What could be more difficult than dealing with consumers? Probably, only backbreaking physical labor can compare with this. But it's not about him now. Demand generation and sales promotion is a long and demanding process that requires careful preliminary preparation. This is what will be discussed today.
What is the sale of a product based on?
Demand generation and sales promotion is not only a set of automatic processes, but also an activity that includes a human factor. Before presenting a product, advertisers must thoroughly study it in order to say with confidence that it can meet the needs of the buyer, and is also reliable, competitive and safe.
If the product, among other things, is new, popular and affordable, then it will be somewhat easier to generate demand and stimulate sales. As you know, regardless of profession, education and ethnicity, when making a purchase, people are driven by only three types of motivation:
- Rational motivation. A person considers a product in terms of value for money.
- Moral motivation. The choice of a person is influenced by the traditions that have developed in society. For example, a person who works in an office will not buy jeans for work.
- Emotional motivation. For most people, not only the quality of the product is important, but its brand, which will emphasize the social status.
When generating demand and stimulating sales, you first need to pay attention to these points.
Promotion
After a person realizes that he needs to buy something, he begins to look for information about the product. It, as a rule, is presented in the form of means of generating demand and stimulating the sale of goods. They, in turn, are designed specifically to grab the attention of consumers.
The tool in this case is such a concept as promotion. This is a message of information about a product in any form that grabs attention. Important promotion functions are:
- Creation of a prestigious image at a low price and product novelty.
- Providing complete information about the properties and qualities of the goods.
- Maintaining the popularity of the product.
- Changing the way of using the product.
- Creation of enthusiasm.
- Convincing the consumer to buy.
To arouse the consumer's need and desire to purchase a product from the buyer, various types of promotion are used in marketing:
- Advertising. Most often, they use the media to distribute it or directly contact a potential buyer by mail.
- Publicity. This term refers to non-personal appeal to the audience. The company usually does not pay for such a message, unlike media advertisements. Usually publicity refers to a comment that the editor writes in the press about a product.
- Sales promotion. This includes various types of marketing activities that encourage the buyer to make a purchase. Unlike advertisements and publicity, which are meant to spread the word about a product, sales promotion is focused on hot selling.
- Personal sales. This method of generating demand and stimulating sales has been a leader for a long time. Initially, as soon as the marketing industry began to take shape, personal communication between the seller and the buyer with the aim of convincing the purchase of goods was the basis of successful sales.
If we combine all types of promotion and sales, then we can say that these processes are complex measures to generate demand and stimulate sales. Every entrepreneur needs to know them in order to increase their own sales.
Briefly about the system
If we talk about the system for generating demand and stimulating the sale of goods, then all efforts are aimed at finding solvent groups of consumers and drawing their attention to the product in order to satisfy their consumer needs. At this time, experts are trying to solve the problem of choosing between "their" product and those of competitors. Of course, if the buyer is well informed, he will certainly opt for the product he knows best about.
Thus, we can say that demand generation activities have a communication and commercial effect.
Effects
What is the communication effect manifested in? During the survey, the consumer easily perceives the name of the company, brand, brand, and the like. When it's time to buy, he easily distinguishes these moments from other products.
The second, commercial effect, can be observed when a customer has an intention to purchase a specific product. This effect manifests itself only in 13-15% of respondents.
The processes of generating demand and stimulating product sales in different market segments differ from each other. In addition, the marketer needs to consider the behavioral characteristics of consumers, taking into account the product life cycle and the amount of forecast demand. This is not the end of the demand generation and sales promotion activities.
Estimate
It is important to pay attention to the company that promotes the product. You should especially carefully monitor the volume and consistency of the use of promotional tools. Demand and sales activities do not have to be expensive. The relationship between advertising costs and related processes may look like this:
- Development and promotion of a trademark - 17% of the total budget.
- Holding exhibitions and presentations - 19%.
- Mail advertising - 12%.
- Provision of services to a potential buyer - 13%.
- Bonuses, discounts, incentives, souvenirs, lotteries - 23%.
- Pure promotional items - 12%
- Meetings and other meetings - 4%.
In carrying out these actions, it is worth remembering that in marketing, demand generation and sales promotion should focus on attracting buyers to its ranks for many years. There may not be an immediate result, but one should not count on it.
FOS and STIS block
The demand generation and sales promotion system consists of two blocks. These are, accordingly, measures to create demand and stimulate sales.
Their main purpose is to inform potential buyers about the existence of the product. In addition, attention is drawn to the needs that a specific product can satisfy. Also, the consumer is presented with evidence of the quality of the products. It is precisely the right evidence that inspires confidence in the product among buyers, which in turn increases the level of sales.
The main task of measures to generate demand is to conquer a certain market share by the product. This process should be implemented at an early stage, as soon as the product begins to enter the market. In general, purchasing decisions are subject to careful discussion or reflection, so all demand generation activities should have a targeted impact on everyone who may be involved in making the decision.
Activities that help generate demand usually include:
- Advertising.
- Exhibitions.
- Trade fairs.
- Public relations.
Sales promotion
As for the sales formation policy, it should generate in the consumer a stable preference for a particular brand and a desire to make a second purchase. Simply put, the main task of such events is to induce the consumer to subsequent, repeat purchases of a product of a certain brand, purchase large quantities of goods and establish commercial relations with the manufacturer.
In conditions of high competition and an overabundance of goods on the market, the activities of sales promotion activities are of particular importance. In general, these processes are divided into 2 large groups, depending on the object to be influenced.
The first group includes activities aimed directly at the buyer. They create an image of a commercial proposal with tangible benefits. For example, there are discounts at distribution points. Or a person can get a loan for a favorite product. You can also find events such as:
- Free trial distribution.
