Discuss the differences between the breakdown and buildup approaches to measuring company sales potential. What are the similarities between these two approaches?
What will be an ideal response?
The two general approaches that measure company sales potential are breakdown and buildup. In the breakdown approach, the marketing manager first develops a general economic forecast for a specific time period. Next, the manager estimates market potential based on this forecast. The manager derives the company's sales potential from the forecast and an estimate of market potential. In the buildup approach, the marketing manager begins by estimating how much of a product a potential buyer in a specific geographic area, such as a sales territory, will purchase in a given period. The manager then multiplies that amount by the total number of potential buyers in that area. The manager performs the same calculation for each geographic area in which the firm sells products and then adds the totals to calculate market potential. To determine company sales potential, the manager must estimate, based on planned levels of company marketing activities, the proportion of the total market potential the company can reasonably attain.
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