The assessment of market capacity (in the following, market capacity is understood as actual capacity) depends on the type of product and its purpose.

Below are several ways to calculate market capacity:

1) based on production volume taking into account exports and imports:

where is the volume of production per year for a particular type of product or product group;

– volume of imports of state and non-state entities;

and – balances at the beginning and end of the analyzed period, respectively;

– volume of exports of state and non-state structures;

- market volume.

Peculiarities:

Data on government reserves and production volumes in a number of industries are available only to official government agencies. Production volumes are often underreported to avoid full taxes. Import data is distorted due to the presence of “black” imports. Special marketing research is not required. The method gives approximate results, which should be clarified by other methods.

2) according to population consumption standards:

where is the volume of consumption of goods per person per year;

– the number of people using the product.

Essentially, it is the theoretical or potential capacity of the market. Used for quickly consumed goods purchased systematically.

Features: marketing research is required to find consumption standards. Known data based on population categories can be used. Consumption standards depend on the age of the population, place of residence, region, and solvency. For new consumer products, research is required to determine consumption rates.

Consider the annual market of Moscow. The number of people using toothpaste is 80% of the total population.

E = 365 * 20 * 10,000,000 * 0.8 g, or 58,400 t

Beer consumption is 40 liters per person per year.

Russian market for the year.

Proportion of the population drinking beer K = 50%.

E = 140,000,000 * 40 * 0.5 = 240 million decl.

3) Market capacity in monetary terms:

Where Q- market capacity for the year;

P - the number of buyers of the product in the market;

q- average number of purchases per year;

R - average unit purchase price.

4) Market capacity can also be assessed using panel studies. Panel research allows you to obtain the necessary information about changes occurring in the market by regularly surveying the same group of stores (panel of retail outlets) or group of consumers (panel of consumers).

EXAMPLES OF MARKET CAPACITY ASSESSMENT:

The initial data and methods for calculating demand for industrial and technical products, with the exception of some differences that will be discussed below, are essentially the same as for consumer goods.

Current market demand (market capacity) is often determined based on the normative method. This method involves a consistent decomposition of the market potential up to finding estimates of demand for a specific product or brand based on the use of a number of standards and share indicators.

Example: a company sells an additive (products for industrial and technical purposes) intended for use in conjunction with reagents for water softening in boiler rooms. Since many enterprises do not yet use this additive, it is necessary to assess the current and possible market potential, as well as the real level of demand in a certain geographical area. The calculation is made as follows.

Based on reporting, regulatory and statistical information, the volume of water consumption by all firms in a certain region that have boiler houses was determined - 7,500,000 hl;

Consumption rate of softening agent per liter of water: 1%;

Share of companies using this product: 72%;

Additive consumption rate per liter of product: 9%.

The possible market potential is calculated:

7,500,000 hl * 0.01 * 0.72 * 0.09 = 486,000 l.

Research has shown that the share of firms already using the additive is 54%.

Based on these data, the total current market demand is determined:

7,500,000 hl * 0.01 * 0.72 * 0.09 * 0.54 = 262,000 l.

If the firm's goal is to achieve a market share of 40%, sales of the product in a given region (current market demand for the firm) should be increased to 105,000 liters.

The difficulty of this method, obviously, lies in finding the appropriate standards and share indicators. Obtaining them usually requires special research.

Let's consider an example of assessing market capacity for a new product- TV screen cleaning kit.

The monitor screen care product is a kit consisting of a spray and 50 dry disposable cleaning wipes.

The possibility of modification is currently being considered this tool to expand the scope of its application, in particular for cleaning home TV screens.

We will assess the market capacity of this product based on the following data:

The population of Russia (N) is about 145 million people;

The average family composition (Fs) is about 3.2 people;

The approximate number of families will then be: Kc = 145: 3.2 = 45.3 million families;

Average number of televisions per family St = 1.4 pcs.;

The total number of televisions in the country Kt = 45.3 * 1.4 = 63.42 million units:

Let one cleaning kit last for 1 year.

Let's adjust the data to take into account the fact that about 30% of the country's population lives below the poverty line.

N = 145 (1 - 0.3) = 101.5 million people;

Ks - 101.5: 3.2 = 31.7 million families;

Kt = 31.7 1.4 = 44.38 million TVs.

Thus, if one cleaning kit is purchased for each TV, the market capacity will be about 44 million kits.

However, it is quite obvious that this value characterizes the potential capacity, and not the actual one, since all TV owners will not immediately buy a new cleaning product.

It is known that in the classification of consumers according to the criterion of attitude towards a new product, lovers of new products who try to purchase them immediately make up approximately 13%. Let's introduce an adjustment factor based on this group of consumers (they are called innovators).