- Acceptance, exchange or repair of used goods.
- Presentation.
- Excursions around the company.
- Press conferences.
- PR campaigns.
These events are widely known in the media, as they are constantly talked about.
The second group includes those processes that affect intermediaries and make them sell with much more energy. Intermediaries are much more active in expanding and strengthening target segments. Such events should include:
- Provision of equipment necessary for the sale.
- Equipment for workshops, utility rooms and points of sale.
- Provision of discounts and sales prices (sellers have the right to increase and keep the difference).
- Cash bonuses.
- Additional days off or days off.
- Gifts are moral encouragement.
PR and advertising
Demand generation and sales promotion policies are based on a wide variety of tools and activities. But advertising and PR are in great demand and popularity. With their help, the manufacturer solves the following problems:
- Provides the management of the organization with information on what the public thinks of it.
- Develops responses to influence the opinion of society.
- Directs the activities of the company's management in such a way that it takes place in the public interest.
- Maintains a state of readiness for change, anticipating the development of possible trends in advance.
- She uses research and open communication as her main means of activity.
Put simply, PR helps build rapport between the public and the firm. Such events help to form a positive public opinion about the brand, product and image of the company.
Distribution of goods
An important role in the formation of demand and sales of goods is played by their correct distribution, that is, activities related to the planning and physical movement of goods from the firm to the buyer. It is carried out by distribution channels, and their members perform a number of important functions:
- Research. Gather the information needed to facilitate the exchange.
- Sales promotion. Creation and mass distribution of information about the product.
- Establishing communication with potential buyers.
- Adjustment of goods to the needs of consumers.
- Price negotiation for further transfer of goods.
- Transportation and storage of sales products.
- Search for funds that cover the costs of the distribution channel.
The first five functions are aimed at making deals, the rest help to complete them.
Each product distribution channel consists of several levels. By them it is customary to mean intermediaries who perform a certain type of activity. Each of these activities is aimed at bringing the product closer to its end customer. Since a certain work is performed by both the manufacturer and the buyer himself, they are also constituent parts of the distribution channel. Its length directly depends on the number of intermediate levels.
Turnover
Another important term in the process of forming demand and sales is commodity circulation. This means a complex activity that includes all operations associated with the transportation of products from the manufacturer to the buyer.
The goods movement procedure consists of several elements: warehouse processing of products and their sorting, packaging, transportation, delivery and marketing.
When choosing a location and distribution channel, the following factors should be considered:
- The number of consumers in the distribution center and the size of the average purchase. Locations of shops, opening hours, the need for a sales force and credit conditions.
- Do not forget about the interests of the company. Thus, it is necessary to provide the ability to control profits, the work of employees. Arrange delivery and implementation process.
- As for the product, you need to determine the cost per unit of the product. Consider storage complexity, frequency of shipments, weight, etc.
- Don't forget about your competitors. You need to know their number, the presented range of products. Understand the methods of turnover that they use, means of promotion and distribution channels.
- Product distribution channels. Their number, functions performed, availability, legal aspects and location.
conclusions
Thus, generating demand and stimulating sales can be considered a complex and multifunctional process.
We can say that this is a circular process. Initially, the manufacturer, through surveys and marketing research, determines what needs customers have, creates products that fully meet these needs. After the research is carried out again regarding consumer preferences, the finished product is adjusted to the expectations. Then information about a new product goes to various media, the manufacturer orders advertising campaigns. Establishes communication channels with distributors, supplies them with a finished product. Distributors sell the product to potential buyers, and after a while, the firm again conducts market research to find out how buyers feel about the product.
Along the way, the accompanying needs of buyers are determined, the product goes through a process of modification. The potential buyer is informed that the product can solve his problems, thus creating demand. And where demand is most pronounced, the company makes points of sale for the goods, that is, forms the points of sale. This is the whole procedure for the formation of supply and demand, if we talk about it in a nutshell.
Demand as a Marketing Category
Demand is one of the concepts in economics, which is a market expression of the need of people to acquire economic goods. This term is also used in marketing. It determines whether people will buy the product and how often.
In marketing, demand is understood as a form of expression of need, which is provided by monetary values \u200b\u200band which the consumer presents to the market.
Remark 1
A customer need becomes a demand when the customer pays for his desire. Therefore, demand is characterized as the desire and ability of the consumer to make purchases in a specific period of time and in a specific place.
Demand is influenced by various factors:
- economic (level of production development, retail prices, incomes of the population, degree of provision of goods);
- political (political stability);
- demographic (population size, ratio of urban and rural population, gender and age composition, migration, etc.);
- social (level of cultural development, professional composition of the population, social culture);
- natural and climatic (geographic and climatic conditions).
Demand has an inverse relationship between price and quantity of goods. As the market price rises, the number of buyers who would like to buy the product at the new price decreases. Graphically displayed as a demand curve.
There are eight types of demand in marketing:
- negative (negative);
- missing;
- hidden;
- falling;
- irregular;
- full-fledged;
- excessive;
- irrational.
Figure 2. Types of demand in marketing. Author24 - online exchange of student papers
Remark 2
In marketing, demand has a broader understanding than in economics. All types of demand are important to marketers. In addition, demand is highly volatile and difficult to predict. It may appear suddenly, or it may suddenly disappear. But there is also a very stable demand. The consumer himself cannot 100% determine what he needs. We make 30% of planned purchases, and 70% are impulsive purchases made by external factors (tastings, promotions in the store).
Features of the demand generation and sales promotion system (FOSSTIS)
Demand generation (FOS) and sales promotion (STIS) activities, which together make up the FOSSTIS system, are considered the key elements of marketing.
