Determining Sales Potential in Each Control Unit

The next step is to determine the sales potential present in each central unit. The territorial planner needs some way to measure sales potentials, which, you will recall, represent the maximum possible sales opportunities open to a specific company selling a good or service during a stated future period to particular market segments. For the present purpose, substitute “a particular control unit” for “a particular market segment”, in other words, each control unit is a particular geographical market segment. Geographical market segments, like all market segments, are made up of present and prospective customers, so the territorial planner must identify the buyers of the product as precisely as possible. A vague identification such as, “Our product is bought by women,” is not sufficient. But if it can be determined that “Our product is bought almost entirely by middle aged, lower-income women living in cities,” a more precise description of the buyers comprising the market is obtained. Formal market identification studies may be necessary.

Sometimes, sales personnel supply information, but it is not necessarily usable. For example, a sales force calling only on wholesalers has little contact with retailers or consumers. Even when sales personnel sell to final buyers, as in marketing many industrial goods, they may neglect certain classes of prospects and be able to provide only partial identification of possible buyers. When there is no direct contact with final buyers, formal marketing research studies obtain precise identification of all classes of final buyers.

Having identified potential buyers, the planner next determines the sales potential in each control unit. The planner ascertains how many potential buyers in each class there are in each control unit and the units’ total market potential. Then the planner estimates the portion of the unit’s market potential that the company has an opportunity to obtain (that is, the sales potential).

Market potentials are generally converted into sales potentials by analyzing historical market shares within each control unit, adjusting for changes in company and competitors’ selling strategies and practices, and arriving at estimates. Having made these estimates, the territorial planner ascertains those control units with sufficient sales potential to justify sales coverage. For the manufacturer with mass distribution, this is not a problem. Mass marketers provide sales coverage in every control unit, regardless of how little sales potential it represents, because maximum sales exposure is crucial to marketing success. Many manufacturers, however, provide sales coverage only in those control units containing sufficient sales potential to assure profitable operations, and for most manufacturers, there are some control units where selling costs are excessive. This is true of numerous industrial-goods producers, such as those selling machine tools and mining equipment. (Studies of industrial- goods markets show that over 90 percent of U.S. manufacturing is done in approximately 650 of the 3,000 counties.) It is also true of most producers of consumer shopping and specialty goods; the bulk of the market lies in a small number of market areas.