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Defining the demand for your product within the wider consumer market is an important step in market analysis. It will help you to develop effective strategies to promote and sell your product to as many potential customers as possible.

Market demand is the total volume of a product or service that would be bought by a consumer group where the location, time period and marketing effort are defined. Market demand can depend on environmental factors as well, such as the sales of a related product or service or the current economic conditions.

Base line market demand is called the market minimum. This refers to the number of sales that would occur regardless of any marketing efforts or underlying factors. There is also a limit to market demand that is referred to as market potential. Market potential is where an increased marketing effort, even combined with other factors, would have no effect on overall sales.

Market demand can also be divided into two categories, primary and selective demand. Primary demand is the total demand for all brands of a given product or service. Selective demand is the demand for a given brand of product or services.

A business should estimate what its share of the market could be in order to assess its business potential. Once you have analysed the entire potential market for your product, study the competitors and their customers. Then gauge what amount of this market you can realistically see your business capturing.

To measure market demand, you can use published industry statistics, surveys or even by spying on your competitors and compiling a list of how many customers they have and how many sales they make.

Using this knowledge, you can estimate what the market demand for your business will be. The market demand of your business is equal to your potential market share multiplied by the total market demand.