Definition 1
FOSSTIS is a system of relationships between the manufacturer and the consumer for profit and satisfaction of needs.
The main task of FOSSTIS is to remove the “barriers of mistrust”. The consumer, in order to make a purchase, must be aware of the consumer properties and characteristics of the product. The consumer may not feel the need for a product that he knows little. There are a huge number of similar products on the market that satisfy the same needs. Consumers have to choose. A little-known item is less likely to be bought.
The FOSSTIS system consists of two subsystems:
- demand generation (FOS);
- sales promotion (STIS).
The purpose of the FOS is to convey information to a potential consumer about a product and the needs that this product can satisfy. Demand generation measures reduce the “barrier of distrust” to a new product by providing certain guarantees and protecting consumer interests. The key task of FOS is to bring a new product to the market, ensure first sales and gain market share.
The main measures to generate demand are:
- various types of advertising (ATL, BTL);
- organization of exhibitions and fairs;
- public relations, etc.
The result of FOS is a certain image of the product in the mind of the consumer, which evokes positive emotions and encourages repeat purchases.
The purpose of STIS is to encourage consumers who are already familiar with the product to make subsequent purchases (in large quantities and regularly).
There are three types of STIS:
- in relation to buyers (encouraging purchases using various marketing communication tools);
- in relation to intermediaries (trade promotion: provision of samples, credits for purchase, co-advertising, bonuses, trade competitions, discounts, provision of free equipment, pre- and after-sales service);
- in relation to sellers (stimulating sales personnel to enhance their interest: material and moral incentives, contests among sellers, gifts, etc.).
Demand generation methods
Demand generation work begins long before a product goes to market and is done to prepare potential consumers to accept new products. It continues throughout the entire life cycle of a product.
Remark 3
The main method of generating demand, as well as stimulating sales, is promotion.
Promotion refers to any form of communication about goods and services for the purpose of informing, persuading and reminding.
Promotion functions:
- formation of an image of prestige;
- informing about products, their properties and quality;
- bringing positive information to consumers;
- maintaining the prominence of goods and services;
- changing the way of using the goods.
To generate demand, the following types of promotion are used:
- advertising (media, outdoor advertising, non-standard types of advertising);
- PR events (press conferences, non-advertising publications in the press, conferences, seminars, presentations);
- organization of exhibitions and fairs.
The main method of generating demand for industrial goods is direct contacts with a potential buyer, holding scientific and technical symposia, seminars, demonstration tests and shows.
The demand for consumer goods is formed due to the widespread use of advertising, demonstrations, sales exhibitions, methods of influencing public opinion through the media. In this case, it is imperative to take into account the social, moral, psychological, emotional, aesthetic and other characteristics of each individual group of consumers.
For marketing, the needs of potential and existing consumers are not only an object of study and satisfaction, but also formation. Let's consider the basic concepts used by marketing and related to need.
The objective basis for the formation of needs is need - the feeling that the lack of something is detrimental to the household or the consumer's lifestyle.
Need - a conscious (taking on a specific form in accordance with the personality) feeling of need or less urgent manifestations of feelings - necessity, desire - depending on the conditions of their occurrence.
Consumer - a market entity using material or spiritual goods for their own purposes, but not for resale. This concept is not identical to the concept customer: the process of buying and consuming can be carried out by one or several entities.
Consumption - the process of using material or spiritual goods, services to meet needs.
Demand - need presented in the market and backed by money.
As a rule, the need generates an individual need, which, supported by income, is expressed in demand, and he, in turn, is satisfied by exchanging money for the necessary goods. Buyers present and realize demand in the markets for products and services, therefore the market is the main object of marketing research and regulation (Fig. 1.9).
Figure: 1.9.
The distinction between need and need is rather arbitrary. Often in marketing, these concepts even replace each other. So, it is often said about the need for communication, for moving from one point to another, for food. However, if we proceed from these definitions, then all of the above is a need or a necessity for a person, while needs (that is, a need that has taken a specific form) is, for example, visiting a nightclub with friends, traveling by public transport, and desire to eat roast.
Not all consumer desires translate into clearly articulated needs. Thus, F. Kotler and K.L. Keller define five types of needs:
- declared (which the consumer stated, for example, expressed a desire to buy a brand phone iPhone);
- valid (consumer wants to buy iPhone not because of its technical characteristics, but to create a certain image);
- undeclared (needs that the consumer kept silent about, for example, waiting for the phone to work uninterruptedly for two years);
- need for admiration (the consumer would like to receive a phone case as a gift);
- secret (needs that the consumer does not want to state, for example, to look stylish in the eyes of their acquaintances).
Highlighting types of demand by the degree of stability allows you to synchronize sales in accordance with the time of year, day, etc.
Example 1.11. Seasonal demand
In June-August, the demand for plastic cards and safeguards is growing, while the demand for loans and deposits is decreasing. At the same time, bankers note the seasonal interest of the population in "summer" loans - for recreation, urgent needs and studies. In this regard, the financial indicators of credit institutions do not change. The changes concern only advertising costs: during the holiday season, banks spend 10-40% less on promoting their services than usual.
Analysis implementation period demand makes it possible to regulate the process of purchasing goods subject to long-term storage in order to allocate more space on the store shelves to fast-moving goods.
Example 1.12. Inventory demand. Shopping style: where and how do Russians buy food
Research holding ROMIR Monitoring conducted an all-Russian survey on purchasing habits and shopping style. Every third respondent (32%) usually makes purchases with a margin of 2-3 days. Basically, such buying behavior is typical for the age group 45-59 years old, residents of small towns with a population of less than 100 thousand people. A slightly smaller proportion of respondents make only small daily purchases (29%). This can be observed especially often among young people aged 18-24.
