The market demand for a particular product or service is the total number of buyers in a market willing to buy that product or service. In other words, it’s all the individual demands for a particular offering put together. Market demand increases with increase in the number of buyers, and decreases when the buyer number goes down.
Companies and market experts are usually interested in the market demand for a product or service as it denotes the marketplace’s competitiveness and lets them determine their production levels and pricing. Firms contemplating entry into a particular market segment would use market demand as a yardstick to assess the revenue and profit potential of the segment.
Categorizing Market Demand
Market demand could be categorized as primary and selective. Primary market demand refers to total demand for a particular product or service irrespective of its brand. For instance, the primary demand for a luxury watch would comprise market demand for watches made by all luxury watch makers such as Patek Philippe, Audemars Piguet, Rolex, Blancpain, Cartier, etc. Selective market demand, on the other hand, is the market demand for a particular brand offering. For instance, market demand for only Patek Philippe watches is selective demand.