Normally, the focus is to go out there and find out what there is demand for, then make or find products and services that meet existing demand. That means facing all the competition who have similar products that meet roughly the same demand. This philosophy of marketing generates a waves of status quo. The development of products is stuck in cycles of unchanging consumer demand. Sometimes people don’t know what they want until they see it. As Henry Ford once said,
“If I had asked them what they wanted, they would have said, ‘a faster horse.’
What is demand generation?
A consumer need is not always the same as consumer demand. Sometimes a clever observer can see a need that no one has recognized because there was no product around to embody the need. If a new product is invented and produced, you have to generate demand and reduce the fear of new things that impedes many marketing efforts. It is very important initially to assess demand before a product is released to the market place.
Assessing, predicting, and coping with demand
There are six basic approaches to predicting demand which influence the way the product is actually designed and made.
- An evolutionary approach to forecasting demand. The principle behind this approach is that the demand for a new product is only an outgrowth and evolution of an existing product. The market for the existing product should be taken into consideration while accessing any demand for the new product. And departures between the new and old product should be emphasized.
- The substitute approach. The new product is designed to replace or substitute for an old product.
- The growth curve approach. Estimates of the growth of new product demand are made on the basis of the way demand for the old product developed. Look for patterns in the way the demand for the old product grew over time.
- The opinion poll approach. Marketing surveys have been used to for generations to assess the viability of new products and ways in which design can be changed to make products more marketable. For example, a recent survey of a northern Canadian community tested the viability of a new life skills school. How likely would people attend and what would it best look like.
- Experience marketing approach. Samples of the new product are distributed in a test market to forecast demand. This is done through existing marketing channels through which real sales are likely to be achieved. The viability of the new product is assessed by polling those who received the product.
- The vicarious approach. Demand for a new product is assessed indirectly through the specialized dealers who can judge the needs, tastes, and preferences of their customers.
Generating demand from scratch is a complex process with several dimensions
- The strength of the need and how obvious it is. Some needs are already more or less met by older products. Some needs are really not high demand needs–they are more like wants than needs.
- How different the new product is from what people already use. If a new product is too much like an older product, demand may be divided and not too quickly developed. If the new product is radically different from anything seen before, demand may also be difficult to generate. There is a Goldilocks region where the product is just different enough but not too different.
- Word of mouth and a history of success. A lot depends on the word of mouth reviews of the product during the initial period of use. Negative word of mouth can cool demand quickly.
The life-cycle of demand
New products have demand life cycles whose length varies with factors like depth of competition, the rate of new product development in a given market, and product novelty. Product demand may take courses based on these principles.
- Initial demand growth. The birth of a new market will depend on consumer inertia. The development of the market for the first automobiles was comparatively fast. The demand for home computers took considerable time because the need and utility of the early computers was not obvious.
- Development stage. The product starts as an idea that gradually gets fleshed out and turned into a material product.
- Product launch. After the introduction of a new product, companies tend to spend a maximum on marketing.
- Growth Stage. The product is established in the marketplace and sales accelerate while there are few competitors. Companies focus on reducing the costs of production.
- Maturity Stage. Sales growth reaches saturation and may slow or even flatten. Competition has increased and is cutting into prices. Many companies begin a new course of product development and research at this stage.
- Decline Stage. As new competitive products enter the marketplace, demand declines and sales begin to drop. Increased marketing loose sits effectiveness unless new markets are discovered.
Once the basic demand for a new product is established, demand can be manipulated in several ways as well.
- You can reduce availability. Marketers conduct “exclusive sales,” limit production while marketing product, claiming that reduced availability is due to high demand.
- Get attention by leaking information before launch.
- Let users market the product by publicizing user feedback.
- Limit the market to make the product exclusive.
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