Demand is the most important market mechanism that ensures the movement of goods and the functioning of the economy. There are many factors that affect it, and there are several varieties. We’ll tell you what pent-up demand is, what is its specificity and how marketers work with it.
Demand concept
The market seeks to meet the needs of people and profit from it. The expression of this desire is demand. It is defined as the ability of people to purchase a product or service.
Demand is a market expression of need; it shows the conformity of a commodity to its value. Let's analyze in more detail.
The basic law of the market is built on the triad of demand - supply - price. The first term means the general level of sales of a product at a specific cost in a certain period of time. It signals whether the price is suitable for the consumer, whether there is enough product on the market or if there is an oversupply of it. Demand is the main concern of the marketer. He tries to shape and increase it, making it stable. Fluctuations in demand are a true indicator of market conditions. Therefore, it must be constantly studied, monitored and stimulated.
Types of demand
In marketing, it is customary to consider various classifications of demand.
By the frequency of occurrence, these types are distinguished:
- Daily. One that knows no recessions and is characterized by constancy. For example, food - bread, milk and others.
- Periodic. One that appears at some intervals. For example, seasonal clothes, ski equipment, New Year's toys.
- Episodic. Occurs at undefined intervals. For example, jewelry, cars, black caviar.
According to the degree of satisfaction, the following types of demand are distinguished:
- Real. This is the level of sales for a certain period of time. Measure it in the amount of money that can be spent on the purchase of any product at the current price.
- Satisfied. This is realized demand, i.e., it is the volume of goods purchased for a certain period. It is always less than real, as some buyers were unable to purchase the goods for various reasons.
- Unsatisfied. This is a demand that has not been satisfied due to the high price, inappropriate quality of the product or its lack of access. In turn, this type may be obvious when the consumer has the financial ability to purchase the goods, but he did not buy it. There is also hidden unmet demand. This is when the buyer purchases a substitute product, but it does not fully satisfy his needs. There is also unmet pent-up demand. In this case, the buyer needs the goods, but he is forced to postpone the purchase, most often due to lack of financial resources, and the need remains urgent.
Depending on the price, demand is elastic and inelastic. In the first case, it directly depends on price changes. For example, when cars go up in price, the population abruptly starts to buy them less, that is, demand falls. And in the second case, the dynamics of value does not affect the volume of purchases. This usually applies to essential goods.
Factors Affecting Need
Demand, as a market mechanism, is subject to various influences. The most important factor in influencing it is the price of goods. But this is the tip of the iceberg. Specialists divide all indicators into the following groups:
- Economic. These include the general state of the economy, the level of production and incomes of the population, the state of prices for different groups of goods, the purchasing power of the population, and market saturation.
- Demographic. This includes the population, its structure, the ratio between urban and rural residents, migration indicators, etc.
- Social. The development and condition of society and its culture affect the demand for various goods.
- Political. The situation in this area can intensify or, conversely, lower the demand for certain products. Thus, in a state of political instability, the need for durable goods is increasing.
- Natural and climatic. In different seasons, demand for certain groups of products increases or decreases.
Concept of deferred demand
Consumers always strive to satisfy their needs, but do not always have the opportunity to do so. Sometimes people have to postpone the purchase of a product or service until the circumstances change.
Thus, price increases always cause a change in demand. As a rule, it decreases. A stagnation period may even occur whose duration is not predictable.
Deferred demand appears - this is a situation when the consumer has a need, but there are not enough resources to satisfy it. It can be not only financial, but also temporary or informational reasons. Sometimes a consumer has every opportunity to satisfy a need, but puts it off until a more suitable moment. For example, a person has saved up for a car, but will not run at the same time to make a purchase, but will wait for promotions and discounts from the seller.
Marketing application
In cases where the volume of unsatisfied demand is growing, it is necessary to plan special events that will push a person to purchase. A marketer should constantly study demand in order to take the necessary measures in time to maintain or stimulate it.
If people postpone purchases due to lack of information, then it is necessary to plan a campaign to educate the target audience about the properties and features of the product. If the acquisition is delayed in anticipation of a profitable offer, it may be necessary to carry out some action that will make further waiting unprofitable. If people are massively delaying purchases because of the high price, then it’s worthwhile to conduct a campaign to justify the high cost of goods or start to reduce it.
Examples
In the history of consumer society, there are many examples of deferred demand.
First of all, this phenomenon is observed with a sharp increase in prices. So, right after that, consumers “hide” and stop buying expensive goods and luxury goods.
At the beginning of the season, many buyers also postpone the purchase of things for this time of the year, hoping that at the end of the period they will buy them at a discount.
Marketing has accumulated rich practice in overcoming pent-up demand. These are discounts, promotions, communication campaigns, and promotional events.