Every tenth survey participant (9%) answered that he prefers to make a one-time purchase of groceries for a week or several weeks in advance, then purchasing various little things as needed. First of all, this is a common practice for residents of million-plus cities. And only 3% of respondents admitted that they practice Sunday shopping for food, which for a week or more allows them not to think about the contents of the refrigerator - there is enough food.
Demand classification by purchasing intent opens up ample opportunities for the seller to directly influence the buyer both by advertising tools and by methods of direct influence. A certain part of buyers (according to some estimates, about a quarter) will succumb to psychological pressure, actively reacting to a store demonstration of goods. This implies the need to use technology merchandising - optimal placement of goods in the store, ensuring the availability of goods for inspection and testing, originality and colorfulness of the exposition, its information content (see Ch. 4).
Example 1.13. Spontaneous demand
Today, almost 80% of all purchases in retail chains are unplanned, spontaneous purchases. The main secret of spontaneous buying is successful placement. The most "fishy" place where sellers catch a consumer is the checkout area. Standing in line in front of the checkout, the buyer is most prone to unplanned spending.
Another effective method is to promote the product through a consultant who works on the sales floor. This method is more expensive, and not all manufacturers can afford it. With the help of the promotion, you can sell both a bottle of expensive wine and a set of expensive cosmetics.
Sellers also use the method of placing goods at the intersection of trade rows - highways. In 80% of cases, consumers go to the store for the most popular goods that they need every day: bread, dairy products, cereals, meat. Knowing this. Placement specialists catch consumers on their way to their respective departments. In order to reach, for example, the dairy department, you will need to go through the entire supermarket, purchasing various goods along the way.
Based on the list of "fish" places and the main methods used by sellers, you can make the Top 10 spontaneous purchases:
- 1) chewing gum:
- 2) chocolate bars and chocolate bars:
- 3) napkins;
- 4) toys, baby products:
- 5) additional packages with discounts;
- 6) promotional products, novelties;
- 7) souvenirs and accessories, consumables (filters, coasters, batteries, etc.);
- 8) packages, packaging;
- 9) newspapers and magazines;
- 10) snacks, baked goods.
Considering the types of demand by socio-demographic groups of consumers, companies carry out market segmentation in order to better meet the needs of the population of various groups in goods and services.
Example 1.14
The children's clothing market in Russia is increasingly beginning to adopt the features of the adult clothing market. Russians are spending more money on baby products. This is due both to an increase in the prosperity of the population as a whole, and to the understanding that saving on a child can have a very bad effect on his future. Over the past 10 years, parents have begun to pay much more attention to children's fashion, trying not just to buy a blouse or jeans, but to create an interesting look. And the children themselves are much more independent and demanding, they themselves decide what clothes they want to wear and what not. Most often, this increases the amount of the check.
The children's clothing market is increasingly beginning to adopt the features of the adult clothing market: different price segments stand out with the corresponding policy of market players. At the same time, the most popular categories are medium and medium +.
Quite often, parents choose clothes for children to match what they wear themselves, giving preference not only to style, but also to the same brands. Nowadays, many companies have both an adult and a children's line in their portfolio.
Demand differentiation sign by the degree of population migration is of interest to firms engaged in regional marketing. In the conditions of many years of trade practice of the Soviet period, the overwhelming part of the migrating demand was due to the lack of necessary goods in the places of basic residence. To a certain extent, mobile demand is recreational, related to tourism and resort travel. Identifying such demand is very important for companies specializing in serving tourists and holidaymakers. It is necessary to know not only the size of recreational mobile demand, but also its geography and routes. In addition, information on the territorial differentiation of demand is needed by regional and municipal authorities in order to control the consumer market and develop their own product policy (see Chapter 5 for more details).
Example 1.15
Developers hope that the demand for apartment buildings and apart-hotels will grow due to the arrival of "white and blue collars" in St. Petersburg, writes dp.ni. Experts note that in addition to the relocation of Gazpromneft's office in the city, the number of highly paid specialists in need of rental housing is growing. This is also facilitated by the development of the auto cluster and other technological industries, such as pharmaceuticals. The city administration stakes on attracting "white and blue collars" in the strategy of social and economic development of St. Petersburg until 2020. Realtors and developers believe that this particular category of tenants will create a steady demand for long-term rental housing. Meanwhile, apartment buildings in St. Petersburg are just beginning to form their own segment of the long-term rental market.
Demand analysis for degree of satisfaction will allow to adjust the assortment and service policy, find additional reserves for sales and sales growth.
Example 1.16. Unsatisfied demand
The development of online food trade can bring the entire Russian e-commerce market to a new level, as food is the largest segment of offline retail. However, this segment is in no hurry to develop. So. Métro Cash & Sapu announced the opening of an online store in Russia, but so far the company is not ready to fully organize online grocery trading - its project involves a severe restriction of the range (tea, coffee, stationery and detergents) and the target audience (for offices). "Auchan" opened an online store, the range of which is also limited, and there is no delivery of orders, only self-pickup. New project X5 Retail Group - E5 store is focused on the sale of non-food products. There is undoubtedly an unmet demand in the online food retail market today - there are few players on it, and in recent years the supply has decreased. The main player in this market, Utkonos, changed its strategy: the company closed delivery to some districts of the Moscow region, reduced the number of points of issue, and significantly increased prices.
In Russia, the market for trade in groceries via the Internet has a potential, but there are very few notable and successful projects. Nobody wants to take risks - in the end, everyone builds half-offers that are commercially justified, but, from the point of view of buyers, are insufficient.