N = 101.5 0.13 = 13.2 million people:

Kc = 13.2: 3.2 = 4.12 million families;

Kt = 4.12 1.4 = 5.77 million TVs.

Thus, taking into account customer perception of the new product, in the first year of sale, the market size of the TV screen cleaner can be estimated at 5.7 million cleaning kits.

If the consumer likes the product, and the manufacturing company draws up an effective marketing program for this product, then the market capacity can be 7-8 times greater.

Beer market capacity.

Beer consumption per capita in Russia is 20 liters per year. It is known that in European countries this figure can reach 140 liters. The lifestyle of Russians tends to be closer to the global one. The result of this is an ever-increasing consumption of beer.

What are the actual and potential capacities of the Russian beer market?

Taking into account that the population of Russia is approximately 147 million people, the actual capacity of the Russian beer market is:

20 l * 147 million 2.9 billion liters per year;

potential capacity of the Russian beer market:

140 l * 147 million 20.6 billion liters per year.

Capacity of the household antifreeze market.

The Gelis-Int company, a leader in the Russian market of household antifreeze, estimates the capacity of this market based on the following considerations. There are four large Russian companies operating in the market, whose total sales volume in 2003 amounted to 7 million liters. For imports, based on customs statistics, 500 thousand liters were received. Consequently, the actual capacity of the Russian household antifreeze market in 2003 was 7.5 million liters.

Further, it was taken into account that not all owners of heating equipment use antifreeze; some consumers use ordinary water due to the fact that they do not have to pay for it. Numerous surveys conducted at exhibitions have shown that approximately 30% of possible antifreeze consumers prefer to fill with water. Considering that 7.5 million liters are consumed by 70% of possible consumers, one can easily calculate the potential capacity of the Russian household antifreeze market. It amounts to 10.7 million liters per year.

_____________________________________

As you can see, there are many different approaches to assessing market capacity. Which one to choose depends on the product, the market, the specifics of the country (how accessible the necessary information is in it) and the capabilities of the company (financial and intellectual). As a rule, it is impossible to accurately calculate market capacity, but it can be estimated with a degree of accuracy quite sufficient for decision-making. Assessing market size requires creativity and persistence in accessing sources of information.

When determining the market capacity, an enterprise entering this market does not have the right to count on its full size, taking into account the presence and work of competing firms in the market. Therefore, it is also important to have data on your own share in a given market (if the company is already present in it) and to calculate its possible market share in the future (when entering the market or when assessing the results of its future activities).

Market share is calculated using the formula :

D = Pr / O * 100%,

D – the enterprise's market share;

Etc– sales volume of the enterprise on the market;

ABOUT - total sales of a given product in a given market.

Assessing the state of demand – an important area of market research. Marketers identify several situations that characterize the state of demand.

Market capacity (market size) – the size of the market for a particular product or service, expressed in the total volume of sales of the product for the billing period; or the total demand for a category of goods, expressed in the purchasing power of the population. Often in marketing, instead of the concept of “market capacity,” its synonyms are used: market size and volume.

In this article we will tell you everything about the concept of “target market capacity”: we will consider the terms “potential, actual and available market capacity”; we will talk about the main indicators that are used to determine the size of the market; we will describe the factors influencing the capacity of the sales market; We will also describe existing methods for calculating, assessing and forecasting market capacity. The methods for calculating market capacity described below can be used for completely different industries: to determine the volume of both commodity and consumer markets, and for the b2b sector.

Market capacity varies

In global practice, there are 3 types of market capacity: actual, potential and available. Each type of market capacity can be calculated in different units of measurement: TV in physical terms (in pieces), in value terms (in rubles), in volume of goods (in liters, kilograms, etc.).

Let us give a brief description of each type of market capacity.

Potential

Potential market capacity is the size of the market based on the maximum level of development of demand for a product or service among consumers. The maximum level of demand means that the culture of using the product has reached its maximum: consumers consume the product as often as possible and constantly use it. Potential market capacity is the maximum possible market volume, which is determined on the basis that all potential consumers know and use the product category.

Actual

Actual or real market capacity is the size of the market based on the current level of development of demand for a product or service among the population. The actual market capacity is determined based on the current level of knowledge, consumption and use of the product among consumers.

Available

Available market capacity is the size of the market that a company can claim with its existing product and its characteristics (distribution, price, audience) or the level of demand that a company with its available resources can satisfy. In other words, when calculating the available market capacity, the company narrows the actual market volume, considering not all market consumers as potential buyers, but only those who meet its target audience criteria.

A small example of different types of market volume

Let's imagine that a company operates in the electric toothbrush market. How to determine the criteria by which companies calculate the size of the potential, actual and available market volume? Let's look at it in detail.

