What is market demand?

Market demand is defined as the total amount of purchases of a product or family of products within a specific demographic group. Demographics can be based on factors such as age or gender, or involve the total amount of sales generated in a given geographic location. Assessing market demand is one of the most important ways companies decide what to sell and how to sell the products they produce.

Properly assessing the market demand for a particular product is very important. Failure to accurately design the desirability of a good or service can lead to production levels that exceed the number of units that will actually be sold. As a result, the company is left with a large inventory of unprofitable finished goods. In some cases, not properly predicting market demand is enough to force a company into bankruptcy.

The most common way to assess the suitability of goods and services within a given demographic group is to implement a structured analysis of market demand. Essentially, this process seeks to identify consumers who are attracted to the products enough to buy them. As part of the market analysis, research helps to identify the size of the market. This allows you to determine whether the company needs to cultivate consumer interest in a particular demographic to generate new business or cultivate several different markets at the same time in order to remain profitable.

As market demand can change over time, companies invest resources in constantly checking the current state of consumer wants and needs. This ongoing process often allows companies to remain competitive with other companies also targeting the same markets, as well as keeping the interest of current customers by making improvements to existing products and possibly introducing new products that are also of interest to those same customers. . For example, a company that produces lawn mowers may launch a special line of lawn mower blades if marketing research indicates that consumers would be attracted to the new product in sufficient quantity to make the effort profitable.

A solid market demand strategy can also help companies identify future trends ahead of the competition. For example, some office equipment manufacturers during the 1970s used the results of market research to project that typewriters would lose appeal as desktop computers became easier to use. As a result, these companies were able to devise strategies that allowed them to phase out typewriter production while slowly launching production of compact computers. Because they properly gauged market demand, these companies were able to remain profitable throughout the 1980s and beyond as the desktop computer became a staple both at home and in the office.

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