In order to monitor and forecast demand, demand is also analyzed by the time of formation and presentation on the market. Past demand is demand, realized or not satisfied over some past period of time, its assessment is necessary to identify trends and patterns, as well as to fulfill implementation plans. Current demand - demand at the moment, the knowledge of the size of which allows you to quickly make adjustments to the planned marketing activities, is an element of the market environment. Future demand - demand for the next period, it is necessary to predict its volume and structure, taking into account the possibilities of production and the market.
Example 1.17. Past demand
The era of floppy disks, which most computer users have already forgotten, is coming to an end. Company Sony, being one of the last manufacturers of floppy disks, in March 2011 closed the production of floppy disks due to insufficient demand.
The peak of the floppy disk market is in the distant past. If you add up the capacity of all 12 million floppy disks sold in 2010 in Japan, you get about 17 GB, which is less than the capacity of a single-sided disk. Blue-ray. The slow death of floppy disks began back in 1998, when Apple decided not to include a floppy drive in your computer G3 Shas. Since then, many computer manufacturers have removed support for floppy drives. In 2003, this decision was made by the company Dell, which is the world leader in the production of computers. but Sony all this time she continued to produce floppy disks and sell them in millions of copies. The main buyers of floppy disks remained the owners of obsolete equipment, primarily in the education and science sectors.
Classification of demand according to the named and other signs orients marketing towards the application of a certain product and price policy, the choice of an appropriate strategy for competition, the organization of targeted advertising events, allows for multi-parameter market segmentation and requires the firm to carry out the necessary differentiated actions to regulate demand.
Demand and its market manifestation in the form of demand as objective phenomena are characterized by a number of patterns depending on the conditions and factors that determine their condition and development.
Needs arise from the moment a person is born (and in fact - even before that moment), grow in an ascending line until a certain moment (the peak of needs falling on the heyday of a person's physical, spiritual and professional qualities, experience of consumption), then they begin gradually shrink until the moment a person leaves life. The duration of the need is her life cycle (which corresponds to an asymmetric parabolic curve, Figure 1.10).
Figure: 1.10.
1 - infancy; 2 - childhood and adolescence; 3 - youth; 4 - maturity; 5 - old age.
Each stage of the life cycle of needs must correspond to a certain marketing policy aimed at maximum satisfaction, taking into account their volume, structure and characteristics.
The degree of urgency of the need for a product depends on the level the value (utility) received by the consumer. The principle of decreasing marginal utility states: the greater the consumption of a certain good, the smaller the increment in utility obtained from a unit increment in its consumption (in the case of satisfying hunger, the first pie eaten is most valuable, the tenth one is already needed, and the willingness to pay differs accordingly).
Among the patterns of need, it should be noted the law of the rise of needs: each subsequent need is satisfied at a higher level (for example, in the market of high-tech goods, for example, mobile phones, initially consumers were surprised by cameras integrated into the phone, then they began to demand high-quality cameras, and today they already need the ability to shoot high-definition video (format full HD).
In the process of satisfying needs, acts the law of mutual insurance of generations: each generation initially meets its needs at the expense of the older (parental) generation; this happens up to a certain point, when the new generation itself begins to repay debts to the elders and takes on the next generation as security. This process is continuous. The state interferes in its implementation (pensions, help for children, etc.), it is the basis for the reproduction of life and the needs themselves.
The need can be studied by analyzing consumption volume, so the addiction is established consumption volume from income level. This pattern manifests itself in the form of a damping consumption growth curve as income increases, and, consequently, the level of satisfaction of primary needs (Fig. 1.11). This process can be modeled by the regression equation of a semi-logarithmic function:
where y - demand; x - income.
Figure: 1.11.
Mass demand is a natural economic phenomenon. Among the main patterns of demand, which are used in marketing to influence it, it should be noted that the level and structure of demand depends on prices (the law of demand); the level of demand from income; demand from the quality of the product with the cumulative effect on demand of prices and income; income demand structures; structure of demand from the share of regular customers; the level of individual demand from the share of dependents.
Demand law characterizes the relationship between prices and the amount of goods and services that can be purchased at each price level: other things being equal, it will be possible to sell more goods at a low price than at a high one (Fig. 1.12).
Figure: 1.12.
One of the indicators of the dependence of demand on price is price elasticity of demand - response of demand to price changes.
Price elasticity of demand is determined by the sensitivity of buyers to changes in prices for goods and services that they purchase:
where Ay - change in demand; Oh - price changes; y - average level of demand; x - average price. E shows the percentage change in demand when the price changes by 1%.
As an indicator of demand, commodity turnover is usually used (in natural units or in monetary units, i.e. revenue, income).
If small price fluctuations lead to significant changes in the amount of purchased products, then the demand is usually called elastic. In this case, the coefficient of price elasticity of demand is greater than one. Fig. 1.13 (curve A) it can be seen that the decrease in the chain with Px before P2 leads to a significant increase in demand (from () w to (^ ed.) - If a significant change in price is accompanied by a slight change in demand, then it is inelastic. With inelastic demand, the coefficient of elasticity (modulo) will always be less than one. Curve B shows that a fall in price leads to a relatively small increase in demand The proportional change in demand and chain is called unit elasticity.
Figure: 1.13.
Different products react differently to price changes. The goods of inelastic demand include essential goods, goods that have little or no replacement, and relatively inexpensive goods. The inelasticity of demand can be caused by the lack of choice for the buyer, improved product quality, inflation, etc.
If, with a slight change in the price of one product, there is a change in the volume of demand for another, then cross elasticity of demand. Cross-elasticity appears when prices change for interchangeable (oil - gas, matches - lighter, parsley - dill, tea - coffee, biscuits - cakes, etc.) and complementary goods (computer and keyboard, TV and antenna, washing machine and detergent, etc.).