The company should calculate the potential market size based on the following assumptions (the following are the assumptions from the manufacturer that will form the basis for calculating the potential market size; you can include your own assumptions in the calculation that reflect your current assessment objectives):

All potential toothbrush consumers use “electric toothbrushes” as opposed to regular manual brushes.
All consumers buy brushes in accordance with the frequency recommended by the manufacturer: that is, they change them regularly, after 1 month of use.
The average price per brush corresponds to the current average price of the manufacturer.

To assess the actual market share, the company must take into account the prevailing culture of consumption of the product (electric toothbrushes) in the target market. To do this, she conducts a survey among all potential market consumers and clarifies the following indicators:

Current level of consumption of the category “electric toothbrushes” among the population or What % of all potential market consumers use this type of brush? This indicator is called “category penetration”.
Current purchase frequency of electric toothbrushes or How many times per year do customers who use electric toothbrushes buy them?
The current average purchase price of electric toothbrushes.

To assess the available market capacity, the company clarifies the indicators not for the entire market audience, but only for its target segment, which, for example, are young consumers aged 20-40 years.

What input information is needed to calculate market size?

In order to calculate the capacity of the target market, you must first collect the necessary information through market research, and also determine the principles for calculating the capacity. The following questions will help you solve this problem:

Factors and indicators	Description
Period	For what period will the market capacity be calculated (month, quarter, half-year, year), including a year?
Market boundaries	For which region will the market share be calculated (USA, Russia, Western Europe, Asia, Far East, etc.)?
Criteria for calculating potential	What indicator will be taken as the basis for calculating the potential market capacity - the possible level of production or the possible level of consumption?
Audience	Which audience will be taken into account when calculating market capacity (the entire population 18+, women 35-55 with an average income, all people over 55 years old, young families, etc.)?
Product groups	What groups of goods will be taken into account when calculating market capacity (using the example of the car market - only cars or cars + spare parts or cars + spare parts + service services)?
Unit	What will be the unit of measurement when calculating market capacity (currency, unit of production or volume of production)?
Sources	What information is needed to calculate market capacity, sources for obtaining this information?

Methods for calculating market capacity

There are 3 basic methods for determining the capacity of the target market: the bottom-up capacity calculation method, the top-down capacity calculation method, and the calculation of market capacity based on actual sales. Let us consider each of the methods for assessing market capacity in more detail.

Each method has a universal rule: if the market is divided into several segments or sub-markets, then sometimes it is easier to calculate the capacity of each sub-market and then add it up to obtain the capacity of the entire market.

Bottom-up method

The bottom-up method is the most common way to calculate market size. It determines the market capacity in terms of the current level of demand. Market capacity using the bottom-up method is equal to the sum of all expected purchases of a product by the target audience for the billing period (in practice, it is customary to calculate the annual market capacity).

Calculation formula

If you want to estimate the size of the target market using the bottom-up method, then the following 3 formulas for calculating market size will be useful to you:

Type of market capacity	Calculation formula
Market size in quantitative terms (thousand units)	Market capacity for period N (thousand units) = Number of target market audience (thousand people) * rate of product consumption for period N (in units)
Market size in monetary terms (in thousand rubles)	Market capacity for period N (thousand rubles) = Number of target audience of the market (thousand people) * rate of consumption of goods for period N (in units) * average cost of 1 unit of product on the market (in rubles)
Market size in volume terms (thousand liters)	Market capacity for period N (volume units - thousand liters) = Number of target audience of the market (in thousand people) * rate of consumption of goods for period N (in units) * average volume of 1 package of goods (in volume units - liter)

You can read a more detailed example of calculating market capacity using the bottom-up method in our article

Top-down method

The method involves determining the market size based on internal sales data of all market players for the calculation period (if it is impossible to cover all players, it is enough to take only large ones, constituting 80-90% of market sales).

The formula for calculating market capacity using the top-down approach is as follows:
Market capacity = The sum of sales of all companies on the market, expressed in sales prices to the buyer (i.e. not in shipping prices, but in retail prices).

Information can be obtained as a result of a survey of major market players, as a result of open reporting published by players in some markets.

Method from real sales

This assessment is currently used by many research companies, such as ACNielsen. The essence of the method is to track sales of individual categories of goods using real customer receipts, which represent real purchases to the audience.

This method uses only large chain stores with which agreements are concluded to provide data and these stores are used as a representative sample. As a result, the data obtained can be extrapolated to the entire country.

In this method of determining market volume, it is impossible to isolate a separate audience, but it is possible to realistically estimate: how many pieces of individual types of goods, at what prices, in what volume were sold on the market during the billing period. And the universal technique allows you to analyze information in dynamics.

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