The 8 States of Demand for a Product

When individuals seek to buy a product to satisfy a need, they create demand. The definition of demand in marketing is the same as that used by economists. Demand is call or desire for a particular product the consumer wants to satisfy their needs. Economists assume that market demand can be aggregated, and represented on a chart using one downward sloping line. Philip Kotler, regarded as one of the most influential researchers in marketing, found that market demand is not so neatly linear. His research proved that market demand for a product actually has different states, and the state in which the market is in, in turn, determines the profitability of the product. Skilled marketers seek to influence the concentration, timing and type of demand. 1. NEGATIVE DEMAND Negative demand arises when the targeted market dislikes the product offered. They actively avoid it, and actively dissuade others from consuming it. During the early 1990s, Nike outsourced the production of their athletic shoes to countries with extremely low workplace safety standards. Employees worked under conditions similar to sweatshops described in Charles Dickens novels about British industrialization. At first, Nike claimed they were not responsible for their suppliers activities. Years of bad press and protests by social welfare groups started to affect shoe sales, causing Nike to start forcing their suppliers to allow independent inspectors audit the conditions of the sweatshops. 2. NO DEMAND During a period of no-demand, a customer is unaware of the product or is disinterested. This type of demand is commonplace for new products that serve a need or want that the customer is unaware can be satisfied. Many call this situation a a solution looking for a problem. To overcome this critical issue, the producer must continue to tweak the product in search of the killer application that satisfied the need. A good example is the 3G cellphone. Despite the widespread popularity of earlier versions of cellphones, manufacturers of the third generation, or 3G phones as they were called, found themselves in a state of no demand; the 3G phone offered much better sound quality and reliability, however when it was released, the market hadnt fully absorbed the 2G version yet. When consumers were faced with the choice between the two, they wouldnt justify paying the extra expense. Sales of 3G took off once manufacturers started adding such features as downloadable ring-tones, a digital camera and other items to personalise the phone. These features helped to create tangible differences between the 2G and 3G phone. Products are technology-driven. Markets are time-driven. Markets need time to understand what possibilities exist with new technology. 3. LATENT DEMAND A market is in a period of latent demand when existing products fail to completely satisfy customer need. This occurs due to a variety of reasons: it is not economically feasible, the technology hasnt been invented yet, the producer misunderstands their customer, or the

customer cannot express their need clearly. Producers actively scan the economy for markets with latent demand. They are extremely attractive because there are willing buyers. The automobile industry is a perfect example of a market with latent demand. For over two generations, environmentally-concerned consumers have experienced what psychologies call a cognitive dissonance. These drivers need to drive a vehicle daily, yet experience a sense of guilt or remorse since they know they contribute to global warming. To overcome this sense of conflict, they want automobile manufacturers to sell a zero-emission vehicle. Such a vehicle could have been built 30 years ago using batteries and electric motors, however, it never would have satisfied the safety and performance needs of environmentally-conscious drivers. Batteries do not produce as much power as quickly or as cheaply as gasoline. Imagine if such a car was built. Automobile manufacturers could raise prices as high as the lifetime cost of fueling the vehicle. 4. DECLINING DEMAND Declining demand occurs when customers are losing interest in the good or service because of changing attitudes, tastes, or cultural trends. Although there are many warning signs a market is experiencing declining demand, even the world's best marketers can miss the early indicators. In 2003, McDonalds announced their first loss in their corporate history. Management didnt understand that consumers were extremely concerned about reducing their caloric intake. Obesity levels in the Western world have skyrocketed over the last two decades. As a consequence, McDonalds loyal customers increasingly chose to eat lower caloric but healthier foods such as salads, and lowcarbohydrate foods, items that were not as profitable as their fried food options. Whats more, many customers stopped visiting altogether because they were fed up with persistent requests to supersize their portion. Supersizing is a profitable practice for a restaurant. It is a selling strategy that entails suggesting to a client to choose a larger portion size for a proportionately smaller increase in cost. The restaurant benefits because they fatten their margin, and the customer benefits because they feel theyre getting more value for their money. Morgan Spurlock's 2004 movie Supersize Me detailed this practice quite poignantly. During times of declining demand, marketers must uncover the roots of the malaise and refocus the marketing mix. McDonalds is trying to do that by offering salads, working to remove trans-fats from their foods, and offering new products for adults that include salad, bottled water and a pedometer. Their famous Happy Meal, which is targeted to children, now includes a fruit and milk option. Finally, they publish nutrition and suggested lifestyle changes for people concerned about their health. 5. IRREGULAR DEMAND Many organizations face irregular demand because their sales are correlated to a particular season, the time of day, or the whims of shoppers. For example department stores continually lose money until the Christmas season, which is where the bulk of the profits are made and the other 11 months of operation is paid for. To smooth out the variation, a marketer must find ways to encourage consumers to buy during low-peak

times. Many movie theatres now offer cheaper tickets on Tuesday nights to encourage people to fill seats on what was the slower night of the week for many years. The Hawaiian tourism board knows that April is the quietest time for visitors to come to their islands. They recently started a new campaign in 2005, Hawaii Arts, to draw visitors during April. Focusing on the rich existing arts scene in Honolulu and surrounding area they advertise in the Smithsonian Magazine and the New Yorker, upscale magazines popular with the East Coast upper income class. This campaign has been quite been successful drawing additional visitors during their slowest month. 6. FULL DEMAND Full demand situations arise when the company is selling as much as they expected the market could bear. In this type of market, marketers need only maintain the current level of demand by modifying the marketing mix accordingly.. 7. OVERFULL DEMAND Overfull demand arises when the market demand exceeds supply. Such a situation is initially good for sellers. Not only is the company selling their entire inventory, the shortage is pushing prices higher, and potentially creates a frenzied atmosphere around the product. When Haagen Daaz first started selling a green-tea ice cream in Japan, it became a must-have product. People lined up for hours outside of ice cream parlours, waiting patiently to eat this much-sought dessert. Overfull demand is an envious situation, and if left unprotected, competition will enter the market. 8. UNWHOLESOME DEMAND Products that are harmful to society, but are still demanded by consumers create a market characterized by unwholesome demand. Marketers wanting to deter users attempt to dissuade consumers by pointing out the negative aspects. Shock advertising, price increases, restricted supply, government regulation of consuming a particular product and awareness programs can dampen consumption. Tobacco, illegal drugs and excessive consumption of alcohol are all targets for this type of marketing.