What is the law of demand?
The law of demand states that as prices rise, demand drops, and vice versa. If you put out too much product, you could wind up with unusable stock sitting in a warehouse. Products with a best-by date can go bad before consumers have a chance to purchase them. On the flip side, if you don’t have enough stock, consumers can switch to your competitors, and they may not come back. (A lesson many CPG manufacturers learned during pandemic panic buying.)
However, this is a very simplistic view of demand and does not include any of the external factors that can impact demand. Demand of consumer goods can change even when prices are stable. This is due to external factors like changing trends, global issues, the local and state economy, and even a damaged brand identity.
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Market factors affecting demand of consumer goods
The demand for a good increases or decreases depending on several factors. This includes the product’s price, perceived quality, advertising spend, consumer income, consumer confidence, and changes in taste and fashion. Understanding the many varied elements and the small CPG landscape that affects product demand is hugely beneficial. Fortunately, we’ve compiled a list of the top seven factors affecting demand for you. Select each factor below for a detailed breakdown.
Key takeaways for CPG brands
Knowing the above seven factors is only the first step. How can you utilize this information to move your brand forward and expand your market share? Here are some ways to internalize this information.
Anticipate consumer needs
Many smaller CPG companies are reactive to the market, not proactive. Brands have to use past retail data to make informed decisions, but that information is not always insightful. Once you can dive deep into the factors that influence consumer demand, you can anticipate their needs more accurately. From there, you can adjust your product offerings and capitalize on shifting tastes to increase your sales.
Not only can this data help you understand your current customers, but it can also provide insight into new demographics and market potential. If you’re looking to expand to new areas or retailers, you’ll need to know what to expect.
Create better promotions
If you’re not maximizing your promotional spending, you’re hurting your bottom line. Once you know more about your customers and why they shop for your products, you can develop CPG marketing materials to appeal to their tastes and sensibilities.
Getting data from all seven factors can help you develop more precise marketing materials that can spur action. Plus, showing that you understand your customers can help build brand loyalty, which is always a massive benefit in the CPG world.
Find your place in the market
When building your brand, it helps to see your company on a macro level so that you can figure out where you stand in the marketplace.
Gathering data from these seven factors that affect the demand of consumer goods can enable you to get a bird’s eye view of yourself and the competition. That way, you can determine a better path to growth. Otherwise, you could be flying blind and making decisions that may or may not strengthen your bottom line. Just make sure to ensure your growth can keep up with consumer demand.
Picking the right analytics solution for your CPG company
The easiest way to understand the factors affecting demand for consumer goods is to use retailer data. But, having tons of data is only helpful if you can analyze it, digest it, and turn it into actionable goals.
Fortunately, with Byzzer’s reporting solutions, you can have all the data you need at your fingertips. Contact us today to see what our tools can do for your business. You’ll also want to read our guide on how to use retail data to gain market share.
Byzzer provides breakdowns of all these attributes in easy-to-digest reports. Best of all, we’ll show you how to leverage this information for your action plan.