Did you know that 35% of the time startups fail because there is no market need? Whether founders failed to do proper research or had misperceptions about their market, the fact remains the same.
Most founders see a gap in the market, a problem they can solve, then find a solution for it. They turn this solution into a marketable product, aiming to make people’s lives easier.
Statistically, only 1 out of 3 startups will succeed. It takes a special combination of luck, pricing model, market demand, and branding to make amazing products skyrocket.
The eureka moment happens when you find a product-market fit. So, what is product-market fit? You find product-market fit when your product almost perfectly satisfies a market need. But let’s go back a couple of steps.
How do you know that there is a need for your product in the market? How to determine market demand for a product? And most importantly, what is market demand?
If you want to learn how to determine market demand for a product, discover more about market demand testing and market demand calculation, you’ve come to the right place. Read on through to explore the many ways of determining the demand for your product.
What is Market Demand for a Product?
There are many famous quotes about how you shouldn’t find customers for your products and instead find products for your customers. All of this means that you shouldn’t force unnecessary products onto people because they won’t stick. What you need to do is give people what they want and need.
But wait… How do you know what it is that people want?
This is where market demand for a product comes in to save the day. Before we get to learn how to determine market demand for a product, let’s dive in deeper and understand – “what is market demand”?
What is Market Demand?
Market demand is the total amount of demand that a product has in a certain market at a certain price. In other words, it quantifies how many products would be purchased in a specific market.
But let’s make one distinction – there are people who want a product, people who can afford it, and people who are willing to pay for it. If a person cannot afford or isn’t willing to pay for your product, their desire isn’t included in the total market demand for a product.
Market demand is a crucial metric when it comes to pricing your product, marketing it, and most importantly, deciding whether to build it in the first place.
Now that you know what market demand is, let’s start understanding market demand benefits.
Market Demand Analysis Importance
Understanding market demand benefits is crucial on your market demand analysis journey. If you can gauge how many units you can potentially sell, you’ll be able to:
- Please your customers by meeting their demands.
- Find more cost-effective ways and amounts of production.
- Forecast potential profits and determine worthy markets to penetrate.
How to Find Market Demand
Now that you know a little more about market demand for a product and why you need it, let’s get to the good part. How to determine market demand for a product? With so many different ways you can find market demand, we decided to show you the easier options.
The Harvard Business Review defines 4 steps you can take when it comes to “how to find market demand.”
- Defining the total market, conversion of all possible end-users,
- Segmenting the total market into smaller components to analyze,
- Understanding and forecasting the drivers behind demand,
- Running Sensitivity Analyses to determine the accuracy of research.
All of this, of course, is easier said than done. We’ve decided to cut them down into bite-size pieces for easier digestion.
Here are our top 6 ways how to determine market demand for a product.
1. Defining Market and Niche
First things first, you have to narrow your product down to a market. Is your product for home improvement or entertainment? Beauty or foods & beverages?
Once you have a general market defined, it’ll be time to narrow it down to specific and intentional niches. If you are selling clothing, are you selling luxury shoes or sports jackets?
Finding your ideal niche or niches can be a gamechanger. This way, you’ll be able to gauge exactly how many potential buyers you have.
2. Using SEO tools
Next up, you can use Search Engine Optimization (SEO) tools like Semrush or Ahrefs to determine search volumes for specific keywords. You can narrow your search based on the location, see global volumes, related topics, as well as intentions behind the search.
You can see who is ranking first for specific keywords, which is a fantastic way of finding potential competitors for your product.
The next time you think, “how do you find market demand,” remember that SEO tools can clear things up. Ultimately, you get to see how many individuals are searching for a potential product you want to create.
SEO tools can also help you find gaps in the market, understand what problems users may have, and more.
3. Using Social Media
The second option of how to find market demand online is through social media platforms.
Social media platforms enable you to track the number of people who are interested in specific products, monitor how your competitors are performing, check the volumes of hashtags, and much more.
If you want to take it a step further, you can even use social listening tools. Powerful social listening tools can give you insights about trending topics, plus help you track your brand mentions, along with a positive vs negative sentiment metric. Essentially, this can be a perfect answer to the question of how to determine market demand for a product.
One thing is for sure – when understanding how to find market demand, the power of social media shouldn’t be ignored.
4. Creating Surveys and Doing Observations
Next up, here’s the old but gold way of how to determine market demand for a product – through surveys and observations. Depending on your product, you can hold mass surveys, conduct taste tests, hold individual customer interviews, and more.
Surveys are still one of the most sure-fire ways to get direct feedback from potential customers. They aren’t only ways how you can gather market demand information but also figure out how well your product meets the needs of customers. After all, they are the end-user.
5. Decide and Evaluate the Competitors
Once you’ve used the above methods and determined your competitors, track their stats. Oftentimes, you can gauge market demand for a product by gauging the demand for a competitor’s product, especially in a niche market.
This is where market shares come in. For example, Google holds a 92.47% market share among search engines. If you find out the numeric value of Google’s unique users, you can extrapolate the data and understand the total market demand. Plus, you can forecast your own market shares, which will help you determine future profits or a potential user base.
Remember that you are never alone. Whether directly or indirectly, you always have product competition.
6. How to Find Market Demand on a Graph
Speaking in more economic terms, market demand for a product can be quantified and depicted as a graph (otherwise known as a market demand schedule) that looks something like this:
As you can see, the demand slope is curved down, so when the price goes down, demand goes up, and vice versa (this is true for all normal goods/products).
The graph essentially shows how sensitive price changes are to the total quantity demanded. Once you find the secret formula, you can even use it for gauging demand for other similar products.
