Q. Discuss the terms need, want and demand. Why these terms assume significance for every marketers/business. Discuss.
Understanding the Terms: Need, Want, and
Demand
In the realm of
marketing and business, the terms need, want,
and demand are fundamental concepts that help explain consumer
behavior and the dynamics between producers and customers. These terms are not
just abstract notions but are practical, actionable drivers that influence
business decisions. Understanding the distinctions and interconnections between
these three terms is critical for businesses looking to offer products or
services that effectively meet consumer expectations and create long-term
value.
1. Need: The Basic Requirement
A need
is a basic human requirement or necessity for survival. These are the
fundamental elements that humans require to live, and they can range from
physiological needs like food, water, and shelter to emotional and social needs
like affection, security, and belonging. Needs are innate, universal, and not
influenced by external factors like culture or advertising. For example, the
need for food and water is universal across all cultures and geographic
locations.
In marketing,
needs form the foundation for understanding consumer behavior. If a business
fails to address a fundamental need, its product or service is unlikely to gain
traction. Marketers often identify consumer needs before launching products,
ensuring that what they offer addresses these basic requirements. Needs are the
driving force behind much of human activity, but they are not always
immediately apparent in the marketplace because they are often latent or
unarticulated by the consumer.
2. Want: A Desire for
Specific Products
A want
is a desire or preference for a specific product or service to satisfy a need.
Unlike needs, wants are shaped by cultural influences, individual preferences,
and external stimuli such as advertising and peer influence. While needs are
universal, wants vary greatly between individuals and societies. For example,
someone may need food (a basic need), but they may want a pizza (a specific
type of food) or may desire a luxury dining experience like sushi at a fine
restaurant. Similarly, the need for clothing can be satisfied with a variety of
items, but the want for a designer brand like Louis Vuitton reflects personal
desires influenced by fashion, culture, and status.
Wants are shaped
by psychological, social, and environmental factors, and marketers often focus
on converting needs into wants. By understanding how consumers frame their
needs in terms of wants, businesses can tailor their offerings, packaging,
branding, and advertising to appeal to specific desires. If marketers can
position a product as fulfilling a customer’s want, they are likely to see
higher demand and increased sales.
3. Demand: The Desire
Backed by Purchasing Power
Demand represents the consumer’s desire to buy a particular
product, combined with their ability and willingness to pay for it. It’s a more
specific and actionable concept than need or want, as it involves both a
psychological desire and the financial resources to act upon that desire.
Simply put, demand is the desire for a product that is backed by the ability to
pay for it.
The law of demand
in economics states that as the price of a product decreases, demand increases,
assuming all other factors remain constant. Marketers are particularly
interested in demand because it reflects the actual behavior of consumers in
the marketplace. Businesses and marketers must not only understand what people
want but also whether they are willing to pay for it.
To illustrate, a
consumer may want an iPhone (a want), but demand for the product will depend on
whether the consumer has the purchasing power to afford it. If the price is too
high, demand may decrease, even if the want is strong. Conversely, a company
may create demand through effective advertising, price strategies, or creating
urgency (limited-time offers, for instance) to stimulate consumer purchasing
behavior.
Significance for Marketers and Businesses
Understanding the
interplay between need, want, and demand is essential for businesses in
virtually every industry. Here’s a deeper look at why these concepts matter to
marketers and business leaders:
1. Product Development
and Innovation
The first step in
developing successful products or services is to identify and understand the
needs, wants, and demands of the target audience. This knowledge drives the
creation of products that are not just useful but are also desirable and
accessible to the consumer.
For example,
consider the development of smartphones. The need for communication is
universal, but the want for specific features such as a high-quality camera,
gaming capability, or a particular operating system (Android vs. iOS) reflects the
variation in consumer preferences. Demand for a particular brand or model of
smartphone (e.g., iPhone) may then depend on factors such as pricing, brand
loyalty, and available technology. Businesses that understand how to blend the
essential need for communication with evolving consumer wants (sleek design,
functionality) are more likely to succeed in the competitive market.
2. Segmentation and
Targeting
Effective
segmentation and targeting are crucial in marketing. By identifying specific
consumer segments with particular needs, wants, and purchasing power,
businesses can tailor their products, messaging, and promotional strategies
more effectively. Segmentation allows businesses to differentiate their
offerings and focus on the most lucrative and promising consumer groups.