Other dependencies are also known. The Webelen paradox (wealth effect) - an increase in demand for luxury goods (primarily for jewelry) with an increase in penalties for them. Jiffen's Paradox (Poverty Effect) - an increase in demand for essential goods with an increase in prices for them - an increase in prices makes the product less competitive, it will mix up in consumption (substitutability effect) cheaper goods.
The inelasticity of demand allows the marketing department to recommend an increase in the price of this product, which should lead to an increase in its sales revenue. With elasticity of demand, it is better not to increase prices, since sales proceeds will decrease, in this case it is advisable to reduce the price.
It is also necessary to assess the elasticity of demand in relation to other factors. It is known that the demand for some goods increases when the total income increases.
Income elasticity of demand characterized by a percentage change in the amount of purchased goods as a result of changes in income:
The income factor acts as both a stimulant and a constraint on consumer demand. The higher the income, the greater the opportunity for demand. However, this dependence is not absolute. First, as the transition from a low income level to a higher level, demand at first grows moderately, since a relatively small increase in income limits the possibilities for an increase in demand, then demand growth accelerates (in groups with middle income), and as we move to the richest groups slows down again (due to a high degree of satisfaction in the past). This pattern is often expressed by a logistic (5-shaped) curve (Fig. 1.14).
Figure: 1.14.
The influence of income on the model of the dependence of demand on prices (the law of demand) can be expressed through the coefficient of elasticity of demand with respect to price, taking into account the difference in income for population groups:
where uh - demand from a group of high-income buyers; y0 - demand from a group of low-income buyers; xx - purchase price in a group of high-income buyers; x0 - purchase price in a group of low-income buyers; x and y - averages for both groups.
In general, the demand for most mass-produced goods grows as income increases, but for some goods there is an inverse relationship: this is how the demand for nutritionally low-value and low-quality goods behaves. In today's market, product quality affects demand in a complex combination with price and income. Thus, social groups with a low level of income are characterized by a general heightened interest in price to the detriment of quality, and they perceive quality parameters differently from wealthy buyers. So, if durability for the first group is an important quality indicator, then the second segment is characterized by a high obsolescence of goods, and other quality indicators are valuable - compliance with fashion, style, modern design.
The chain, income and other factors affect not only the absolute size of demand, but also its structure. Known, for example, engel's law, named after the famous German statistician of the middle of the 19th century: the higher the family income level, the greater the share of non-food items and the lower the share of food in total consumption. Income growth primarily leads to an increase in the demand for food (essential items), but as this need is saturated at an outstripping pace, the demand for goods that meet the requirements of comfort, aesthetics, prestige, etc. Positive changes also occur in the composition of food products with an increase in income, in particular, the share of the highest quality and nutritionally valuable goods increases. A similar law (Schwabe law) derived for housing costs: with the growth of family income, its housing costs increase absolutely, but decrease relatively.
To a certain extent, the influence of the income factor can explain such an important pattern for marketing: a relatively small proportion of consumers have a demand for a disproportionately large share of goods and services. This phenomenon is also associated with the consumer preferences of a certain part of the population (for example, a relatively small percentage of buyers purchase the bulk of a certain brand of cigarettes).
Research carried out by marketers has shown that the shares of major buyers and the goods they have bought correlate approximately as 20% and 80%. In 1960, the American marketer D.W. Tweld suggested calling such a phenomenon the "hard half" rule. For such a pattern, there is another term: "principle 80 - 20", or Pareto's law. The presence of such a pattern justifies the possibility and necessity of concentrating marketing efforts on the most effective direction of influence on the target market.
William Sherdep's 80/20/30 Rule - 80% of the profit comes from 20% of consumers, half of whom is lost when serving the 30% of the least profitable customers.
The law of Malthus is also known, which determines that, with the same amount of benefits, their distribution among families and individuals depends on the number of consumers in the family, more precisely, on the ratio of income-generating and dependents in the family. Typically, a dependency is modeled by a function:
Thus, marketing in its practice is guided by the patterns of demand, the desire of demand to come to equilibrium with supply using a system of balances, of which the main ones are price and income, as well as a number of other factors. These general patterns, which are manifested in a significant part of industry and regional markets, require study for specific conditions of place, time, market and marketing tasks of the company, and can also be supplemented by patterns found in the course of marketing research (see Chapter 7) and individual for data conditions.
URL: neoline.info/news/index.php?ELEMENT_ ID-576359
Demand generation
Demand is an economic category that expresses the unity of the needs of the population and funds for their purchase. Demand is a reflection of people's needs for a particular product, service, their desire to buy it. Consumers are not interested in goods in general, but in goods at a reasonable price. Based on this, one should speak not about absolute, but about effective demand. Effective demand characterizes not only the desire, but also the ability to buy a product. Demand is the quantity of a product that will be bought at a reasonable price and within a certain period of time.
The components of the concept of "demand" are:
· The presence of potential consumers with specific needs, i.e. desire to buy;
· Provision of needs with cash income;
· The ability to satisfy the need - the availability of a product offer in terms of volume, structure and price level, corresponding to needs and purchasing power.
It is necessary to distinguish between the concepts of "market demand" and "demand for the firm's products." Market demand is the total sales for the market for a product (or industry) at a given location and period for a collection of brands or competing firms. The demand for a firm's product (demand for a brand) is the portion of the market demand corresponding to the market share held by the firm or brand in the underlying market for the product.
Market demand is not a fixed quantity, but a function of a number of variables called demand determinants. There are two groups of demand determinants:
· Controlled factors (operational marketing tools);
· Uncontrollable factors (constraints that the firm faces in the market).
