Market demand, how to find it and calculate it

When starting a new business or creating a product, you don't just need confidence. To start a concrete business, real evidence is needed to measure the feasibility of a product.

One of the crucial things in starting a business is making a business plan by understanding the value of demand. Market demand is proof that there are people interested in the product or business you are going to do.

Through calculating market demand, you can find out financing strategies, market initiatives, purchasing, and so on. The strategy formation process allows for the development of clear product ideas.

What is market demand?

The definition of market demand is the number of consumers who want your product for a certain period of time. Demand is determined by several factors, namely the number of people looking for a product, their willingness to pay, and how much product is available to consumers (both from your company and competitors).

Market demand can fluctuate from time to time due to various factors. Some factors do occur seasonally and can be predicted. However, there are many other things that are more out of control such as natural disasters or even pandemics.

When more people want a type of product, that's when market demand increases. Under these circumstances, prices usually rise because more people want the product and more people are willing to pay for it.

However, prices usually follow when market demand decreases. One of the most common business mistakes is not considering market demand for the business, especially in terms of product development.

How to find the right market demand for your business

Market demand can be found by knowing the right market for the product you have. To get it, there are various ways you can get data and "hear" consumer needs, including the following:

1. Use optimization tools

You can find inspiration through Google Trends by typing in specific keywords, phrases, and topics to see how often people search for related topics and terms. You can filter by time period, country location, and even city to reveal specifics regarding those search trends.

Specific cities often seek specific products and provide inspiration regarding distribution strategies. Apart from that, you can also get insight into how to focus marketing efforts which can be planned before starting production.

2. Conduct research via social media

Many tools allow you to filter conversations, target geographic locations, and pull summary analysis reports. Each tool works in a different way but is able to achieve the same thing in terms of researching market demand.

Basically, you can use the same method as searching via Google Trends. The difference is, social media tools will attract posts that mention or are relevant to these keywords.

You can see what the sentiment is like, where people are talking about it, and even what they're actually saying about it. Market demand is not just about calculating interest in a product, but rather understanding the number of products that the market will buy and their prices.

How to calculate market demand (market demand)

When you want to start your business, calculating market demand is basically simple. You just need to add up all the individual requests. Individual demand coming from a single consumer represents the quantity he will buy at a certain price and time.

Likewise, the market demand function can apply the same thing. For example, there are 3000 consumers with identical demand functions, namely Qd = 75 – 10 P. To determine the market demand function, multiply the individual functions by 3000.

Qd x 3000 = (75 – 10 P) x 3000

Qd = 75 – 10 P

If the demand function varies across individuals, the above calculations will become more complex. However, basically the determinants of market demand can be depicted using a graph called a demand curve.

The future of products and companies is greatly influenced by establishing the correct pricing strategy. Apart from that, product development will also depend on a price strategy that is in line with market demand. With the right combination of capabilities, your product and business can continue to grow well.