Supply and demand are two essential terms frequently used in the business world. Demand is one of the most important factors in deciding the success of a business. People come up with a business idea when they see demand about a particular thing in the market. For example, toothpaste was introduced to protect the teeth of soldiers fighting in World war One.
A man saw the need to clean teeth and came up with a solution, and now, toothpaste has become an integral part of every household. The same would have happened in the case of bathing soap, moisturizing creams. There is a history of every product that now we use daily. So, let us first learn what demand is?
Demand is the desire of a consumer to buy a product or service and a willingness to pay the price to get it. The demand for a product or service decreases when consumers start to think that they don’t need a particular product anymore. Because of this reason, companies invest millions in advertising their products and services to make their audience believe that they need the product.
Demand for a product plays an important role in deciding the future of a company. A company makes sales when there is a high demand for its products and services. Therefore, it becomes crucial for a person in the business to learn about the demand and what it’s nature?
Why understanding the characteristics of demand is essential for businesses today.
For instance, during the COVID-19 pandemic, companies like Zoom experienced an unprecedented increase in demand. In 2020, Zoom’s daily meeting participants surged from 10 million in December 2019 to over 300 million by April 2020 (Source: Zoom Q1 2021 Financial Results). This sudden spike showcased how external factors can dramatically influence demand, emphasizing the importance of adaptability in business strategies.
As Peter Drucker, a renowned management consultant, once said, “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” This highlights that understanding demand is not just about selling but about aligning your business with customer needs.
In this article, you will learn about the different characteristics of demand.
Table of Contents
1. Dynamic in nature
The first and most important characteristic of demand is its dynamic nature. The dynamic nature of demand that keeps all marketers on their toes. The meaning of dynamic nature means the demand for a product never stays the same in the market. For example, the demand for Moisturizing creams and woolen clothes increases in winters and decreases in summers.
Moreover, the demand of a product also depends on the quality of the product or service. For example, a restaurant stays in demand when it serves good food at reasonable prices. But the demand for food decreases when customers notice a decline in the quality of food.
2. Depends on price
Demand is also sensitive to the price of products and services. Because of this reason, companies pay so much attention while deciding the price of the product. The price value of your product should not exceed the price of the products of your counterparts.
However, some companies decide the price of their products based on reverse psychology. They believe that people will buy their products if they sell their products at higher prices. Because it is fundamental human nature that they think that they get the right quality product by paying more.
Because of the dependability of demand on price, companies make the use of sales concepts to boost their sales. Because a large segment of the population buy products when they are at a discount. They believe that by purchasing products on discount, they are saving their money.
3. Depends on supply | Characteristics of Demand
Supply and demand for a product or service are inversely proportional to each other. Because the demand for a product increases when there is low supply in the market. People get ready to pay any price to get their hands on the product.
Many sellers took advantage of this to create a fake situation in the market where buyers are made to believe the decreasing supply of the product. By doing this, they increase the sales of the product.
4. Demand controls the future of business
The future of a company largely depends on the demand for the product in the market. There is pure science behind this. How can you sell something when people don’t want it? Because of the fear of losing market demand, companies spend large lumps of money on advertising and marketing. They make the use of different techniques to attract more customers.
There are several examples of companies in history that emerged because of the sudden demand for a product and went out of business when the demand for the product ceased.
5. Demand is sensitive to the competition
Competition affects demand big time. The demand for your product will be at a peak when you have a monopoly in the market. You can sell your product at the desired price, and people would still want it in case of a monopoly.
But the competition in the market decreases the value of the product. Your customers will get divided even when there is still demand your product in the market.
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