Definition of demand: services and concept

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In an increasingly competitive environment, demand volume, sizing and forecasting are important factors contributing to the success of almost any company that provides services and sells goods. For marketing, demand is the most important indicator of the state of the market. It is an object of permanent study, formation, observation. Let's talk about the essence of this market phenomenon, what is the current definition of demand, how it is formed and what factors influence it.

The concept of demand

In its most general form, the definition of demand is reduced to the amount of goods or services that the buyer is ready to consume in a certain period of time at a certain price. Consumer demand is the most important characteristic of the market, it is always based on the needs of people. If there are no needs, then there will be neither sales nor supply, which means that there will be no market relations. Purchasing power is always expressed in terms of money. Determination of demand is the function of the buyer, only he decides whether he is ready to purchasea good or service at a given price. Due to the wide variety of markets and human needs, there are many factors that affect demand, its volume and formation processes, and many types of this phenomenon are distinguished.

Demand volume

Manufacturers of goods or services, marketers need to understand how many units of their products they can potentially sell. Therefore, determining the volume of demand is extremely important in production planning and sales management. Demand is the quantity of a particular product at a particular price that a buyer is actually willing to buy in a given period of time. Sales volume is influenced by numerous market and consumer factors.

Types of demand

There are several criteria by which you can classify the demand for goods or services. First of all, the definition of demand is associated with the intentions of the buyer. In this case, a stable, aka rigid, conservative, firmly formulated demand is singled out. The buyer thinks about the purchase in advance, making strict requirements for the brand, quality, price of the product and not allowing it to be replaced by a homogeneous product. Most often, such demand is observed for familiar, everyday products (bread, milk), which are bought at certain intervals in a specific quantity. There is also alternative or unsustainable, compromise or soft demand. It is formed under the influence of various factors directly at the point of sale. Buyer acceptpurchase decision upon reviewing the offer. So, for example, people buy shoes, clothes, cosmetics. And the third type of demand is impulsive. When a person does not plan to make a purchase at all, but under the influence of any factors decides to purchase a product. Most often, this demand is observed when buying small goods: chewing gum, chocolate.

According to the number of sales objects, macro-demand and micro-demand are distinguished. The first applies to the entire population, and the second only to a narrow target audience.

According to the degree of satisfaction, there are such types of demand as real, realized and unrealized. The first is related to the real needs of buyers in the product. The second is the actual sales of goods and services. The third is the number of units of goods that the consumer did not receive due to various reasons: a mismatch between the assortment and the buyer's claims, the lack of goods.

According to the development trend, growing, stable and fading demand is distinguished. It can also be daily, periodic and episodic. These species stand out depending on the purchase cycle.

According to the forms of formation of demand, such types of demand are distinguished as emerging, i.e., created as a result of studying demand and promoting goods, potential, i.e., the maximum possible ability to buy a product at a given price, total - this, according to Essentially, market capacity. There are other bases for classifying demand.

Factors affecting demand

The volume of purchases is not infinite and depends on many factors. Experts distinguish the following groups of them: economic,social, demographic, political and climatic.

In economics and marketing, demand factors are traditionally divided into price and non-price factors. Let's dwell on this issue in a little more detail.

Price demand factors, which are the easiest to define, are related to the cost of a service or product and the buyer's response to the price. The income of consumers is finite, and it is the price of goods that is a factor in the regulation of demand. The buyer reacts to changes in the purchase price, often lowering it leads to an increase in demand. This group includes the actual price of the product and related products, as well as the expectations of buyers, psychological reactions to the cost. Non-price factors influencing demand include consumer preferences, fashion, purchasing power, cost of competitors' products, product substitution.

The law of supply and demand

This law establishes the relationship between three important economic concepts: price, demand and supply. In its simplest form, it can be formulated as follows: if there is demand, then there will be supply. Usually, the higher the demand, the greater the supply and, accordingly, the higher the price. To balance the system, a balance must be established between ideal and real demand, adequate price and sufficient supply. Determining supply and demand, finding their balance is an important task of management. The manufacturer must carefully analyze fluctuations in demand and consumer response to price and supply. Per ratioBuying opportunities and supply are affected by two more laws:

1. The law of demand. It states that the quantity demanded is inversely related to the price. The higher the cost of a service or product, the less demand for them.

2. The law of supply. It says that an increase in price directly entails an increase in supply. Since the rising price allows the manufacturer to make more profit, it attracts more and more entrepreneurs to this market segment.

However, the growing supply always entails a decrease in demand, since the consumer can only purchase a certain amount of goods and services. Thus, excess supply leads to a decrease in price, and then the supply and demand mechanism starts in a new circle. The price in this case is a means of regulating the balance between these categories.

Elasticity of demand

Depending on the price that affects the consumer activity of buyers, there are two types of demand: elastic and inelastic.

Elastic demand is called, which changes with fluctuations in the price of goods and services and with fluctuations in incomes of the population. The consumer is sensitive to the cost of certain goods and is ready to refuse to buy them if the price is high or his income is falling. So, we see that during the economic downturn, the consumption of luxury goods, cars, etc. decreases.

Inelastic, respectively, is the demand, which remains unchanged when the income of the population and the price of goods change. This applies beforejust for essentials. People will buy food even if prices rise and their ability to pay falls. However, it is unlikely that people will consume more bread, even if the price drops significantly. The elasticity of demand, the definition of which is the task of marketers, is a tool for regulating sales. So, with high elasticity, the seller can increase turnover by lowering prices. Elasticity is strongly influenced by supply: the more sellers offer similar goods and services, the more elastic demand becomes.

Demand study

To understand the potential magnitude of demand, the manufacturer needs to make some research efforts. Usually, a distinction is made between the study of current demand, which influences the formulation of short-term goals of the seller and the manufacturer, and its forecasting, which is associated with strategic decisions. Determining demand is important for building plans. This phenomenon is studied by various methods: statistical, marketing, economic. It is important for the manufacturer to take into account the psychology of the consumer in order to understand his needs and manage to satisfy them.

Demand Generation

Determining the demand for a product or service allows you to develop, if necessary, a program to regulate it. The most important sales management tool is the price: its decrease and increase can reduce and increase the number of purchases. But price regulation is not always possible and is often not economically feasible.profitable. Therefore, marketing tools come to the aid of the manufacturer, these include: advertising, creating and maintaining an image, various methods of facilitating trade and after-sales customer support.

Demand Forecasting

It is important for every manufacturer to see the prospects for its development and existence in the market. Demand, the definition of which is an important part of planning and management, is the main goal of any seller and manufacturer. Therefore, they need to systematically study the volume of possible sales, consumer behavior and market changes in order to adjust demand forecasts in time. To develop forecasts, various methods are used, which are divided into heuristic, economic-statistical and special.