Based on the information given in Figure 3-3, what will the market potential become if the buying ceiling and purchase rate are increased to 60% and 25%, respectively? (You may use an excel sheet to do the calculations or use the Marketing Performance Tools in the Roger Best textbook website, specifically Tool 3.1 at http://www.rogerjbest.comav.cfm?A=N&C=3&P=0.)

		$438.8 million
		$585.0 million
		$351.0 million
		$526.5 million
		$365.6 million

FIGURE 3-3 ESTIMATING MARKET POTENTIAL-PERSONAL COMPUTERS 100 Geographic Scope of Market Focus Worldwide Scale (e.g., none, thousands, millions, billions) Millions Consuming Unit (e.g., household, business) Individual User Current Market Demand (units) 325 Performance Factors Performance 60 Maximum Number of Consuming Units 4,500 Market Development Index (MDI) Buying Ceiling (% who can buy at average price) 50% Annual Purchase Rate 20% 40 Quantity per Purchase Market Potential (units) 450 20 Market Development Index (MDI) 72 Average Price (for achieving buying ceiling) $650 0 1980 1990 2000 2010 2020 Market Potential (millions $292,500 Market Penetration Chapter 3 Market Potential, Market Demand, and Market Share 87 average price of $650 for 2020. This price estimate is based on a long-running market trend of price declines of about 7 percent annually. Using economic data on the popula- tions of the world's nations, we can estimate a buying ceiling of 50 percent, meaning that only about half of the maximum number of consuming units can afford to buy a personal computer. For the personal computer industry, then, 2.25 billion is the estimated world- wide number of personal computer users when the market saturates. Market Potential = 4.5 billion potential X 50% buying ceiling = 2.25 billion users If we assume that each user has just one personal computer, and that users replace their computers on average every 5 years, the number of units sold per year at full market potential would be 450 million. At the estimated price of $650 per unit, the annual sales at full market potential would be $292.5 billion, barring any unpredictable major devel- opments. These calculations are embodied in the following formula for figuring a mar- ket's annual sales when it reaches its potential: Market Maximum Buying * Purchase * Purchase Average Potential Consuming Units Ceiling Rate Quantity Price Market - 4.5 billion x 50% X 20% rebuy * 1 PC per $650 Potential users buying ceiling annually user Price = $292.5 billion annually For the U.S. soft drink market, retail sales at full market potential may be estimated in the same way. Of the 300 million people in the United States, we exclude very young children and other individuals whom we could not consider as potential consumers, leave ing 80 percent of the population as the maximum number of consuming units. The aver- age soft drink consumer buys 365 soft drinks a year. At an average price of $1 per drink, annual retail sales would be $87.6 billion if all potential consumers entered the market. Market _300 million , 80% 365 units $1 per $87.6 billion Potential ($) people ceiling annually unit annually For flat-panel TVs, let's assume the number of households in the United States will grow to 120 million in 10 years. If we further assume that 80 percent of the households would buy a flat-panel TV at an average selling price of $500, and each household would buy one TV every 5 years, the market potential would be an estimated $9.6 billion annu- ally. If the average price fell to $400, and the consuming units grew to 90 percent of the households, the market potential would drop to $8.6 billion. Market 120 million x 80% * 20% rebuy x 1 unit per * $500 per _ $9.6 billion Potential ($) households ceiling annually `household unit annually To estimate the U.S. market potential for motorized golf carts, we would similarly rely on facts, logic, and assumptions. First, we would research various sources to find the