Market volume is crucial in starting a business

// 01.11.2007

The knowledge of market volume is vital for a company to plan its current/future strategies, investments (for instance, into production capacity, promotion) and revenues.

Evaluation of market volume and assessment of market sector attractiveness allows the company to understand expediency of entering the market and decide which price segment it can occupy.

Market volume means plausible volume of product sales under particular market situation and product price. It is also defined by the level of demand and offer. The accuracy of market volume calculations may not be absolute, though it is sufficient for making strategic decisions.

Marketing practices indicate that data on market volume and market share pose significant interest for manufacturers. These data are essential both for expansion and for entering the market with a new commodity or novel trademark. The demand for such information is already well-shaped. Currently, there are many entities which perform such type of marketing researches.

The study of market volume and market demand means the investigation of sales of specific trademark(s) on the required market during certain period of time. In order to study these parameters, experts analyze the following elements:

• secondary information;
• product manufacture and sales;
• production costs and consumers’ behavior;
• market volume on the basis of product consumption;
• market volume on the basis of ‘revaluation’ methods (the well-known market volume in a region is used as a basis for calculation of market volume in another region using market ‘revaluation’ techniques).

Unfortunately, market volume study is a difficult issue, which may lead to certain mistakes in its measuring.

Market volume is often evaluated with the help of the following equation:

Q = N*K*F*P, where:

N – number of prospective consumers within particular segment;
K – percentage of buyers ready to purchase analyzed product;
F – average frequency/quantity of purchases within particular segment during particular period;
P – average product price.

It is a common situation when a company, once it has made market analysis, curtails future researches and uses outdated data in its future forecasts. However, such approach may be misleading, since many markets are highly volatile and apt to quick changes in each segment.