Demand segmentation and demand drivers concept: a marketing article

Segmentation of the demand for products/services by analyzing the drivers of demand

Traditionally, marketers try to entice customers to buy the product of their choice with tools like ads, POP, offers and giveaways, discounts and credit limits, better offers on services and product features, etc.

But can we segment the total available demand? This article looks at how we can do that.

Marketers have been interested in meeting demand by increasing sales through tools such as a larger sales force, increased visibility, and direct marketing tools. These have been instrumental in increasing the results of most organizations in India. A backward integration of the same demand would arise in the generation of needs. A simple difference between need and demand is that the demand would be supported by the ability whereas the need would only deal with the willingness to buy the product or service. A Beggar who dreams of traveling by plane can be taken as a case of necessity, although he dreams of it (will), he does not have the money (ability) to pay for it. This is a case of necessity and sellers are not interested here. Now comes the case of an aspiring businessman to travel by plane. He has the two necessary ingredients, Skill and Will. And marketers are interested here because it generates demand, figuring it out according to their desire is his job. Now the question is; Is it possible to decipher the demand from the point of appearance of the need?

Demand segmentation

Segmenting the available demand would be of real interest. It will be important for both analysis and action. We will analyze demand at three simple levels. It will be analyzed how a brand is effective in creating demand instead of satisfying it. The concept of drivers of demand will also be discussed.

Needs-Based Demand

I have seen that when a train approaches the station, many local vendors may be selling consumable items depending on the hour. Suppose that if a customer is thirsty (Need) and has the money to buy a bottle of bottled drinking water (Demand), he will wait until the water vendor arrives. Here two cases arise. Either he can choose to consume what the vendor sells (His need for him is satisfied) or he can wait for a specific brand to arrive (He has a choice of brand). The latter would go to 2nd category. We will analyze the first case here. Going back to the example given that your need for thirst is being met by the water available with the vendor. The brand that is available from the vendor is sold, not the one that the marketers choose. This is schematically represented by figure I in which the lower part of the pyramid gives the volume of the demand and the area of ​​the trapezoid is proportional to the total demand for it. Since the area is large, the demand would be higher. But since the demand is greater, there would be more brands/products to satisfy it. Here the point to note is that it is not the brand that pushes customers to buy it, but the consumer’s need. Brands that fit here are a “Me Too” type of brand, where because of customer need, the brand sells. A larger sales force than other marketing functions will result in increased brand sales. A brand fits here when it is a me too brand that fills the need. There will be more options available as the demand in that segment is higher. It would be difficult to create brand awareness in this segment, as only the need attracts the demand and not the brand. There is little to no differentiation here, as literally all products provide the same benefit. Customers tend to prefer those products whose perceived benefits are higher compared to others. That is, value for money products.

Need-based demand, of course, meets the basic needs of the consumer. You don’t have a brand option here because you can’t postpone the need/requirement. Whatever comes your way, it is ready to consume to satisfy your need. More of a first come/first serve type. Need-based demand forms the largest part of the figure, as this need arises for everyone, even a layman. The basic needs proposed by Maslow arise for each and everyone, even for animals! Here there are no options like “I want this/I want that”. The need, if it is strong, will be satisfied by whatever comes into view. Going back to the “first serve” method mentioned above. Need-based demand, while the largest in the pyramid, is the hardest to crack. I’m not saying it’s not possible to figure this out, but it’s hard and it’s only possible if the consumer is able to postpone the need for it, so that their choice of brand comes through. It is simply because consumers cannot postpone their need, or rather they have a specific brand choice. For marketers, it will be difficult to decipher this zone and all marketing efforts made here will be in vain.

Brand-based demand

We return to the previous example, where the consumer seeks to quench his thirst. Suppose a seller is selling brand X water while he needs brand Y, and if he is prepared to wait until brand Y arrives, or is not prepared to buy brand X because he does not have Y, we can say that the demand It is brand based. This forms the middle level of the demand pyramid where the demand, although small, is well segmented. Different brands have different market shares and the offer is well differentiated. Customers are aware of the fact that the brands they buy talk about themselves and therefore make decisions. As seen in the pyramid of demand, the demand here is less than that of level 1: need-based demand. Marketing tools will work here as they try to reinforce the minds of the customers with the brand image. The success of these tools can be determined by how good the brand is at making the customer’s preferred choice.

Brand-based demand arrives when customers’ brand choice arrives. It is able to postpone/change the demand so that its brand choice prevails. Unlike Tier 1: Need-Based Demand Marketers are interested in this segment, even though the volume of demand is less than Tier 1, because they can crack this segment. And although the customer has a different brand choice here than the first, his choice can be modified by the activity of the marketer. This is where the aforementioned sales tools come into play. Marketers mainly focus their activities here as they are bound to get better results. A customer’s brand choice can be changed to another of the marketers’ choice by drawing the customer to your side using the tools mentioned above. Marketers delight in doing more and more of those. Offers, discounts and gifts are the easiest way to show the results of the efforts made.

Demand Drivers

These form the highest portion of the demand pyramid. These are essentially need/demand creators. This can be well explained with an example. We will take the example of the passenger car industry. Currently in our country, depending on the price, a customer can go to any purchase level, from Rs 1 Lac Nano to Crore Buggatty. We will now take the example of a customer looking for a Rs 10 Lac car. Suppose you save close to Rs 3 Lac a year in the next five years you can opt for an entry level Benz or Audi. Instead of opting for the Rs 10 Lac car, which many might have, you can dream of owning a Mercedes within the next five years. Now is demand created here? The demand that was initially for a Rs 10 Lac because it was postponed for something higher. The brand appeals both to the emotional part of the customer and to others. The Mercedes car usually carries the label of ‘I have arrived’, a feeling that appeals to the emotional part. It reminds me of the old Britannia jingle when a little girl is thinking of growing up as her big brother. It is true that when she grows up she will be in demand, of her pocket money or whatever. But it will be specific. Now the point is to figure out the demand for her at the very last stage from the point of generation of need (at a young age). After becoming a specific demand, marketers will be able to do less only when the demand is specific and unvarying. Demand drivers do this job, they’re effective at creating demand, and that’s too specific. This is not only true in the premium offerings, but also in the mass category if one brand manages to differentiate itself from the others. The demand, as the pyramid shows, is the smallest compared to others, but it is the most specific. Customers that fall into this category are brand specific and have their choices. It will be difficult to attract customers from one brand to another. Another example would be a customer using a Parker ballpoint pen. Although he can use a popular Rs 5 pen, he has opted for the Rs 100 plus Parker pen because it gives him a sense of euphoria. He will save for many months to purchase this offering. And since she’s carrying a parker pen, she won’t hesitate to show off her pen. I know of people who buy a used Mercedes and store it in front of their house only for other people to say that their house has a Mercedes, they won’t take it out for a ride because of the low mileage. Just to brag.

Demand drivers, in fact, also appeal to the emotional part of a person. Touching and feeling the product makes you feel euphoric, and owning it enhances your image. Demand drivers are effective in creating the need in the initial stage and then go on to create a specific demand in the last stage, thus acting as demand creators. Marketers need to work on the brand and continue to position it as a dream brand in the minds of customers. Create aspiration for the brand. It is like a dream product for the customer. In short, a demand generator can be termed as a product that is capable of creating demand for itself.