Market Potential Estimation

Submitted to Prof Suresh A.S

As a part of CIA I of Sales Management and
Negotiation Skills (MBA 321)

Submitted by: Group 1

Divjyot Singh

1627607

Karthik Krishnan S

1627615

Aarohi Nagarkoti

1627632

Shristi Mishra

1627657

Abhishek Agrawal

1627501

Daris Jose

1627505

Praneta Bhatt

1627550

Trimester III M1

INTRODUCTION:
The objective of this assignment is to estimate the market potential for a given product.
Market Potential: It is the entire size of the market for a product at a specific time. It represents
the upper limits of the market for a product.

MP = N x P x Q

Where, MP = market potential

N

= number of possible buyers

= average selling price

= average annual consumption

PRODUCT DESCRIPTION:
The product for which the market potential is to be found out is
Home Solar Panel with batteries. The system provided is a 5kW
system that is capable of running a number of appliances at a
time including a fridge, multiple televisions, multiple air
conditioners and a lot more for 24 hours a day, 7 days a week.
The two main components of the system are the solar panels
and the batteries.

The cost of the components is as given below

Solar Panel Rs3,00,000/Batteries

-- Rs,1,50,000/-

A 5kW solar panel requires an area of 400sq feet to be installed

and would require atleast 5 hours of sunlight a day for the
maximum power. This system could produce an estimated 750
kWh to 850 kWh per month on full power.

The 20 sets of individual panels producing 255W each are stacked besides each
other to form the entire unit. The life of a panel is considered to be 20-22 years
although some companies give a warranty of 25 years.

COST COMPARISON:
As mentioned above in the product description the Home solar system is suitable for those
households which consume around 800 units of electricity per month.

Cost incurred by using conventional system:

Mentioned below is current electricity tariff of Bengaluru.

Fixed Charges:
For 1 Kw

Rs 30

For every subsequent Kw

Rs 40

Variable Charges:
0-30 Units

Rs 3.00

31-100 Units

Rs 4.40

101-200 Units

Rs 5.90

Above 200 Units

Rs 6.90

Monthly Cost for consumption of 800 units while using a 5Kw system Rs 5583 (Including 5%
tax)

Inverter is a must in a city like Bengaluru, so we have to add the cost of that.
Average Annual cost of 1 KVA inverter

Rs 10000

Average annual battery cost for 1 KVA inverter

Rs 9500

Monthly cost for inverter and battery

Rs 1625

Total monthly cost of conventional electricity

Rs 7208

Cost incurred by using Home solar system:

Cost of Panel

Rs 3, 00,000 (life of 21 years)

Annual cost of panel

Rs 14,285

Cost of battery

Rs 1, 50,000 (life of 3 years)

Annual cost of battery

Rs 50,000

Total annual cost of Home solar system

Total monthly cost of Home solar system -

Rs 64,285
Rs 5357

From the above calculations we can see that the cost of using a Home solar system is around
25% less than the cost of conventional system.

Payback period and ROI:

Cost of home solar system for 8.5 years Rs 7, 25,000
Cost saved by not paying electricity bills and not using an inverter for 8.5 years - Rs 7, 35,216
Payback period is between the 8th and 9th year.
Anything saved after 8.5 years is the return on investment.
Annual cost from 9th year

Rs 50000

Annual savings

Rs 86,496

So, overall annual savings

Rs 36,496

Total Savings for 21 years

Rs 4, 37,952

Therefore Rs 4, 37,952 is the return on investment.

SEGMENTATION:
The Home solar system is targeted at the segment of the population that lives in a household and
consumes around 800 units of electricity per month.

Total number of household where the main source of lighting is electricity 51, 25,655

To calculate the number of Potential buyers who consume around 800 units of electricity per
months, we will use a survey method.

SURVEY:
After calculating the specific costs of the two options, electricity from the board and
the solar panel kit, we went out the survey to find out how many people consume
more than 800 units of electricity. The main agenda of the survey was to find out
what percentage of independently owned households would come in our potential
market based on the amount of electricity they consume.
The main questions asked were:

Do you reside in an independent house?

Are you aware of the solar option for household electricity?
Do you consume over 800 units of electricity in a month?
If your consumption is over 800 units would you want to switch to the solar
panels which would provide you with huge cost savings and a payback period
of less than 9 years?

The results were as follows:

Question

No. of

No. of No

Do you reside in an independent house? (Total respondents=154)

Yes
83

71

Are you aware of the solar option for household electricity? (Total

51

32

19

62

respondents=83)
Do you consume over 800 units of electricity in a month? (Total

respondents=83)
If your consumption is over 800 units would you want to switch to the

14

solar panels which would provide you with huge cost savings and a
payback period of less than 9 years?
(Total respondents=19)

ANALYSIS:
Based on the survey results we found out that 19 out of 83 (i.e. 22.89%) is the number of
possible buyers. By generalising this to the actual number of independent households in
Bengaluru, The number of potential buyers is,
22.89% of 51, 25,655 = 11, 73,262 (N)

Average selling price (for 21 years) (P) = Rs 13, 50,000

Average annual consumption (Q) = 1/21

Market Potential = N*P*Q = 1173262*1350000*(1/21) = Rs 7542, 39, 85,714

CONCLUSION:
From the above approach we have found out that the market potential for home solar system in
Bengaluru is Rs 7542, 39, 85,714/- only.

REFERENCES:
1. Bengaluru census data
2. https://www.bijlibachao.com/electricity-bill/electricity-duty-and-tax-onelectricity-bills-in-india.html
3. http://www.gogreensolar.com/products/5kw-diy-solar-panel-kit-microinverter
4. http://bescom.org/wp-content/uploads/2016/05/Electricity-Tariff-for-FY-17pdf.pdf