Categorization of Market for a Product

The market for a product can be categorized as follows:

  • Potential market. These are those who express some level of interest in a product. For example, this can be determined from a survey where, for instance, 30 percent of respondents say they are interested in your product. Extrapolating forward, you may conclude that 30 percent of the population is a potential market.
  • Available market. Just because someone is interested does not mean that the person will actually buy or can even afford to. So the available market is the subset of the potential market who have interest, income, and access to the product.
  • Qualified available market. This is a further refinement of the available market since it may be possible that those who have interest, income, and access, nevertheless cannot get the product due to technical issues such as laws (e.g., minimum age requirements for liquor) or distribution constraints (e.g., remoteness of their location).
  • Served market. Also known as the serviceable available market. This is the market that the company can actually service with its current state of logistics. • Penetrated market. This is the subset of the market that is already actively using the product.
Illustrative Sizes of Market Categories

The market demand for a product or service, on the other hand, is the total volume of the sales that is generated by a defined customer group in a defined geographical area, time period, and marketing environment under a defined marketing program. It is a factual number, meaning that market demand by definition is something that has already happened.