For example, a
high-end luxury car brand like Rolls Royce understands that its customers'
needs may include transportation and safety, but their wants are likely to be
tied to status, exclusivity, and superior engineering. Rolls Royce targets a
very specific consumer base with the demand to purchase a luxury vehicle,
backed by the financial resources to make such a purchase.
In contrast, a
company like Ford, which sells more affordable cars, will target a much broader
audience, addressing the basic need for transportation, while appealing to more
moderate wants in terms of style, fuel efficiency, and price sensitivity.
3. Pricing Strategies
The relationship
between need, want, and demand is also critical when setting prices. A
product’s price should reflect both its intrinsic value (how well it satisfies
a need) and its perceived value (how well it fulfills a want). Furthermore,
understanding demand helps businesses to optimize pricing strategies.
For instance,
companies often use price discrimination or tiered
pricing to capture different levels of demand based on the purchasing
power of consumers. Luxury brands may price their products at a premium to
reflect exclusivity, while mass-market brands may adopt lower pricing to
attract a larger customer base.
In times of high
demand, businesses may increase prices to maximize revenue (a practice known as
price skimming), while in periods of low demand, they may offer discounts or
promotional pricing to stimulate sales (penetration pricing). Businesses also
use dynamic pricing (adjusting prices based on demand
fluctuations), as seen in airline tickets or ride-sharing apps.
4. Advertising and
Promotions
The creation of
demand is often the result of effective marketing campaigns. While consumers may
have the inherent need for something (e.g., food, transportation), businesses
use advertising to shape their wants and then generate demand. Advertising
strategies are designed to communicate the value of a product, to convince
consumers that the product is not only desirable but also affordable and worthy
of their investment.
A key tool in
generating demand is persuasion. Through compelling
advertising messages, emotional appeals, and showcasing the features and
benefits of a product, businesses can turn latent wants into actual demand.
Advertising also influences consumer perceptions, which in turn can affect how
much they are willing to pay for a product.
For example,
Coca-Cola doesn’t just sell a drink—it sells happiness, lifestyle, and moments
of refreshment. Through decades of advertising that tap into social emotions
and desires, Coca-Cola has created strong demand for its product.
5. Customer Experience
and Satisfaction
In the competitive
business environment, companies cannot afford to only meet basic needs. They
must aim to delight customers by addressing both wants and demands in a way
that leads to satisfaction and brand loyalty. Fulfilling needs and wants in a
memorable way increases customer satisfaction, which is directly linked to
repeat purchases and long-term success.
Companies like
Apple and Amazon understand this well. Apple’s success is not just due to its
innovative technology but also to its ability to create products that resonate
with consumer desires (wants) and provide a seamless, enjoyable user
experience. Similarly, Amazon capitalizes on its customers’ demands by offering
convenience, speed, and personalized recommendations that increase the
likelihood of repeated purchases.
6. Understanding Consumer
Behavior
At its core, the
relationship between need, want, and demand is about understanding consumer
behavior. Marketers and businesses must always be in tune with shifts
in consumer preferences, changes in cultural norms, and fluctuations in
purchasing power. With this understanding, businesses can anticipate changes in
demand, adapt their strategies, and continuously improve their products and
services to meet evolving needs and wants.
7. Global Marketing
Considerations
The concepts of
need, want, and demand are also crucial in global marketing.
Needs may be universal, but the ways in which consumers fulfill these needs can
differ greatly across cultures. Businesses must adapt their marketing
strategies based on cultural, economic, and social factors. A product that
satisfies a need in one country may not be successful in another if it does not
align with local wants or if the target audience does not have the financial
means to demand it.
For example, the
demand for luxury goods in emerging markets like China may be higher due to rising
affluence, while in less developed countries, demand might be focused on
products that cater to basic needs at affordable prices.
Conclusion
In conclusion, the
terms need, want, and demand
are not just theoretical concepts—they are practical, everyday drivers that
influence how businesses operate, market their products, and engage with
consumers. By understanding these distinctions, businesses can design products
that fulfill both needs and wants, create demand that aligns with consumer
purchasing power
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