Controlled demand factors include:
· The product or "solution" to the buyer's problem, ie. a set of created goods;
· Price, a set of costs incurred by the buyer in order to take advantage of the chosen solution;
· Place or provision of goods with the greatest convenience for the buyer;
· Promotion or communications informing about the merits of the offered product.
Uncontrollable demand factors include:
· Restrictions on the part of buyers;
· Restrictions from competitors;
· Restrictions on the part of distribution networks;
· Resources, strengths and weaknesses of the firm;
· Situational limitations (environmental factors).
The purpose of the demand generation policy is to inform the potential consumer about the product and the needs that this product satisfies, as well as to lower the “barrier of distrust” to the new product through familiarization with the system of guarantees and protection of consumer interests. The task is to bring a new product to the market, ensure initial sales and gain some market share. Consequently, in order to make a purchase, the consumer needs to have information about the functional or consumer properties of the product. Demand formation is the initial activity in the promotion of a product, which carries out an introductory function with uninformed consumers.
The demand generation service has a communication direction, i.e. informative. Thanks to the positive communication impact, the buyer easily recalls the name of the company and the product, prefers this product to others and wants to purchase it immediately. With the help of measures to generate demand (advertising, exhibitions, fairs, etc.), an image of the product is formed in the minds of potential buyers, which plays a decisive role in making purchasing decisions. And since the purchase of a product in many cases is the result of a peer discussion, then measures to create demand should affect not only those who have the right to make purchasing decisions, but also those who, in one way or another, influence this decision.
Demand generation methods are developed in such a way as to provide evidence of the high quality of the product and other benefits for the buyer, to inform about the guarantees of protection of his interests if he is dissatisfied with the product. To achieve its goals and accomplish its tasks, the WCF uses the following means:
· Public Relations (РR) (creation of a positive image of the product and the company);
· Personal (personal) sale.
In addition, specialized measures are used to generate demand. They can be:
· Introduction into the minds of potential customers of information about the availability of a new product (announcement);
· A story about the special properties of a product, which favorably distinguish it from other products of the same purpose;
· Story-testimony about the practical use of this product and the resulting socio-economic effect;
· Proof of high quality based on reviews of prestigious consumers of this product;
· Offering non-trivial ways to use this product;
· A report on the testing of goods by an independent expert firm.
The activities of the WCF include:
· Participation in exhibitions and fairs;
· Free transfer of samples for temporary use or for testing;
· Publication of non-commercial articles in the industry and general press;
· Holding press conferences, etc.
The result of the formation of demand is the formation of the image of the product. In the mind of the subject making a purchase decision, an image of the product should be formed: attractive, evoking positive emotions, well remembered. Specific forms of FOS events: a story about the specific properties of a product that distinguishes it from other products of the same purpose; story-testimony about the practical use of the product and the resulting socio-economic effect; proof of the high quality of the product based on reviews of prestigious consumers of the product; report on the testing of goods by an independent expert firm. Demand generation activities are primarily: advertising, exhibitions, fairs, as well as all other marketing communications tools.
Hello colleagues. Another important topic for every marketer and a big question: is the task of marketing to generate demand or satisfy demand?
Let's think about this issue together,
So, can marketing "supply the amount of demand"?
As often happens, in what is said, everyone is inclined to hear something different. To begin with, let's define demand and try to distinguish: the volume of demand in the market and the demand for a particular product.
Demand volume (market demand) - the amount of goods or services that a buyer is ready to purchase on the market at a specific price during a certain period(McConnell K. R., Bru S. L. "Economics: principles, problems and policies.
Moscow, Republic, 1992.- T. 1.- S. 61-67.- 399 p.
ISBN 5-250-01534-4)
The demand for a specific product is the consumer's willingness to purchase this particular product in the event of any change in the established price range. That is, the functional dependence of the value of demand for a product on its price.
Thus, the demand in the market and the need for your product are completely different things. In other words, when someone in the context of marketing says the word "demand", you always need to clarify what kind of demand you are talking about.
Market demand
If we talk about market demand in general and about the role of marketing in changing the magnitude of demand, then there is a role for marketing, but not determining. There are many non-marketing and non-marketer factors that affect the amount of demand, the so-called:- Change in the number of buyers (change in the birth rate, say);
- Change in household income;
- Consumer preferences, their tastes;
- Price market factors not controlled by market loggers. Let's say:
- changes in prices for complementary goods;
- changes in prices for interchangeable goods;
Thus, it is clear that the value of market demand is determined by the need for an item and the financial ability to buy it. Marketing cannot directly affect financial ability, fertility. Collusion of producers, the result of which is the expectation of an increase in prices or a shortage can affect demand, but this does not lead to consumer satisfaction. Financial incentives can be a marketing tool, but the development, customization and application of this tool are beyond the responsibility of a marketing specialist. But on consumer expectations ... However, more on that below.
What is marketing responsible for?
Marketing is a type of human activity aimed at meeting needs and demands through exchange.Philip Kotler "Fundamentals of Marketing" Short Course .:
Per. from English. - M .: Publishing house "Williams", 2007. - 656 p.
Peter Drucker, speaking of Alfred Sloan, a manager and management theorist with nearly 50 years at General Motor, said:
Its success was due to ... and the correct understanding of marketing - to create and produce goods that the client needs.
Per. from English: - M .: Publishing House "Williams", 2004. - 272 p.
Thus, from the definitions, marketing only helps to meet demand. The goal of marketing is a satisfied person. To spy on the consumer and give him something, so, in that place and for the money, so that the user can be: convenient, simple, joyful and satisfying - this is marketing.
Consequences of satisfied demand:
- sales growth;
- an increase in the quality of life;
- income growth;
- formed consciousness;
- culture of consumption.
