What is Sales Potential?: Everything You Should Know as a Beginner
by Mashum Mollah Sales & Marketing Published on: 29 January 2022 Last Updated on: 11 November 2024
What Is Sales Potential? It generally refers to what extent, a product can be sold in the market. In essence, it refers to what amount of a particular brand is possible to be sold. Let me make it simpler for you. Do you own a business? Then you will understand sales potential better. Here is an example for you…Have you estimated how much sales would you gain from a particular product within the coming 6 months? I’m sure you have. In short, it is the tool to determine the expected income from a business.
For further details about sales potential including its definition, importance, metrics, and examples…read till the end.
Sales Potential Definition
Sales potential is the predicted sales volume of a company in the stipulated period. In simple terms, it is the projected amount of money that you can earn throughout the product’s lifetime from the market.
What does it mean for your business?
By guessing the sales potential, you can gauge the current market situation in your industry. If you are planning to launch a new business, you can decide if it is beneficial for you to enter a market.
In order words, sales potential tells if your product is performing according to expectations in the market. It also gives you an idea of the number of products that you can sell in the market, considering the existing competition and other factors.
CBS News states that Between 2018 and 2020, tesla sold 80% of the EVs in the market. However, the number came down to 55% in 2023. That means Tesla could not determine their accurate sales potential for that projected year. They could not map the market factors properly. Or they could not fathom the number of cars that they could sell in FY 2022-23.
Sales Potential vs Market Potential
You must determine the market potential when measuring your sales potential. But these are two different parameters.
| Market Potential | Sales Potential |
|---|---|
| You can measure the market potential of a specific market only. | However, the sales potential of a product can be identified for any market. |
| Market potential is an indicator of all the companies in a specific niche, existing in a particular market | Sales potential refers to the impact that “n” number of existing competitors in the market will have on your business |
| Market potential allows you to gauge the sales potential of all the competitors. | It is specific to a company. But you need to understand the sales potential of the competitors in a market, before launching your product. |
Pros and Cons of Measuring Sales Potential
Now that you know the definition of sales potential, what it’s importance in the real world? Follow the bullet points below to get a sneak peek at its advantages as well as disadvantages:
Pros of Calculating Sales Potential
- It indicates to what amount you can sell a product so that it brings the highest possible revenue.
- Since it deals with a summative assessment, it facilitates the decision-making process of a firm regarding the product or service.
- The sales potential method allows a business to predict the future revenue volume, market share, financial and business development.
- It facilitates the key stakeholders to determine the overall business health and meet the targets.
- Profit estimation is also pretty easier through it because of the involvement of direct costs.
Cons of Mapping Calculating Sales Potential
- At times, this forecast gives incorrect results that hamper the decision-making process
- The purchasing behavior cannot be changes
What Sales Potential Metrics Can We Use?
There are 3 key sales potential methods or metrics to estimate the future sales volume of a product or service. Once you get to know them, there is nothing simpler than implementing them. Let’s check them out:
Market Size
You must measure the target market’s size before tapping onto any unexplored market. For instance, you want to enter the fitness market of the US. In 2023, there were 113,326 gyms in the whole of America. It means that the number of gyms increased by 2.3% in the year 2023.
In the US, around 14% of the population have active gym memberships. It means that the 45 million people (about twice the population of New York) go to gyms approximately. Experts say that this number can grow in the future. So, this is the right time to enter this market, as per the market size.
Consumers’ Demographics
Demographic data shows whether customers will buy your product. In this regard, you will search the number of customers who will buy your product in the given market. Then you will search the common preferences of customers while buying your product.
For example, there were 282 million cars in the US in 2021. But it rose to 283 million vehicles in the year 2023. That means the number of people with capacity and intention buy cars is increasing. You can treat this as the best time to step into the car retail market.
Competitors Analysis
Your sales potential calculation is incomplete if you don’t gather competitors’ data from the market. Firstly, you should search for the number of competitors in the market. If the number of competitors is high, your sales potential will go down.
Then you will search for the differentiating factors of the competitors’ products.
At present Tesla has GM, NIO and Volkswagen as its main competitors. At the same time, BYD is competing with them in the US market. Hence it is not the right time to launch another series of EV in the US.
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What Are Some Examples Of Sales Potential?
Would you prefer some examples of sales potential over the theoretical explanation? Well, then; let’s consider a company, McDonald’s predictive potential sales is a key component of their decision-making process. Based on the previous data, economic/social/legal/technological factors, the sales potential prediction happens regionally.
Also, here, they adopt internal situational factors like customers, company, employees, etc for this prediction. Finally, they incorporate the outcomes of this calculation into their business decision-making process. The improvement areas are also dependent on these sales potential outcomes.
Now you see, what helped McDonald’s to gain such a huge market share globally!
Q1. An Accenture Sales Team Is In Conversation With A Potential Client. What should the Sales team emphasize to differentiate Accenture’s AI capabilities in the marketplace?
The correct answer to this question is Option 1… A Guarantee That We Will Deliver AI Solutions More Cheaply Than Any Competitor
Explanation To The Answer
Accenture Sales Team Is In Conversation With A Potential Client. One of the key strategies to apply during client communication is to show how quirky a business is. The only thing that matters to the client is how different is your service or product from the competitors. Among the two options, it seems that “low-cost AI solutions” is the thing that the client would get attracted to.
It is because, he will get the alteratives of Accenture’s knowledge, experience, and assets among the competitors; for example IBM. But maybe IBM would not be able to deliver AI services at such a lower price like Accenture. Hence the guarantee to deliver cheap AI solutions is the correct answer.
An Accenture Sales Team Is In Conversation With A Potential Client. – Hope your idea of Sales potential is crystal clear by now.
Frequently Asked Questions (FAQ)
Ans: There is a general sales potential formula. It is the estimated number of customers*average value of the customers’ purchases. Other than this, there are some more:
total value from the deals in the currents ales cycle * close rate,
last month’s sales* velocity = additional sales. After that additionals ales + last month’s rate = next month’s forecasted sales.
Ans: Your sales analysis builds your sales forecast for the next quarter or next FY. So, choose a tool that reflects the best trends after research. I suggest using Insightsquared. It lets you build a concrete understanding of the sales activities in the market. But you can also use other tools like MethodData.
You can download MethodData sales analysis into your CRM directly. After that you can view as well as process the sales data from multiple perspectives. As a result, you can understand the market better too.
Ans: How to write a sales letter to a potential client? Follow the steps below:
• Use catchy headlines
• Incorporate bullet points with crucial information
• Use statistics, figures, and facts
• Place call to action at the right places.
• Mention unique offerings
Ans: The advantages of potential sales are as follows:
• Best utilization of resources
• Meet the financial targets
• Kickstart the decision making
The Verdict
We have reached the end of this sales potential guide. Not only we have explained the sales potential, but also, we have elaborated on the definition, merits/demerits, metrics, examples of sales potential. Also, we have run a short case study analysis in the scenario of Accenture.
I hope you have got rich insights from this guide. Do you have any further questions for us? Let us know your queries or any viewpoints in the comment area below, we will be reverting back to you.
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