Sales Potential and Sales Forecasting

Sales potentials, are defined earlier, are quantitative estimates of the maximum possible sales opportunities present in particular market segments open to a specified company selling a good or service during a stated future period. They are derived from market potentials after analyses of historical market share relationships and adjustments for changes in companies’ and competitors’ selling strategies and practices.

A firm’s sales potential and its sales forecast are not usually identical – in most instances, the sales potential is larger than the sales forecast. There are several reasons for this:

“Some companies do not have sufficient production capacity to capitalize on the full sales potential;

“Other firms have not yet developed distributive networks capable of reaching every potential customer;

“Others do not attempt to realize their total sales potentials because of limited financial resources; and

“Still others, being more profit oriented than sales oriented, seek to maximize profitable sales and not possible sales.

The estimate for sales potential indicates how much a company could sell if it had all the necessary resources and desired to use them. The sales forecast is a related but different estimate – it indicates how much a company with a given amount of resources can sell if it implements a particular marketing program.