Question

Total global market demand for a type of product is valued at $60 billion. A key player in the market current has a 14% market share. The firm is targeting a 5% revenue growth of its current market share even though the global market demand is expected to be flat (0% growth) for the coming year.

How much revenue is this firm currently extracting from the current market?

What is the target market share for next year?

Continuing the problem above, if the average consumer spends $12 per unit purchased and buys one unit a week (50 weeks),

How many buyers are in the market?

How many buyers buy our firm’s product?

If the product average price and units purchased per buyer remain constant, how many new customers must the firm attract to meet its revenue growth / market share target?

If the firm has a strong loyalty among its current customers (meaning 100% retention) and the firm raises its average price per unit to $14, how many new customers must the firm attract to meet its revenue growth / market share target?

Answer 1

Revenue the firm is extracting from the market = 14% * $ 60 billion = $ 8.4 billion

Target market share = $8.4*1.05/$60 = 14.7%

Average consumer buys units worth = $12 * 50 = $600 every year. Hence, no. of consumers in the market = $60,000,000,000/$600 = 100,000,000.

Number of buyers in the market of the firm's product = 14%*100,000,000 = 14,000,000

Number of new customers to be added to the firm in the next one year= (14.7%-14%)*60,000,000,000/600 = 700,000