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Demand

DEMAND

Demand for industrial or business is normally a deriveddemand for consumer goods and services

The demand therefore is derived from the expectations /forecasts of the requirements from the industry or businesshouses

The demand for industrial products are joint as well

Cross elasticity of demand plays a very important role on theentire corporate strategy

The demand for industrial products is more fluctuating or has

high variations than the consumer products

Bullwhip effect is due to in-accurate demand forecasting,inaccurate batching, price fluctuations and distortion ofinformation in supply chain network

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Demand

FACTORS INFLUENCING DEMAND

End consumers

The ingredients sometimes are not liked by the ultimateuser and the manufacturers need to change the product

Sudden change of preference from one product to another

(semi automatic to fully automatic washing machine ordirect cool to frost free refrigerators, one model of car issuddenly liked by the market A Maruti or Nano effect)

Business conditions

General economic conditions taking a dip or jump

The customer losing business to competition

Seasonal demand sometimes hampered by changes (rainsin May/June affecting sales of ACs or room coolers

Financial conditions of the customers

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Demand

Price

For consumer products the demand may increase if theprices are reduced i.e. an inverse relationship exists whilein the case of industrial products the demand normallydoes not change unless the reflection of price on thefinished product is very high and the demand for the

ultimate product goes up

Case of Tetra Pack

However in the case of equipments and machineries thechange in prices do not impact the demand

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INDUSTRIAL MARKETINGDemand issues

Short term demand

Normally short term demand is calculated by projecting the salesbased on the previous data available and the expected demandpattern of the ultimate product

Though it a crude method, but with the least variables and theexperience of the executives working in industry, helps in settingthe short term demand of the product

Long term demand

Whereas long term demand would involve many factors at

macro level, such as;

1. The growth of the GDP of the country

2. Growth of the industry itself and the related industry

3. Spending pattern of the people

4. Study of the consumer behaviour

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INDUSTRIAL MARKETINGDemand issues

5. Expected increase in the earnings

6. Socio-economic pattern and the changes expected(middle class and the upper and lower middle class andthe change of this pattern over time depending upon thegovernment policies with regard to employment and othersocial securities)

7. Policy of the government towards existing industry andthe external factors like imports (including the dutiesimposed by the government and free trade agreementswith the countries

8. Developments in the field which force customers to

replace products faster (of course also depends on theprice of the products - products getting cheaper withenhanced technology and competition).

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Demand

It is therefore very necessary that the forecasting of the

demand is made as scientifically as possible

The seller needs to take care of the following;

Keep a proper record of the past performances of

1. Own company

2. The customers

Competitors past performance as well as activities on

developments and investments (including new entrants)

Global developments on products and replacements if any

Technological innovations and developments which mayaffect present products

Close liaison with customers, suppliers and markets

Regular scheduled meetings with customers

Relate demand to the ultimate demand and study theimpact.