In business, the term “market potential” or “industry capacity” refers to what important marketing factor? Understanding market potential helps you create a strategy that works for your business. First, you need to identify the types of consumers in your market. Think of each consumer as a “segment.” Then, divide your potential market into subsegments based on demographics, common interests, and behavior preferences.
Another way to estimate market or industry capacity is to use a chain ratio method. This technique involves ranking alternative market segments based on current indices. Two widely used indices are the Category Index and Brand Index. The former measures patterns of product categories, while the latter calculates brand performance within a particular category. Multiply these values, and you have a measure of market potential.
While income distribution is a critical marketing factor, it is far less significant than population. The world’s population is more evenly distributed than its income, so the size of a country’s market is not necessarily representative of the entire population. For example, one country’s market is 80% of another country’s. By mid-century, that number will grow to 12 billion.
Geographic factors can impact product features, price, location of facilities, and promotional design. In business, a market can be a shopping mall, a catalog, or an ad. Markets are characterized by dynamic economic forces such as supply and competition, as well as government intervention. While there are numerous ways to analyze market potential, focusing on one of these factors is essential for marketing decision-making. Geographic factors can affect factors like product features, geographical location, and even government control.