Demand is the economic principle that describes a consumer's desire, willingness and ability to pay a price for a specific good or service. A firm in the market economy survives by producing goods that are in demand by consumers. Consequently, ascertaining consumer demand is vital for a firm's future viability. Many companies today have a customer focus. In this approach, consumer wants and needs are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs and wants of potential consumers.
A need is a consumer's desire for a product's or service's specific benefit, whether that be functional or emotional. The emotional benefit tends to be a stronger driver for consumers, as functional benefits can be easily copied by competitors. On the other hand, a consumer want is the desire for products or services that are not necessary, but which consumers wish for. For example, food is considered a consumer need. However, a steak dinner or dessert is considered a consumer want, as these things are not necessary in order to live.
Customer Decision Process
There is a five step process that consumers can go through in making a purchase decision. These steps include:
The customer decision process begins with need identification. Whether we act to resolve a particular problem depends upon two factors: the magnitude of the discrepancy between what we have and what we need, and the importance of the problem. This involves the concept of consumer motivation, which is the internal drive consumers experience to fulfill conscious and unconscious wants and needs. Once the problem is recognized, it must be defined in such a way that the consumer can actually initiate the action that will bring about a relevant solution.
The next step is information search and processing. After a need is recognized, the prospective consumer may seek information from family, friends, personal observation, consumer reports, salespeople, or mass media. The promotional component of the marketer's offering is aimed at providing information to assist the consumer in their problem-solving process. If the buyer can retrieve relevant information about a product, brand, or store, he or she will apply it to solve a problem or meet a need.
The criteria used in the evaluation of alternatives vary from consumer to consumer. One consumer may consider price the most important factor while another may put more weight upon quality or convenience. The search for alternatives is influenced by such factors as time and money costs, how much information the consumer already has, the amount of the perceived risk if a wrong selection is made, and the consumer's disposition toward particular choices.
During the purchase phase of the decision-making process, the consumer may form an intention to buy the most preferred brand because he has evaluated all the alternatives and identified the value that it will bring him. Anything marketers can do to simplify purchasing will attract buyers. Providing basic product, price, and location information through labels, advertising, personal selling, and public relations is an obvious starting point. Product sampling, coupons, and rebates may also provide an extra incentive to buy.
A consumer's feelings and evaluations after the sale come into play during the post-purchase phase. These feelings can influence customer retention and influence what the customer tells others about the product or brand. The marketer may take specific steps to reduce post-purchase dissonance. Advertising that stresses the many positive attributes or confirms the popularity of the product can be helpful.
Caveats of a Customer Focus
Customer focus should be treated as a subset of the corporate strategy rather than the sole driving factor. This means looking beyond current-state customer focus to predict what customers will demand in the future, even if they themselves discount the prediction.
Companies should pay attention to the extent to which what customers say they want does not match their purchasing decisions. Surveys of customers might claim that 70% of a restaurant's customers want healthier choices on the menu, but only 10% of them actually buy the new items once they are offered. Truly understanding customers sometimes means understanding them better than they understand themselves.
Customers can be currently ignorant of what a company might argue they should want. IT hardware and software capabilities and automobile features are examples. Customers who in 1997 said that they would not place any value on Internet browsing capability on a mobile phone, or 6% better fuel efficiency in their vehicle, might say something different today, because the value proposition of those opportunities has changed (Figure 1).