Calculating Market Demand: Do your customers really want your products?
It is well known that for any entrepreneur putting a new product in the market is always a challenge, since there are many factors that might affect our business plan, including the demand. If you are planning to launch a new product, you want to make sure you know your niche and the probability to have enough supply for the demand to maybe avoid a great loss. In this article, you will find many reasons why calculating market demand will influence your plan appropriately if you consider certain details.
Knowing the importance to determine the success or failure of our new products in the market, it is essential to understand the market demand would help us establish certain aspects of our business such as pricing strategies, marketing initiatives, purchasing among others. Calculating the market demand would let us know how many people would buy our products, if they are willing to pay for it, for this, it is important to keep in mind not only our available products but also the ones from our competitors.
Market demand fluctuates due to several factors, affecting the pricing. More people buying your products means they are willing to pay for it and this would increase its price, a new season or even a natural disaster would decrease the demand as well as the price. Market demand obeys the principle of supply and demand law. According to The Library of Economics and Liberty “The law of supply states that the quantity of a good supplied (i.e., the amount owners or producers offer for sale) rises as the market price rises, and falls as the price falls. Conversely, the law of demand (see demand) says that the quantity of a good demanded falls as the price rises, and vice versa”.
When doing market research it is important to consider as many individuals as possible, although it would be easier to focus on those who would love your product, there will be individuals who would be more likely to pay for a specific product but they wouldn’t define your target. For example, some individuals are more interested in vegan beauty products but that would not determine whether our product is attractive or not to a universe of potential customers. Market demand is based on more than individual demand, the more data you collect more reliable the information.
A market demand curve is based on product pricing, the “x” axis represents the number of times the product has been purchased at that price and the “y” axis represents the price. The curve represents how people buy less the product because its price is increased. According to myaccountingcourse.com The market demand curve is a graph that shows the quantity of goods that consumers are willing and able to purchase at certain prices.
Whether you want to calculate your market demand at a local or global level, it involves seeking information, data and studies about your sector. You might need different methods to collect the information, you can observe the market physically and even use newspapers, magazines, ecommerce stores and social media to determine what is trending and what your customers would buy in a given period of time. You could also try some experiments like selling a product at a discount price and see how your customers react, sending surveys by email or on social media is a great idea for products or services to share with customers and for them to forward it to their contacts, asking what they think of certain aspects of your products, some of this surveys would be helpful at a local scale.
When it comes to a local business willing to grow the target market, calculating the market demand globally through the previously mentioned methods represents an important step to understand customers, competitors and of course the demand. This would help them expand and grow on a global scale but are there easier ways to reach a wider audience? It is possible to sell our product out of our hometown? This is when technology plays its part in our business plan.
What happens when we talk about e-commerce?
E-commerce as its name says, is all about electronic or internet commerce, our business being operated online and using internet for our products or services transactions. There are several platforms nowadays for this type of business and from an online store to a website to sell your services, platforms like Shopify, Wix, Ebay and Weebly have become the best resource for entrepreneurs’ online business aspirations.
Types of E-commerce models
We will find several types of e-commerce business models depending on the business – consumer interaction. According to shopify.com we have:
Business to Consumer (B2C): when the product is sold directly to the consumer.
Business to Business (B2B): in this case the buyers are other business entities.
Consumer to Consumer (C2C): when consumers post a product online for other consumers to buy it.
Consumer to Business (C2B): here a service is offered to a business by a consumer.
Some examples of Ecommerce are Retail, Wholesale, Dropshipping, Crowdfunding, Subscription, Physical products, Digital products and Services.
The first advantage of an e-commerce model is probably the fact of being built online, where anyone can find you, no matter where they are, an international business is definitely catching if you want to start your own plan. Another advantage is the low financial cost, think about it, you would need a website instead of a physical store location and everything it requires from design to equipment and staff. The best-sellers are easier to showcase and of course, it would be easier to influence your customers to buy the newest products or the ones we consider essential in our inventory. These aspects could make a huge difference when we start a business plan or for those who want to take their own business from a physical location to the online business platform.
No matter the type of business you want to start, you probably want it to be based on a product with a stable demand, we know market demand fluctuates because some products are seasonal but there are products or services with a more stable demand along the year. While important information comes directly from your customers, nowadays, there are several ways to obtain valuable information such as social media and search engines.
How would social media and search engines help?
This is probably one of the easiest and fastest ways to connect with your customers and also get to know them a bit better. Nowadays we have several applications such as Twitter, Pinterest, Facebook or Instagram to share and search for information, products and services we love.
Use social media to enter keywords and find several posts related to that keyword, posts that would allow you to find information about people’s thoughts, expectations and feelings about certain trends, products or services. Searching for case studies, industry reports and products sales information on the traditional Google search would be a good start, the results would help us to determine the demand on specific products during a specific period of time, it is also important to keep in mind the pricing and competitors.
Use search engines optimization tools such as:
According to Google’s SEO Starter Guide, SEO is the process of making your site better for search engines and also the job title of a person who does this for a living.
Keyword Surfer, a free Google Chrome add-on where you get information form search engine result pages, it shows search volume, key suggestions and estimated organic traffic for each ranked page.
You could also type keywords to see frequently users search related to those topics on Google Trends, this would be a helpful tool for local information.
A tool like Google Keyword Planner would help you search for keywords and the results would be based on search frequency on a monthly term. You would need a Google Ads account for this. If your idea is to target a different country, it is also possible with this tool.
In resume, we all have had that business plan and new product idea, some of us want to run a physical business and others will start the adventure of an online business. It is important not only to learn about the foundation and what would help us start a successful business but also to learn about our customers and what would give them satisfaction from our products. Although the traditional observation is efficient, nowadays we count social media and search engines to help us through this process and it’s all based on our customers’ preferences. Launching our next product based on a good market demand calculation would help us grow our business on a local or global scale and will definitely prevent losses.
Now that you know the importance of market demand research, what would you change in your business plan?