Terms

Demand

Demand is an economic principle that refers to a consumer's desire to purchase goods and services, coupled with their willingness to pay a specific price for them. Generally, this relationship is inverse; as the price of a product falls, the quantity demanded by consumers rises, and as the price increases, the quantity demanded falls. This concept is fundamental to how businesses set prices and how markets function, as it helps determine the value of goods and the volume that changes hands.

Factors Influencing Demand

While a product's price is a primary driver, several other factors can shift the entire demand curve. These elements cause consumers to buy more or less of a good even when its price remains unchanged, reflecting shifts in circumstances and market conditions.

  • Income: Changes in consumers' disposable income directly affect their purchasing power.
  • Preferences: Shifts in consumer tastes, trends, or the perceived quality of a product.
  • Substitutes: The availability and pricing of alternative products that satisfy the same need.
  • Complements: The price and availability of goods that are often used together with the product.
  • Expectations: Consumer beliefs about future price changes or product availability.

Types of Demand

Demand is often categorized by its relationship to other products. Joint demand occurs when two goods are used together, like printers and ink. Derived demand is when the desire for one product stems from another, such as the need for steel in car manufacturing.

Competitive demand applies to products with close substitutes, like butter and margarine. Composite demand describes a single product with multiple uses, where demand for one use impacts its availability for others. These types help businesses understand market dynamics.

Demand vs. Request

While often used interchangeably, in a business context, 'demand' and 'request' have distinct meanings and applications.

  • Demand: This refers to a consumer's desire for a product backed by the willingness and ability to pay for it. It is a measurable economic concept crucial for enterprises to forecast sales, set prices, and manage inventory. While powerful for market analysis, it can be complex to estimate accurately.
  • Request: This is a simpler expression of want, without the inherent financial commitment. For companies, it's useful for gathering customer feedback, feature ideas, or handling internal service needs. It provides direct qualitative insights but doesn't reflect broader market purchasing power or price sensitivity.

Demand in Different Markets

Demand patterns vary significantly from one market to another, influenced by the nature of the goods and specific economic conditions. While market demand focuses on a single product, aggregate demand considers the total demand across an entire economy. These differences lead to unique consumer behaviors in various sectors.

  • Normal Goods: Demand for these items typically rises as consumer income increases.
  • Luxury Goods: Demand can paradoxically increase with price, driven by status and exclusivity.
  • Necessities: Demand remains relatively stable regardless of price or income fluctuations.
  • Substitutable Goods: Demand is highly sensitive to the price and availability of competing products.

Impact of Demand on Pricing

Demand is a key driver of a product's price in the market. When demand for a good increases while supply remains constant, prices tend to rise as more consumers compete for it. Conversely, if demand falls, prices typically decrease as suppliers try to attract fewer buyers. This dynamic helps markets find an equilibrium price.

Frequently Asked Questions about Demand

How does a shift in the demand curve differ from movement along it?

Movement along the curve is caused solely by a change in the product's price. A shift of the entire curve, however, is caused by non-price factors like changes in consumer income or preferences, indicating a change in overall demand at every price point.

What is demand elasticity?

Demand elasticity measures how much the quantity demanded of a good responds to a change in its price. Inelastic demand means quantity changes little with price, while elastic demand means it changes significantly. This concept is crucial for strategic pricing decisions.

How can businesses practically measure market demand?

Businesses measure demand through methods like consumer surveys, market experiments with different price points, and analyzing historical sales data. Statistical analysis and regression models are also used to forecast future demand based on various economic indicators and market trends.

Other terms

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Digital Sales Room

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Lead Generation Funnel

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Rapport Building

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Customer Loyalty

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Buyer Intent Data

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White Label

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Target Account List

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Content Delivery Network

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Customer Data Platform (CDP)

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Siloed

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Employee Advocacy

Employee advocacy is the promotion of an organization by its staff members, who share positive messages and content through their personal networks.

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C-Level or C-Suite

The C-suite, or C-level, refers to a company's most senior executives. Their titles usually start with 'Chief,' such as CEO, CFO, or CTO.

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Account-Based Sales Development

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Prospecting

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Sales Automation

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FAB Technique

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Draw on Sales Commission

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Purchase Buying Stage

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Git

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Mid-Market

Mid-market companies are businesses larger than small businesses but smaller than large enterprises, often defined by revenue or employee size.

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Demand Generation Framework

A demand generation framework is a strategic process for creating awareness and interest in your product, ultimately driving new business.

