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What is demand and pent-up demand
The social sciences give different definitions of demand; associate it with prices, quantity of goods and other material aspects. But in marketing, we focus on the customer and talk about demand as a need that the consumer presents to the market.
There are several classifications that help describe demand as a phenomenon.
- By frequency:
- daily demand (food, taxi etc),
- seasonal demand (vacation, ),
- episodic (real estate, cars).
- By formation speed:
- stable, in which the client considers the purchase and consciously chooses the product;
- unstable, when a customer intentionally makes a purchase, but chooses from alternative options in the store;
- impulsive, without prior consideration by the customer of the purchase.
- By price role:
- elastic – the purchase is not urgent, it can wait for the price to fall;
- inelastic – the product is necessary and will be bought at any price.
- By satisfaction level:
- Satisfied – the totality of goods that were purchased;
- unsatisfied – the number of goods that the consumer wanted to buy, but did not buy;
- real – the sum of the previous two types.
Pent-up demand is a kind of unmet demand; it includes inquiries from customers who intend to make a purchase, but not now, but later. At the same time, the customer has a specific guideline when to buy the product, it’s about plans, not dreams.
Pent-up demand intersects with elastic demand, that is, it is observed in non-essential goods. Take a grocery store for example. If the consumer runs out of salt, he will buy it immediately. But the sweets will wait until the end of the diet.
Pent-up demand is also present in segments with stable demand. When the customer considers the purchase in advance and chooses the product, he may decide to buy it later. Which is rare in niches focused on impulsive shopping.
Pent-up Demand Example
The most vivid example of pent-up demand can be seen in seasonal goods and services. For example, in Turkey, there are many resort hotels, but due to the climate, the resort season doesn’t last the whole year—it’s too cold for beach vacations in winter.
Nevertheless, our client, NG Phaselis Hotel, continued to advertise during the off-season. This advertising attracted customers who made early hotel reservations, and we described this effect in the article “How to Promote a Hotel During Off-Season: NG Phaselis Using DV360 Case Study”. However, we also expect it to have a lasting impact. Some of the audience will remember the hotel but postpone the decision to take a vacation.
And these people who postpone their decision contribute to the pent-up demand for a vacation at the hotel. Eventually, the customer can convert pent-up demand into actual sales by launching a remarketing campaign, which can be highly effective.
We recommend that all businesses dependent on seasonality follow this experience. Continue advertising during the off-season because it creates pent-up demand that can be capitalized on later.
Factors that affect pent-up demand
Demand decreases as prices increase. This was true in the nineteenth century, and does not lose relevance in the twenty-first. But it’s not just the price that influences the intention to make a purchase. Consider demand factors, how they can generate deferred demand and turn it into sales.
Consumer income
People with an income of $10 000 and $30 000 per month make purchases differently. Marketing cannot make current customers richer, but reorienting to a more affluent audience is a standard approach for both B2C and B2B companies.
At the same time, there are a number of purchases that are postponed “after the salary”. If this is your case, increase your campaigns in the first and 20th days of the month – the days when most people receive a salary and an advance.
When it comes to B2B, run price-focused campaigns when your customers have a high season. You should also launch a promotion or discount in November-December, when companies plan a budget for the year and can provide a place for your product.
Number of consumers
The more potential buyers in the market, the greater the demand. The company can increase their number by entering new markets or warming up a cold audience. In both cases, media advertising helps to meet new potential customers.
For example, promoting the Rocket brand, we focused on video advertising for YouTube in TrueView, Bumper, Discovery formats. And also used banners to increase coverage and contact with the user. What results we got – read in the case study Raketa delivery service: how to attract more customers with digital marketing optimization – newage.
Availability of analogues and competitors
Everyone knows what to do with competitors: compete, rebuild, take market share. But many here forget about analogues, which, it would seem, are not competitors at all.
Take, for example, Berliner Verkehrsbetriebe Gesellschaft, Berlin’s municipal carrier. There is no private metro or competing tram junction in the city, but the company is all about branding and rebuilding from alternatives like taxis, bicycles or even asking someone to pick you up.
BVG builds a strong, recognizable brand and works deftly with the negative. In its campaigns, the carrier shows passengers and situations in which they need transport. Thanks to this, customers remember that they can use public transport.
Expectations
The economy includes expectations on global issues, such as: “How will the financial situation of the family change in the coming year?”. If the answers are optimistic and the consumer confidence index is high, it is worth waiting for the growth of demand in the market as a whole.
But marketing also considers the expectations of customers from a particular company or product. These include the announced products that users are waiting for. For example, flagship smartphones, movies, regular events, etc.
A strong brand is needed to work with expectations. And the scale of the brand is not as important as the loyalty of the audience to it. If the mini-bakery tells customers that there will be Easter cakes according to a secret recipe, regular customers will look forward to the purchase, just as fans of the movie universe are waiting for a new movie. Therefore, it is important to build a brand and increase the loyalty of the audience to it.
Also in dealing with expectations, it is important to communicate to customers. If the bakery has enough to post an ad in the window, the international company will need a comprehensive advertising and PR campaign. Here, too, media advertising will help, because it is this tool that brings new products to market and introduces users to them.
Tastes and preferences of consumers
This includes customers’ intrinsic motivation for why they make or don’t make purchases. Consider the example of the fashion industry. Some consumers regularly update their wardrobe because they follow trends and find new ways to express themselves. Someone for environmental reasons buys clothes rarely and for a long time. And someone adheres to the principles of minimalism, and even for free will not take an extra T-shirt, because it is superfluous.
It would seem that all these beliefs are in the minds of customers and we can not influence them. But it is for such an influence that there is advertising. There are three main behavioral strategies.
- Adapt to consumer demands. Launch a line of capsule wardrobe to reach the minimalists, and articulate how environmentally friendly the company’s production is.
- Ignore not “your” audiences. To build on ecological minimalist brands, focusing, for example, on the manifestation of a bright personality. This strategy allows you to attract more consumers who share the company’s values and create a cohesive community.
- Create trends yourself. In this case, the brand communicates its values to people who are not the target audience and may not share them. In the example of fashion – to explain to minimalists that a small amount of clothing needs to be changed more often to express themselves more clearly.
It doesn’t matter if you are influencing the tastes of the audience, adjusting to them or rebuilding yourself from competitors, in any case you need PR and media advertising. These are the tools with which the brand communicates with the world and can declare its values.
Conclusions
- Pent-up demand is the intention to make a purchase that has been postponed for some reason.
- Pent-up demand is usually observed in niches with elastic and stable demand. It applies to non-essential goods, as well as purchases that people plan in advance.
- The formation of demand is influenced by: consumer income and quantity, the presence of competitors or analogues, consumer expectations, fashion.
- To convert demand delayed for financial reasons, run advertising when the consumer has enough money on hand. For B2C niches, these are the first and 20th days of the month when people get paid. And in B2B it is necessary to be guided by a high season at clients, and also at the end of the year when strategic sessions pass and the budget for a year is planned.
- Use media advertising to reach the maximum number of consumers and build a pool of customers with delayed demand. It aims to help the user remember the companies and the product, and then turn to you, not to competitors.
- It is important to build not only from direct competitors but also from less obvious counterparts. If you create a brand with an audience loyal to it, then the delayed demand for this audience will meet you, not look for substitutes.
- You can artificially generate deferred demand by announcing the product and shaping customer expectations from it. This technique is used by global companies to make a big start in sales, but local brands are also able to use expectations for their own purposes.
- There are three strategies for using consumer tastes to work with demand. You can adapt to them, change them, or look for customers with certain preferences. All these communication options are implemented through PR and media campaigns.
