Tools For Calculating Market Demand For Your Ecommerce Store
Market demand reflects the quantity of products customers in a marketplace are able or willing to purchase at various price levels.
Demand is dynamic and fluctuates based on competition, economic factors and overall buying trends.
When building an ecommerce website or choosing products, a merchant must be aware of market demand in order to plan a sound strategy.
Having a gut feeling about a product is simply not enough, and demand research and analysis is certainly an important starting point in any new ecommerce endeavor.
The reasons market research demand is vital:
- Validation of product ideas - to establish if there is demand for this product at all
- Setting price points - to set the optimal price for maximum sales and profit
- Smart budgeting decisions - to plan marketing and inventory spending wisely
What's A Market Demand Curve?
Market demand is best understood in a visual manner, with the help of the market demand curve.
This curve displays the overall quantity demanded of a product at various price points.
There are four ways in which price and quantity demanded affect each other.
Prices impact demand in the following ways:
- When prices increase, demand decreases. A merchant will lose a certain amount of customers to the competition by raising prices.
- When prices decrease, demand increases. There are typically more purchases made when there are special sales or discounts.
Demand also affects the prices:
- When demand increases, prices increase. When there is a surge in demand for a particular product, prices are pushed up.
- When demand decreases, prices decrease. A business losing customers might lower its prices to get demand back up.
How To Measure Demand
Once the theory behind market demand is clear, you might ask yourself how to measure it. Here are the best ways:
- Marketing Experiments - By performing a test Google Adwords campaign, you will be able to measure demand prior to purchasing inventory. If you get conversions, this will validate demand and you will be able to collect emails during this campaign to use once you launch your product.
- Surveys - Posting surveys on social media is an excellent way to learn more about your potential customers and measure demand for a product. Asking specific questions, you will be able to estimate how many sales could be made once you launch your product.
- Competition Analysis - Looking at your competitors’ reviews are the absolute best place to start when analyzing what your future customers are actually buying. If there is a large number of reviews this is a positive sign as it indicates that people are buying the product. Positive reviews can show us what customers are looking for, while negative reviews can give us ideas on how to improve existing products.
[H2] How To Find Demand
Where there is demand, there is potential revenue to be made. Finding demand in the ecommerce sphere can be done in some or all of the following ways:
- SEO Tools - These tools are the most useful ones for finding demand, and validating it. Using tools like Google’s Keyword Planner and Keyword Surfer, you will be able to find demand based on search volume, search trends, keyword intel, and estimated organic traffic. You will be able to splice the data according to country or demographic, as well as analyze the distribution of interest to know what products to focus on. To be ahead of the curve, you can use Google’s “recently trending” page to be on top of emerging search queries.
- Social Media - This type of channel can be highly effective when it comes to actually listening to potential customers and what they are looking for. There are plenty of social media listening tools such as Keyhole, Awario and Agorapulse which can help you aggregate data from comments and conversations across the various types of social media.
- Online Forums - The advantage with this method is that you can be an active participant. In addition to gaining useful information from these targeted groups, you will be able to engage with the members to ask more specific questions about what they are looking for, as well as their feedback on various products on offer today.
Data is highly important in business, and ecommerce is no exception. Perhaps the most important data for an online store owner is market demand, as this will validate ideas and justify investment and effort. It is important to stay in touch with potential customers and their desires, with the help of the useful tools and media the online space provides. If you know how to find and measure demand for a product, you are already halfway there when it comes to ecommerce success.