Suppose a developer is interested in building a new townhome community. Through

Question

Suppose a developer is interested in building a new townhome community. Through her market research, the developer has determined that the target market makes up 10% (core market share) of the households that currently reside in the metropolitan area. If an analysis of data from the MLS indicates that there should be approximately 500 residential sales in this area over the next year, what is the projected number of units the developer could expect to sell in year 1 if she is able to capture 30% of the market potential?

Explanation / Answer

This question involves understanding the mathematical problem.

Approx 500 residential sales would be there.

However only 10% of this is the target market of developer.

So his taregt market comprises of 10% * 500 sales = 50 sales

But his capture rate is 30%. This implies, out of every 100 customers, he is able to convert 30 customers to being buyers.

So for 50 target market, number of units that could be expected to be sold are = 50 * 30% = 15

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