Market Dynamics: Supply, Demand, and Consumer Behavior
Understanding Supply and Demand
Supply: Represents the willingness of sellers to offer a product at a specific price. The higher the expected price, the greater the quantity of product vendors will be willing to supply.
Demand: Represents the willingness of buyers to purchase a product at a specific price. The higher the price, the lower the quantity that buyers are willing to purchase.
The interaction between supply and demand determines the market price of a product:
- High Price: Discourages buyers and encourages sellers due to expectations of profit, potentially leading to oversupply. Prices will tend to decrease as sellers prefer lower prices over not selling their product.
- Low Price: Encourages buyers but discourages sellers due to low profit expectations. This can lead to excess demand, meaning a lack of product in the market. Prices will tend to increase as vendors find customers willing to pay higher prices.
Factors Influencing Purchase Decisions
Psychological Factors
These are grounded in consumer motivation:
- Rational Reasons: Based on the buyer’s reflection on the product’s characteristics and its ability to meet their needs.
- Emotional Reasons: Related to the consumer’s desire to gain reputation or status by owning a particular product.
Macroeconomic Factors
These relate to the state of the economy as a whole:
- Unemployment Rate: A high unemployment rate often leads consumers to protect themselves against the future, reducing spending and increasing savings.
- Economic Outlook: If consumers are confident in a booming economy, their willingness to purchase increases.
- Interest Rate: Low interest rates encourage spending, especially on items like vehicles or homes.
- Other Macroeconomic Factors: The stock market’s performance, inflation rate, and tax levels also influence purchase decisions. For example, individuals may buy less if the stock market declines, their investments lose value, or taxes increase.
Social Factors
These relate to the model of social organization:
- Women’s Participation in the Labor Market: This has influenced factors such as reduced time for shopping, impacting the development of new products and sales methods.
- Birth Rate: Determines the composition of spending, from diapers to school supplies.
- Education: Influences the purchase of certain products, such as computer equipment or books.
- Other Factors: Various changing consumer habits due to factors like immigration, fashion trends, etc.
Market Segmentation
Market segmentation involves implementing a specific business strategy for each customer group. Each group consists of customers who demand a product with similar characteristics.
Segmentation Criteria
- Objective:
- Geographical (the geographical area where customers live)
- Demographic (age)
- Socioeconomic (social class)
- Consumption Pattern (regular, casual, etc.)
- Subjective:
- Personality (psychological traits)
- Lifestyle
- Values
- Preferences
Product Positioning
A positioning strategy defines the features you want the consumer to perceive in the product, differentiating it from competing brands and positioning it as the best solution to meet their needs.
Types of Positioning Strategies
- Functional: Based on the benefits the product offers.
- Quality-based: Linking the product to a certain standard of quality.
- Price-based: Associating the product or brand with a certain price level.
- User-based: Highlighting benefits or qualities valued by certain user types, such as health or physical appearance.
- Symbolic: Associated with self-image or identification with social groups.
- Image-based: Associating the product with a personality’s image.
- Social Group Membership: Associated with a certain social status.