Market demand is the total amount of purchases of a product or family of products within a specific demographic group. Companies assess market demand to decide what to sell and how to sell their products. Properly assessing market demand is important to avoid overproduction and loss of profit. Companies use structured analysis to identify consumers and market size, and invest resources in constantly checking consumer wants and needs. A strong market demand strategy can help companies identify upcoming trends ahead of the competition.
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 particular geographic location. Assessing market demand is one of the most important ways that companies decide what to sell and how to sell the products they produce.
Properly assessing the market demand for a given product is very important. Failing to accurately project 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 finished goods that do not generate any profit. In some cases, failing to adequately forecast market demand is enough to force a company out of business.
The most common way to assess the suitability of goods and services within a given demographic 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, the research helps to identify the size of the market. This makes it possible 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 as a means of remaining profitable.
Because 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 that are also targeting the same markets, as well as maintain the interest of current customers by making improvements to existing products and possibly introducing new products that are also of interest. for those same clients. For example, a company that produces lawn mowers may introduce a special line of lawn mower blades if the marketing survey indicates that consumers would be attracted to the new product in sufficient quantities to make the effort profitable.
A strong market demand strategy can also help companies identify upcoming trends ahead of the competition. For example, some office equipment manufacturers during the 1970s used market survey results to project that typewriters would lose appeal as desktop computers became easier to use. As a result, these companies were able to create strategies that allowed them to gradually reduce production of typewriters while slowly implementing production of compact computers. Because they properly assessed market demand, those companies were able to remain profitable through the 1980s and beyond, as the desktop computer became a staple in both the home and office.
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