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Regression Analysis

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Day Sales Outstanding

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Buying Signal

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Customer Lifecycle

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LinkedIn Sales Navigator

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Buyer Journey

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Call Analytics

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Sales and Marketing Analytics

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Inbound leads

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Bulk Application Programming Interface

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Average Revenue per Account

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Sales Manager

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Sales Presentation

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Big Data

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Deal Closing

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Sales Development Representative (SDR)

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Closed Lost

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Hybrid Sales Model

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Outbound Sales

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Revenue Operations KPIs

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HubSpot

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Salesforce Administrator

A Salesforce Administrator is a certified professional who manages and customizes the Salesforce platform to meet a company's specific business needs.

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Lead Conversion

Lead conversion is the process of turning a prospect into a customer by getting them to complete a desired action, such as making a purchase.

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Solution Selling

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Operational CRM

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Conversion Path

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Real-time Data Processing

Real-time data processing is the method of analyzing data the instant it's generated, enabling immediate actions and decision-making.

Real-time Data Processing

Lead Generation Tactics

Lead generation tactics are the strategies and methods used to attract potential customers and convert them into leads for your sales team.

Lead Generation Tactics

Data-Driven Marketing

Data-driven marketing uses customer data to inform marketing decisions, optimize campaigns, and deliver personalized experiences to consumers.

Data-Driven Marketing

Trademarks

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Edge Locations

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Personalization

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Sales Dashboard

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Geo-Fencing

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Custom Metadata Types

Custom Metadata Types store application configurations as metadata. This makes them easily deployable between different Salesforce environments.

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Cloud Storage

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Price Optimization

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Salesforce Object Query Language

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Weighted Sales Pipeline

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Funnel Analysis

Funnel analysis is a method for understanding the steps users take to complete a goal, revealing where they drop off in the conversion process.

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Expansion Revenue

Expansion revenue is the extra money a business makes from its current customers via upgrades, new products, or additional services.

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Subscription Models

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Psychographics

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Psychographics

Smile and Dial

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Data Encryption

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Data Encryption

Webhooks

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Webhooks

User Interface

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Drupal

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API

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Sales Pitch

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GPCTBA/C&I

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GPCTBA/C&I

Key Accounts

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Mobile Optimization

Mobile optimization adapts your website to ensure visitors on smartphones and tablets have a seamless, user-friendly experience.

Mobile Optimization

Phishing Attacks

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Phishing Attacks

Marketing Mix

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Marketing Mix

Call for Proposal

A Call for Proposal (CFP) is a document that solicits proposals, often through a bidding process, for a specific project or service.

Call for Proposal

Firmographic Data

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Firmographic Data

Customer Experience

Customer experience (CX) is a customer's total perception of your business, based on every interaction across the entire customer lifecycle.

Customer Experience

Sales Stack

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Tokenization

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Customer Relationship Marketing

Customer relationship marketing is a strategy for building lasting connections with customers to foster long-term loyalty and engagement.

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Sales Champion

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Business Intelligence

Learn about business intelligence, including key components of business intelligence, the role of BI in decision making, business intelligence tools and techniques.

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Ramp Up Time

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Browser Compatibility

Learn about browser compatibility, including understanding the importance, common challenges, best practices, & tools for testing.

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Event Tracking

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Sales Enablement Platform

A sales enablement platform centralizes content, training, and analytics to help sales teams engage buyers and effectively close deals.

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Lead Generation

Lead generation is the process of identifying and cultivating potential customers for a business's products or services.

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Request for Proposal

A Request for Proposal (RFP) is a formal document that outlines a project's needs and invites qualified vendors to submit bids to complete it.

Request for Proposal

Lead Generation Software

Lead generation software helps businesses automate finding and capturing potential customers' contact information to build sales pipelines.

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Content Rights Management

Content Rights Management involves controlling the use and distribution of copyrighted digital media to protect intellectual property.

Content Rights Management

Precision Targeting

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Tire-Kicker

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Tire-Kicker

B2C2B

Learn about B2C2B, including how B2C2B transforms sales, key strategies for B2C2B success, & differences between B2C2B and B2B2C.

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CPM

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GDPR Compliance

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Sales Velocity

Sales velocity is a key metric measuring the speed at which your company makes money. It shows how fast deals move through your sales pipeline.

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Behavioral Analytics

Learn about behavioral analytics, including implementing behavioral analytics successfully, & key metrics in behavioral analytics.

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Email Verification

Email verification is the process of confirming that an email address is valid and deliverable, which helps improve campaign performance.

Email Verification