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Demand Analysis Memo

Coca-cola  Potential Buyers.  Market potential can be estimated by determining the number of possible consuming or purchasing units and the consumption rate of each unit.  For example, if the product/service is health care provided by a family practice center, population data (number of potential users) could be obtained from government sources and data on patients rate of visits (consumption rate) might be obtained from the U.S.  Public Health Service.   This information would allow a calculation of potential demand (visits per year).  Later, when we identify different buyer types (segments) it will be necessary to consider the degree to which purchase rates vary.  Finally, market potential may increase because the number of potential buyers or the rate of purchase may increase over time.  Industry sales may increase because prices decrease, industry marketing efforts increase, environmental factors change, etc.               You will also want to make estimates of company sales and company potential.  Company sales may increase because the sales of all firms competing in an industry increase as industry sales increase.  Some firms may also gain sales at the expense of competitors by offering a superior product and increasing market share.    Defining What to Measure               You must clearly identify the market to be measured to accurately measure industry sales and potential.  Sometimes it may be difficult to determine the size of the market.  The problem is often one of definition.  For example, is a smartphone part of the market for cell phones or is it part of the market for electronic equipment of all types?  (This issue will appear again during the competitive analysis).  A narrow definition of the market may result in the omission of a market opportunity or a competitive threat from your analysis.  Similarly, defining the market too broadly may not yield a useful basis for evaluation and planning.