The economy or free market is a mechanism that is self-regulating and keeps consumers purchasing products in order for it to remain stable. Consumers are complex creatures and their needs and wants can either make or break a product and a market. How do market demands relate to consumer needs and wants? And how can this affect the successful marketing of a product?
The Key Differentiations
Whilst they may sound similar, demands, needs and wants are three different things that businesses need to be aware of. A need is something that satisfies a basic requirement, in Maslow’s hierarchy of need, a need is classified as something such as shelter and safety. This need doesn’t take a particular form; rather it is something that gives someone a particular feeling.
If a person’s needs aren’t fulfilled, they won’t be able to focus on their wants, which is the second stage of Maslow’s hierarchy. A want is a request for a particular item; it can be very broad or very specific depending on what it the consumer wants. In terms of products, it can be the consumer wants a microwave or wants an iPhone. Finally, a demand is a very specific product that customers are willing to pay for and have the capital to do so.
Supply and Demand
There is a very close relationship between supply and demand in economics. It is the relationship of the cost of the goods, the price of the goods, the demand for the goods and the available supply. In a perfect world, everything within this graph would be in equilibrium, but the reality is that demands, supply and customers wants are very fluid and dynamic.
What was in fashion three weeks ago, won’t be now, so businesses have to keep on top of these changing trends.
Market Demand and The Relation To Needs and Wants
In this day and age, we can have almost any product delivered to our door, often within 24 hours of placing the order. Due to this increased accessibility of products, the demand for some items has increased due to the ability to get them from multiple different retailers and outlets. However, the supply is larger than the demand, so the price is vastly reduced. The more that are in supply, the lower the price will be so that businesses have the ability to sell more and increase their profit margins.
However, there are other items where the supply is low, yet the demand is high. This results in elevated prices that also work to drive up demand. Limited or special edition items that carry a brand name use these techniques to increase demand, but keep the supply limited so that they can command the higher rate of money.
Does The Increase In Needs and Wants Help Consumers?
The consumer market now looks very different to how it looked 20 years ago. Since globalisation and the fast-paced environment that we now live in, our needs and wants change on a daily basis. The market now has to keep up and the way businesses design, manufacture and ship goods has also changed. Fashion houses such as H&M no longer have multiple warehouses across different countries as there is no need to store items. Once they have designed a new item, it can be seen in the stores in the same week, therefore no satellite storage options are needed.
The shifting in consumer demand results in businesses needing to be able to react at the drop of hat. H&M aren’t the only organisation operating like this, through this changing climate; it has become a consumer market who dictates the price. The consumer needs and wants are in control of market demand and if they aren’t happy with a price of the product, they will simply go and source it or a similar item elsewhere.
How Do Needs and Wants Impact Businesses?
Consumers are in control of markets when it comes to commodities such as electronics and fashion, but how do businesses fare? Well, if a business puts out a new product, which has similarities to one that is already on the market but more expensive, how do they convince people that they need it?
Companies like Apple and Samsung are amazing at this. In reality, you don’t need to upgrade your phone every year, but in the face of consumers dictating how the market runs, they have made sure that people still go out and purchase the new phone as soon as it is released. This is done through clever marketing strategy; the generated need ensures sales and they will get the price that they command from it.
Final Thoughts
Market demands, needs and wants are all intrinsically related and you can’t have one without the other, they really are mutually exclusive in an economics context. In order for consumers to have wants, their basic needs must be fulfilled first. This is something that businesses often can’t do as they don’t provide shelter and safety, but once consumers have attained this, they begin to develop wants. Market demand is dependant not only on customers, but marketing.
If there is a high market demand for a product, the chances are the business has done an exceptional job in manufacturing a need for the product, such as the latest iPhone model. The more limited the supply is of a product and the more consumers are aware that there is a finite supply. The higher the chances are of the consumer not only willing to spend money on it, but they will also part with a lot more cash than they anticipated in order to have something that someone else can’t have or can’t afford. In a perfect world, the market would operate in equilibrium, in that supply met demand and consumers were always give a fair price, but this isn’t the reality however consumers control more pricing now than they did 20 years ago.
