What is Market Demand?
Definition: Market demand denotes the total quantity of goods and services that people are willing and able to purchase at a certain price and time. The demand, in this case, is determined by consumers’ willingness to spend on goods and services. Likewise, demand tends to have a direct impact on the underlying price of goods and services.
Demand measures how much of a product consumers are able and willing to buy. It differs from consumer desire on the fact that a consumer may have the desire to buy an underlying good or service but not in a position to do so because of financial constraints. Economic demand, on the other hand, measures the number of individuals willing and in a position to buy goods and services at prevailing market prices.
Market Demand Factors
Price is one of the main economic factors that influence market demand. The prevailing market demand will always edge higher whenever prices going down. In this case, consumers would be willing and able to spend more on goods and services. Similarly, demand will tend to edge lower whenever the price of goods and services moves up.
The quality of goods and services also influences market demand directly. For example, customers might be willing to spend more on the improvement of the quality of goods and services in the market. Similarly, demand could take a toll on the quality of prevailing goods and services taking a hit.
Carrying Market Demand Research
Market demand research is paramount if a business is to navigate choppy waters of varying economic and business cycles. Such studies allow businesses to understand customer-shopping patterns as well as get a good feel of the kind of products they are willing and able to buy at any given time.
Marketing research, therefore, involves conducting studies to obtain data and general information from a given industry or sector. Different research options are consequently used in the collection of valuable data for ascertaining market demand.
Surveys are one of the methods commonly used to ascertain market demand. Social media networks offer some of the best platforms for carrying market demand surveys, to get an idea of what consumers are saying about a given product or service.
Markets also rely on experiments to ascertain whether consumers would be willing to buy new products. Such experiments involve the offering of new products at a discounted price for a limited time as a way of testing the market. However, the method can be time consuming and expensive.
Observations of the overall market can also provide huge clues about the market demand. In this case, marketers observe trending topics as well as products already in the market to get a feel of how consumers are likely to react to new products in the market.
Market Demand Importance
Economists and business owners rely on market demand to ascertain the appropriate price for goods and services. Careful study of market demand allows businesses to set prices at levels sure to elicit optimum market demand for optimum returns.
Similarly, business owners rely on on-demand to ascertain which products to introduce into the market. For instance, during rainy season market demand would dictate the selling of umbrellas and warm clothing’s.
Market Demand can also inform future businesses on profitable industries and the kind of products to introduce. By conducting in-depth market demand research, business owners can ascertain the right sectors to expand into and the kind of products to introduce.
Summary
Understanding market demand is crucial to the survival of any business. Having a clear understanding of market demand can help a company set the right price for goods and services sure to generate optimum returns. Similarly, market demand helps businesses have a clear idea of the kind of products to introduce into the market, at any given time.