Question

Research and identify key non-price factors that influence supply and demand. Which do you feel is the most important, and why? Be sure to support your answer with a reference(s).

Answer 1

For a company that wants to market effectively, considering the non-price factors affecting demand is an important part of devising a marketing and promotion strategy. Non-price factors vary depending upon a wide variety of market influences, climates, and preferences and may change at any given point in a product’s life span.

Because of this, it is important to stay on top of this ever-shifting climate in order to market a product efficiently. Consider the following non-price factors when devising a marketing and promotional strategy for your company’s products and services:

Income

As far as changes in demand go, consumer income expectation is one of the most important things to keep an eye on. When consumers expect their income to increase, companies will see an increased demand for goods, products, and services. Likewise, when consumers expect their income to decrease or cease entirely, they are less likely to be in the market for products, goods, and services, thereby decreasing the demand.

It is worth noting, however, that the effect over income on demand varies depending upon the product being sold. While the demand for expensive luxury food items may fall when consumer income falls, companies that sell low-quality, high-fat ground beef may see a sudden uptick in demand for their product, given the fact that the meat is inexpensive and filling.

These types of goods are called inferior goods. Although inferior goods are not always low-quality, they are generally the types of goods that will see an inverse relationship between customer income and product demand.

Price of Related Goods

Another important non-price factor that determines demand is the price of related goods. Substitute goods affect the demand of related goods when the supply increases or decreases. Because substitute goods are used one in place of another, rather than together, the demand for one will always decrease when the demand for another increases. For example, if a company manufactures rubber products and there is a huge uptick in the availability of natural rubber, the demand for synthetic rubber (natural rubber’s substitute) will inherently decrease.

Unlike substitute goods, however, complementary goods affect the demand for related goods on an inverse scale. Because complementary goods are used together rather than separately, the demand for complementary goods tends to increase in a side-by-side fashion. For example, a drastic decrease in gas prices will lead to an increase of cars on the road. This, in turn, will lead to an increased demand for gasoline, coolant and engine oil, complimentary products to the gasoline itself.

Tastes and Preferences

Consumer tastes and preferences play a large part in determining the level of demand for a given product. As trends, fads and styles change, consumer preference does, too. This means that changing hairstyle preferences among women will also change the demand for related products, such as hairstyling equipment, products, accessories, and colors.

Expectations Of Future Price

When consumers expect the price of a given good to drop in the future, it is likely that the demand for said product will stall until the aforementioned drop occurs. Likewise, when the price of a product is projected to go up, the demand for that product will increase in anticipation of the increase.

Seasonal Considerations

The seasonal environment drastically affects the demand for given products throughout the year. For example, there is a greater demand for Christmas lights in December than there is in June, there is an increased demand for candy in October than there is during other months and there is an increased demand for raincoats in the spring than there is in the summer.

These seasonal considerations can easily be factored into marketing strategy in order to ensure a company is providing its customers with in-demand products at the appropriate times of the year.

Population

When it comes to non-price factors affecting demand, population is a large consideration. Population does not simply mean the number of people living in a certain area, though. Population, from a marketing standpoint, indicates the number of buyers in any given market. When the number of buyers in a market increases, there is a subsequent increase in the demand for products, goods and services. Likewise, when the number of buyers in a market decreases, the demand for the aforementioned products, goods and services also decreases.

When more buyers enter the market, the amount of product consumed on the large scale experiences a drastic uptick. The amount of consumers in the market can vary based upon a university being in session or not, a housing boom, the creation of new jobs in particular area and any number of other factors.

Why Marketers Need to Pay Attention to Non-Price Factors

Non-price factors have the potential to greatly influence the success of an item on the market at any given time. Because of this, it is wise for marketers to pay attention to non-price factors that affect demand as they prepare to put together a marketing and promotions plan. While non-price factors can vary greatly, they are an important consideration in any marketing strategy.