Q. Discuss the terms need, want and demand. Why these terms assume significance for every marketers/business. Discuss.

The terms "need," "want," and "demand" are foundational concepts in marketing, economics, and consumer behavior. They are the building blocks that help businesses understand the driving forces behind consumer decisions and shape the strategies that target, engage, and convert customers. Although they may seem straightforward, these terms are intricately linked, and their understanding is critical for marketers to align their offerings with consumer desires, preferences, and purchasing power.

1. The Concept of "Need"

A "need" refers to a fundamental requirement or necessity that is essential for the survival or well-being of an individual. Needs are inherent and biologically driven. They are the most basic level of human motivation. In the context of marketing and business, needs are often framed as the essential items or conditions that people must have in order to lead healthy and functional lives. For instance, food, water, shelter, and clothing are all considered basic needs. They represent what people cannot live without or what they require to sustain themselves physically and psychologically.

Needs are universal in nature—every person, regardless of culture, society, or economic status, experiences them. However, they do not tell us much about the specific ways in which individuals seek to satisfy those needs. This brings us to the next concept: wants.

2. The Concept of "Want"

A "want" represents a specific desire or preference for a particular way to satisfy a need. While needs are essential for survival, wants are shaped by an individual’s personality, experiences, social influences, and cultural context. Wants are not universal, and they can vary significantly across individuals, societies, and time periods. The concept of want is influenced by factors such as income, education, lifestyle, and exposure to advertisements or social trends.

For example, while food is a basic need, the specific type of food one wants could be influenced by taste, dietary preferences, geographic location, cultural influences, and even advertising. A person might want a gourmet meal, while someone else may be content with a simple sandwich or a piece of fruit. Similarly, a person might want to buy a luxury car to satisfy their transportation needs, whereas another individual might be satisfied with a more economical, functional car.

Wants are, therefore, more flexible and subject to change. Marketers often focus on transforming consumer needs into wants by influencing their preferences and desires through advertising, branding, and product design. Businesses recognize the opportunity to create products or services that appeal to consumers’ wants, and they often position their offerings to highlight how they can provide more desirable solutions to basic needs.

3. The Concept of "Demand"

Demand is a more specific term that refers to the willingness and ability of consumers to purchase a particular good or service at a given price point. It represents the convergence of need, want, and purchasing power. While needs are universal and wants are personal preferences, demand is a function of both the desire to satisfy a need or want and the ability to afford that satisfaction. In essence, demand reflects the economic reality that, in order to acquire a product or service, a person must have both the desire (want) and the means (purchasing power) to buy it.

Demand is not just about the desire for a product but also about its affordability. For instance, someone may want a luxury car, but if they do not have the financial means to purchase it, the demand for that car is effectively zero. This distinction is important for businesses because demand shapes the production, pricing strategies, and marketing tactics they use. Understanding demand helps businesses predict how many products they are likely to sell at various price points and what factors influence consumers' purchasing decisions.

The concept of demand is also influenced by external factors such as changes in consumer income, the price of related goods, consumer tastes, economic conditions, and the availability of substitutes. Demand can fluctuate over time due to shifts in any of these variables.

4. The Interrelationship Between Need, Want, and Demand

The relationship between need, want, and demand is dynamic and interconnected. Needs drive wants, and wants drive demand. Let’s look at this relationship in more detail:

Need → Want: A person starts with a basic need (e.g., food). However, their desire for specific types of food (e.g., sushi, pizza, or a specific brand of snack) represents a want. The basic need for nourishment has been transformed into a preference based on individual choice, lifestyle, and external influences.
Want → Demand: Once a person has a want, their ability to convert that want into actual purchasing behavior depends on whether they have the means to pay for it. This is where demand comes in. Demand is the outcome of both the desire to fulfill a want and the ability to do so within one’s financial capacity. For example, someone who wants a luxury handbag might have to assess whether they can afford the purchase, and their purchasing decision will ultimately depend on their ability to pay the asking price.
Need → Want → Demand: The three concepts operate sequentially. For example, a person may need a transportation solution (need), want a particular brand or model of car (want), and then demand that car if they have the financial ability to purchase it.