If you want to know how to find market demand on a graph, simply choose a price point, note where it meets the demand curve, and draw a horizontal line down to the quantity demanded line.
Ways of Testing Product’s Market Demand
Now that you’ve arrived at what you think is your product’s market demand, it’s time to test it. In the olden days, this might’ve been impossible, but with powerful digital tools like Prelaunch, you can test almost anything you need.
Today’s digital tools allow you to not only test market demand but to actually gather proof and validate your idea. This can later be helpful in raising capital from investors.
So, how to test if a product will sell? There are infinite answers to the question, but we will discuss only 5 of them. Here are 5 ways how to determine and test market demand for a product.
Research the Market for Trends Related to Your Product
Testing demand in a market is no easy task. First, we recommend taking a look at the market trends related to your product. Is it going up? Is the demand seasonal? What are the forecasts? Various market research tools can come in handy when you’re doing your research.
Google Trends is a very cool tool to use when trying to understand relative demand. It clearly shows a trendline going either up, down, staying the same, or in irregular patterns.
For example, if you search the terms “Superbowl” and “Thanksgiving” over the past 5 years, you will clearly notice a pattern.
Both of these terms are seasonal, and you can notice interest for the “Superbowl” term decreasing over the 5 years.
How to test market demand for your product with Google Trends? Simply search the terms and keywords related to your niche market to view interest trends. You may also filter the query by location, categories, time range, and search type.
Identify Your Brand
Another amazing way how to test demand for a product is by identifying your brand. Setting up everything you want your brand to represent can help you position yourself better, enabling you to be a little more ready to test demand in the real market.
Here are some brand identity elements you can consider creating:
- Logo
- Color Pallete
- Tagline
- Philosophy
- Mission and vision
Present Your Product Concept
If you have a prototype of your product, you’re already one step ahead. All you have to do is present it to the world and monitor the reactions. If it’s a horrible product, people won’t get too excited about it. But if it’s a killer concept, you will definitely feel it. Essentially, one of the best ways of testing demand in a market is through mock launches.
Have a Landing Page
In theory, everything is up in the air. Unless you actually test launch your idea, you’ll never be sure if it’s viable. So, we recommend creating a landing page or test store and giving people a little taste of what your product/service can do. Plus, thanks to Google Analytics, you’ll be able to track every little movement, every little reaction.
Note: You can even have a feedback section and gather ideas or impressions from actual website visitors.
Wondering how to determine market demand for a product through a landing page? Advertising it through Google PPC ads and tracking the results can definitely do the trick.
Consider Advertising and Driving Traffic Through It
Once you have a landing page made, testing demand in the market becomes easier. You’ll need a well-managed Google Ads account to run successful campaigns and test demand in the market.
Choose your budget, write your PPC (Pay-per-click) ad headings and descriptions, optimize the keywords (don’t forget to take not of negative keywords), and you’ll be good to go. If you’ve never used Google Ads, you can follow this checklist.
Figure Out the Results
Once you’ve completed your campaigns, it’s time to turn the data into information. What clickthrough rate do you see? Did you get any conversions? What actions did people take on your site? These are all questions to be answered, and the answers can be very enlightening in terms of testing demand in the market.
How to determine market demand for a product through digital advertising results? Keep an eye out for traffic, average session duration, any specific button clicks, and more.
Consider Creating a Crowdfunding Campaign
How to test if a product will sell? The answer is simple – start selling! Crowdfunding campaigns can come in handy here since you will only be raising funds to finance the idea you want to bring to life.
Crowdfunding is a win-win solution if you want to know how to test a product in the market. Essentially, you present your product to a wide audience and offer perks (oftentimes, the perks are the products themselves) in exchange for a little investment. You get to gauge interest, PLUS the customers’ willingness to pay.
Note: There is very little risk associated with running crowdfunding campaigns. If you don’t meet your goal, you don’t get paid, but you won’t owe anything to the campaign backers.
So, the next time you ask yourself: “how to determine market demand for a product,” remember about crowdfunding.
How to Calculate Market Demand for a Product
As we come near the end of the “how to determine market demand for a product” guide, it’s a good time to recap it all and discuss how to calculate total market demand.
Market demand is the numeric representation of the total quantity demanded (of your product) by individuals in your market. Remember that ability and willingness to pay are necessary dispositions among those who are considered to demand your product.
Total market demand equals the sum of all individual demands in the market.
If you want to learn how to determine market demand for a product, you can start by using SEO tools, social media, surveys, or other market research tools. Once you’ve calculated market demand and validated your idea, it’ll be time to test it with Google Trends, landing pages, and PPC ads.
Market Demand Schedule
Do you remember the graph we showed you earlier with price and quantity on the vertical and horizontal axis, respectively? That graph is also known as a market demand schedule.
For starters, let’s define the demand schedule. What does a demanding schedule show? Essentially, this type of graph shows the relationship between price and quantity demanded of a specific product. The market demand schedule helps you determine the sensitivity of price and demand for your product, allowing you to find the perfect equilibrium to maximize profits.
Note: Traditionally, price and quantity demanded have an inverse relationship. This means that when the price goes up, demand goes down, and vice versa.
Conclusion
If you’ve ever had a genius idea and wanted to know how many people would pay for it, we suggest you scroll back up. In this guide, we discussed how to determine market demand for a product, how to measure demand with a market demand schedule, and how to test your product.
There are countless market research tools out there, so whenever you meet a roadblock, give it a search on Google.
Remember – validating your idea is critical for your success. If you don’t know how to determine market demand for a product, you might end up creating something nobody needs.
