Demand is the quantity of any product or commodity that any customer buys at a given price during a specific time.
The ability to purchase some fixed quantity at alternative prices during the given time.
1. Law of Demand
This law states that the price and demand are inversely proportional, when the price increases the demand for that commodity decreases, and vice-versa; so, if you have an excess of stock it can lead to you having a lot of it left-over because the demand will decrease due to high availability.
Although, if the product is too less, it might die out very quickly and since the demand will be high customers will move to competitors for the same or similar product.
However, this is a very simplistic view of demand and does not include any of the external factors that can impact demand. Demand for consumer goods can change even when prices are stable.
This is due to external factors like changing trends, global issues, the local and state economy, and even damaged brand identity.
Although there can be other reasoning for the demand rise and fall which are not just related to these two variables.
2. Change in Demand vs Quantity Demanded
It is important not to confuse a change in demand with the quantity demanded and depending on the price being charged for the product in the market, the total amount of products demanded at any given time is referred to as the quantity demanded whereas the change in demand, on the other hand, focuses on all determinants of demand other than price changes.
3. Factors that Affect the Demand
3.1. Price of Product
Usually, the price of a product is a very sensitive factor to determine its demand. If the price of a product is low it creates higher demand, as the price increases the demand decreases because customers feel that they can not afford the product.
It can be easily understood that when the prices do not fall in their customer reachable bracket they are not satisfied with that product.
3.2. Tastes and Preferences
The taste and preferences of customers keep changing all the time, which leads to an increase in demand for one product and a decrease in another.
The preferences can change for various reasons like age, marital status, economic status, and geography.
Since there is a significant difference in shopping for beaches or mountains or; children and adults the effect multiplies and creates a change in the demand.
3.3. Consumer Expectations
Expectations of the customer are another variable that is perpetually changing and can not be predicted.
Habits develop a person’s expectations, so we can probably focus on learning and understanding the habit.
For example, if somebody is using a certain brand of mouthwash, and you want to increase the demand for your competitive product you will have to find a way to decrease the other product’s demand.
So, when your product is coming out not only should it have everything that the other product has but also an additional allure which makes the customers shift from their primary choice.
3.4. Consumer Income
The amount of money a customer will spend on a commodity usually falls in a small bracket and drastic changes in the same are unlikely to happen.
The people who fall in the higher income segments always tend to buy more and buy better products.
Although, these people do not fall at the bottom of the pyramid and govern the major part of creating or abolishing a demand for any product in the market.
It is the middle-income groups and the low-income segments which make that difference.
3.5. Availability of Substitutes
You can perpetually work on getting more features in your product although it will not stop the competition from rising and hence providing the scope of substitutes.
As the players will increase your share of the market that you can capture will decrease as the demand will decrease or spread out. Important points to consider include the following –
- Is your price point the selling criterion, if yes then always make sure that the competition product’s price should not slash very low as it will directly affect your demand
- Is your product a stand-alone breadwinner or is it your product line, if there is a range of products you have to manage the correct distribution and make sure that they are reachable and accessible to all consumers to maintain a steady demand for the same
- Are the substitutes an alternative or just similar products – The substitutes which fall in the category of exact alternatives will be a bigger challenge because as soon as there is a small variation in the primary product the alternative will quickly generate high demand. On the contrary for similar products, the habit-building process will take time but if the similarity is high and the prices also close then the time might reduce.
4. How to Keep Getting a Steady Demand
Consumer demands should be anticipated beforehand and this should be done by using trends of sales of their retail stores. The product line and the advertising should shift in a manner that can accommodate the change in prices, tastes, and income of the consumers.
Decisions of production and distribution should be made in a manner that the target customer is completely satisfied across all spheres like accessibility, quality, and price.
This should be done on a loop process so you can always be prepared for the next launch and create full potential demand for your product.
5. Final Thoughts
When you are launching, introducing, or re-branding any product to increase its demand in the marketplace, you have to keep in mind all the factors that affect the demand and make informed decisions based on those.
Get a complete understanding of your competitors and introduce offers or products which would allure more consumers towards your brand.
Try working in a manner that you can gain high customer loyalty as that will eventually lead you to evergreen demand generation in your sector.