For businesses, understanding these relationships is key to crafting a marketing strategy that resonates with consumers and drives sales. A company must identify what needs its product or service fulfills, how it can shape consumer wants, and the factors that will make the product or service in demand among its target audience.

5. Why These Concepts Matter for Marketers and Businesses

The distinction between need, want, and demand is highly significant for marketers and businesses for several reasons:

a. Market Segmentation and Targeting

By understanding the difference between needs, wants, and demand, businesses can more effectively segment their markets and target the right customers. Market segmentation involves dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics.

Needs-based segmentation might involve targeting consumers who have specific unmet needs. For instance, a company that produces health supplements might segment the market based on the need for better nutrition.
Wants-based segmentation can focus on tailoring marketing campaigns to appeal to consumers’ specific preferences or tastes, recognizing that not everyone has the same desires for a product or service. Luxury brands, for instance, focus on the want for exclusivity, prestige, and quality.
Demand-based segmentation involves targeting consumers who not only want a product but have the financial capacity to purchase it. This is particularly important for luxury goods or high-end services that cater to high-income segments.

By identifying the most pressing needs, desires, and purchasing capacities of different groups, marketers can develop more personalized and effective marketing strategies.

b. Product Development and Positioning

The understanding of needs, wants, and demand is crucial when it comes to product development. A business must first assess the needs of its target market to create a product that addresses those basic requirements. Once the product is developed, marketers can position it in a way that appeals to the specific wants of the consumers.

For example, if a company is launching a new health drink, it must first consider the universal need for hydration and nutrition. Then, it may need to understand whether consumers prefer organic ingredients, whether they prefer sweetened or unsweetened beverages, or whether they prefer certain packaging. These wants will guide product development decisions. Finally, demand will be influenced by the price point and the purchasing power of the target audience.

c. Pricing Strategies

Understanding demand is particularly important when it comes to pricing strategies. The price of a product or service directly impacts its demand. The concept of demand elasticity (how demand changes in response to price changes) plays a critical role in pricing decisions. If the price is too high for the target market, demand might be low, even if there is a strong desire for the product. Conversely, if the price is too low, businesses may risk undervaluing their products or failing to meet profitability targets.

Marketers must also consider how the demand curve shifts based on consumer needs, wants, and income levels. For example, during an economic downturn, consumers may prioritize their basic needs over their wants, leading to a drop in demand for luxury goods. A keen understanding of demand dynamics enables businesses to adjust their pricing strategies to align with the market conditions and consumer behaviors.

d. Consumer Behavior and Decision Making

Understanding needs, wants, and demand allows businesses to anticipate consumer behavior and make better marketing decisions. Consumer behavior is influenced by a combination of psychological, social, and economic factors. By understanding how these factors drive needs and shape wants, businesses can craft messages and promotional strategies that speak directly to consumers' emotions, desires, and rational decision-making processes.

For example, a consumer’s decision to purchase a smartphone may be influenced by the basic need for communication (need), the desire for a high-end brand (want), and the ability to afford the phone (demand). Marketers who understand these motivations can tailor their advertisements and offers to align with these different levels of influence. Discuss the terms need, want and demand. Why these terms assume significance for every marketers/business. Discuss.

e. Brand Loyalty and Customer Retention

Fulfilling consumer needs and wants leads to customer satisfaction, which is crucial for fostering brand loyalty and ensuring long-term business success. When a company is able to meet both the fundamental needs and the specific wants of its customers, it builds trust and encourages repeat purchases. This is why businesses that successfully create a strong value proposition—one that addresses both need and want—are more likely to retain their customers over time. Discuss the terms need, want and demand. Why these terms assume significance for every marketers/business. Discuss.

Discuss the terms need, want and demand. Why these terms assume significance for every marketers/business. Discuss.