Market Potential

The market forecast shows expected market demand, not maximum market demand. For the latter, we have to visualize the level of market demand resulting from a "very high" level of industry marketing expenditure, where further increases in marketing effort would have little effect in stimulating further demand.

■ Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment.

The phrase "for a given market environment" is crucial. Consider the market potential for automobiles in a period of recession versus a period of prosperity. The market potential is higher during prosperity. The dependence of market potential on the environment is illustrated in Figure 1-13(b). Market analysts distinguish between the position of the market demand function and movement along it. Companies cannot do

iod

Market

pe

potential, O2

ec sp

Market ^

X

nd a em

et

Market

ar M

minimum, Oi

(a) Marketing demand as a function of industry marketing expenditure (assumes a particular marketing environment)

Planned

Planned

Industry marketing expenditure

(b) Marketing demand as a function of industry marketing expenditure (two different environments assumed)

iod er

p

Market

ec sp

potential-^

e

(prosperity)

nd

Market ^

a m e

potential

et

(recession)

ar M

Recession

Industry marketing expenditure

FIGURE

anything about the position of the market demand function, which is determined by the marketing environment. However, companies influence their particular location Market Demand Functi°ns on the function when they decide how much to spend on marketing.

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