When Figuring the Potential Sales Figures, It's Important to Remember That "Potential Market" and "Potential Sales" Are Two Different Things.
By James F. Riordan
When looking at their product's potential, many inventors are confused by terminology, especially between the words "market" and "sales." So let's take a look at these terms so you can begin figuring the realistic sales potential for your product.
If we add up every person who could possibly use one of your products, we'll have a figure to define your "Potential Market." But of course, not every one of those individuals will wind up buying your product. The figure for "Potential Sales" is the probable number of units that you can reasonably expect to sell during a specific time period (usually short) for which you are forecasting or "projecting."
The "Total Potential Sales" is everyone who could use one, afford one, and PROBABLY WILL BUY ONE if they are properly educated about the existence, benefits and whereabouts of the product, during the life cycle of the product. Winning products in this category are those that have almost as large a potential sales volume as the potential market size.
However, it's important to remember that Potential Sales will never equal the Potential Market because it's virtually impossible to reach everyone during a product's life cycle. And of the people you do reach, not everyone who COULD use one will actually WANT one.
For example, when I was a child, a friendly old monk used to visit our family a couple of times a year. Because of his vow of poverty, he had no money, yet he would still go through the stores regularly to see all the new products. One day I asked him why he "window shopped" for merchandise that he never intended to buy. He told me, "I enjoy seeing all the things I can do without." He's a classic example of a person who could use a product if you gave him one free, but who would never actually buy one.
If there are other products available that would present the end-user with a choice, then your potential sales figures must be downgraded, because some of the end-users will buy the other brand. Also, it's important to be realistic about the end-users' reaction to your product entering the market, especially if other similar products have been out there for a while.
For example, if your product is the "Hair Guard," a hair dryer with a digital temperature readout to show you how hot the air is, your potential sales DO NOT include ALL persons who are capable of using or affording a hair dryer, since may of those persons already have a hair dryer, and they wouldn't be likely to throw theirs in the garbage just to buy yours with a digital air temperature readout. Those people are likely to wait until theirs goes "belly-up" before purchasing another one.
YOUR Potential Sales are another matter. Yours may end up being only a small piece of the pie we call "Total Potential Sales." Why? Because":
1. You may have limited ability to quickly reach the market, educate the targeted buyers, and supply them through distribution channels.2. You may have competition from other suppliers
3. Consumers are fickle creatures. Generally, many factors must coincide favorably to change the potential buyer into that beloved character, "your customer."
In the next issue, we'll discuss those factors and look at how you might calculate the potential for your product.
The above article was taken from James F. Riordan's classic book, HOW TO EVALUATE THE POTENTIAL FOR SUCCESS OF A NEW PRODUCT OR TECHNOLOGY. Riordan's highly-acclaimed, 36-point system is a valuable tool for inventors, product evaluators or anyone interested in the invention process. Each section is followed by a comprehensive questionnaire that can be used to evaluate your product.
The highly-recommended book can be ordered through the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501. The phone number is (310) 328-1925.
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