Sales growth, recognition, the number of checks is not a marketing goal, it is only a reward, a consequence and result of a satisfied demand
All divisions of the company, including marketing, are not engaged in: the development of sales, relationships, culture, do not invent and produce goods, do not distribute them, but satisfy the demand. Depending on how well they do it, the sales grow.
More on demand and sales
If we continue talking about demand in the context of marketing activities, then:- You can only reorient the buyer from one product to another - you can try to increase the consumption of the product being promoted, at the expense of the competing product. Market demand has been and will remain at the same level.
- You can try to sell to other market or geographic segments, if there is demand there, reorienting buyers to your product or service. This will increase sales. Market demand will remain as it was.
- If the consumer meets the demand with a competitor's product, and you do not offer something better for the market, then all you do is promote the product, promote yourself, shoulder push, attempts to occupy the shelves, but this is not marketing. Because the the buyer does not get better from being on the market for such a product,the lack of sales that are in any way similar to the sales of the segment leaders - this is the explanation for non-marketing activities;
- You can deceive the consumer by stimulating demand. You can make him consume more or more often: two pillows of gum - in his mouth, wash his hair twice with shampoo, etc. This deception is not called marketing!
- You can stimulate the purchase of your particular product - to offer the consumer a large package, at a better price, only:
- the demand for your product will increase, but only in the medium term, then, if you do not continue to stimulate, the demand will return to its previous values \u200b\u200b- they did not consume more, market demand did not increase;
- in the short term, you sell off stocks, but postpone the next purchase - demand and consumption, as they were, remained so;
- part of the surplus of the purchased goods, unable to consume, the buyer will throw away, which means that satisfaction, in the long term, will decrease and you will receive an outflow of buyers dissatisfied with your manipulations;
It is a very difficult marketing task to increase "demand" and increase consumption without fraudulent actions and deception!
Who generates market demand?
Let's try to understand how market demand is formed, using the example of the jewelry market - an example will be very contrasting. Today, there are three predominant jewelry buying needs:Thus, the generated demand for jewelry in jewelery is the result of a great deal of work to introduce into the minds of consumers the above-mentioned needs imposed by mass propaganda. Who is doing this? There is such a profession - "trend maker", there are global players who can afford to engage in the reformatting of consciousness.
- The need to “invest money profitably”;
- The need to acquire emotion: "beautifully", "fine graceful work", "emphasizes my thin fingers", etc .;
- The need to acquire a symbol: symbols of social status, religious affiliation, expressions of the giver's feelings.
Krok G. Jewelry store: management, merchandising.
M .: Publishing house "6 carat", 2008. S. 85.)
Trends, hype and demand
There are market players who don't even try to meet demand. They can afford not only to reorient the target audience of any product or market segment, but to reformat the consciousness transboundary, at the same time of large masses of people. Everything is illustrated by such a case from the same market.The result of these measures was a 55% increase in diamond sales. But excuse me, the basis of sales growth is manipulation. After all, the reason for being active is not a desire to satisfy demand (marketing), but profit!
A few more similar campaigns come to mind:
- Global propaganda work on introducing into the consciousness of the idea of \u200b\u200breplacing freon with another gas in cooling systems, called the "Ozone hole over Antarctica" * ;
- The raids on nuclear power by Greenpeace and other propaganda tools by one country losing the global nuclear competition;
- "Buy domestic goods", "rest at home" - campaigns to stimulate demand for domestic goods and services;
- Healthy Lifestyle (HLS) is a global trend, but promoted and generously funded from the pockets of the global corporation of manufacturers of sportswear and sports goods;
- Electric cars are a global project with the aim of luring investors and their finances out of the existing energy market, reformatting this market and getting cheap energy carriers and energy. **
I think that you yourself can easily remember a couple of similar cases. All advertising and propaganda work does not lead to the real goal of consumers. Not to be confused, the global task of companies to increase profits and its cover in the form of propaganda campaigns about the social and social benefits of innovations, built on fake research. There is no more marketing in these cases than diamonds in roadside mud. To quote the words of P. Drucker:
In marketing, nobody starts with the question "What do we want?" It all starts with the questions: "What does the other party want? What are its values? What are its goals? What results does it want to achieve?"P. Drucker "Management Challenges in the XXI Century"
Per. from English: - M .: Publishing House "Williams", 2004. - 272 p.)
then, it becomes clear that the cases offered to your attention, have nothing to do with marketing, walking and quite accurately describes the mechanics of the formation of market demand.
Form market trends and demand - a global task that lies outside the marketing goal and is not subject to marketing.
I will say more, if the propagandized and imposed does not satisfy the needs, the consumer will certainly take revenge. When the consumer understands and the veil of "hype" subsides, returns, screams, exposing posts in social networks, lack of repeat sales, and the words "again a marketing scam" - all this will be practically guaranteed!
A couple of words as a conclusion
Dear marketing specialists, I hope that all of the above does not raise doubts about the following:- The task of creating a need is a global and not a marketing task;
- Forming a need is a huge propaganda work and incredibly large funds, including for the subsequent maintenance of the idea itself.
- Sustainable global trends affecting demand are not formed in the market, but in society.
- The marketing task is to satisfy the demand for goods and services;
- The task of marketing is to reorient the demand for promoted goods and services;
- To spy on the emerging trend and offer a product and service that satisfies the emerging need - this is marketing;
- Sales growth is not a marketing goal, it is a consequence of customer satisfaction.
P.s. * The panic around the ozone holes was organized and paid for by E. I. DuPont de Nemours in order to replace the generally accepted (cheap, efficient in many industries and completely safe) freons with their new developments - much more expensive and less efficient, but produced at that moment only by it.