There are over 7,200 health and fitness clubs in the United Kingdom. Collectively, this means one in six of the UK population, or 10 million people, are members. Around 50 percent of the clubs are fitness-only centers with an annual turnover of nearly £2 billion. Most of the facilities are relatively small, with turnovers under £300,000. The COVID-19 pandemic has had a drastic impact on the health and fitness market. Health and fitness clubs were shut down during the UK lockdowns, and even outdoor exercise was restricted. From March 2020 to April 2021, 52 percent of UK consumers were engaged in home workouts and 53 percent purchased products to aid their workouts at home. The average spend on the products was around £165. Of those that bought workout equipment, 31.7 percent had not exercised regularly before, and 76 percent claimed that they would continue to use the equipment after the pandemic had passed. According to global data, the fact that remote work appeared to be a longer-term impact on working patterns made UK consumers much more confident about investing in higher-cost exercise machines and equipment from Amazon, Argos, and eBay, all of which benefitted from a high rise in demand. At the same time, the sales of “athleisure wear” increased, with consumers opting to wear this type of clothing at home for work as well as for their workouts. This increase in sales of casual clothing prompted the UK Office of National Statistics to add these and home exercise equipment to their basket of goods and services used to calculate the cost of living.

A home gym and athleisure wear retailer have a consumer catchment area of 70,000. Research suggests that 40 percent are interested in spending around £320 on equipment and clothing. Use the chain ratio method described in Market Potential and Sales Estimates in Appendix 2: Marketing by the Numbers to calculate the market potential for these products for the retailer.

Data from appendix 2

Wise Domotics has now calculated the sales needed to break even and to attain various  profit goals on its new product. However, the company needs more information regarding  demand in order to assess the feasibility of attaining the needed sales levels. This information  is also needed for production and other decisions. For example, production schedules  need to be developed and marketing tactics need to be planned.

The total market demand for a product or service is the total volume that would be bought by a defined consumer group in a defined geographic area in a defined time period in a defined marketing environment under a defined level and mix of industry marketing effort. Total market demand is not a fixed number but a function of the stated conditions. For example, next year's total market demand for this type of product will depend on how much other producers spend on marketing their brands. It also depends on many environmental factors, such as government regulations, economic conditions, and the level of consumer confidence in a given market. The upper limit of market demand is  called market potential.

One general but practical method that Wise Domotics might use for estimating total market demand uses three variables: (1) the number of prospective buyers, (2) the quantity purchased by an average buyer per year, and (3) the price of an average unit. Using these numbers, Wise Domotics can estimate total market demand as follows:

where

              Q = total market demand
              n = number of buyers in the market
              q =  quantity purchased by an average buyer per year
               p =  price of an average unit

A variation of this approach is the chain ratio method. This method involves multiplying a base number by a chain of adjusting percentages. For example, Wise Domotics's product is designed to automate operation of multiple internet-connected smart devices in a home. Thus, only consumers who have broadband internet access and Wi-Fi in their homes will be able to use the product. Finally, not all Wi-Fi internet households will be willing and able to purchase this product. Wise Domotics can estimate U.S. demand using a chain of calculations like the following:

Total number of U.S. households
× The percentage of U.S. households with broadband internet
× The percentage of internet households with Wi-Fi
× The percentage of these households willing and able to buy this device