Non-price determinants of demand definition
/What are Non-Price Determinants of Demand?
Non-price determinants are factors that impact the demand for goods or services, not including the price point being charged. These determinants will alter the demand for goods and services, but only within certain acceptable price ranges. For example, if non-price determinants are driving increased demand, but prices are very high, it is likely that buyers will be driven to look at substitute products. The following list enumerates the non-price determinants of demand.
Branding
Sellers can use advertising, product differentiation, product quality, customer service, and so forth to create such strong brand images that buyers have a strong preference for their goods. While the cost to create and reinforce branding can be substantial, the payoff can be a substantial level of customer interest in your products, even if your price point is well above the industry average.
Market Size
If the market is expanding rapidly, customers may be compelled to purchase based on other factors than price, simply because the supply of goods is not keeping up with demand. In this situation, a customer might feel lucky to acquire your goods, simply because demand is so great that your productions are on allocation.
Demographics
A change in the proportions of the population in different age ranges can alter demand in favor of those groups increasing in size (and vice versa). Thus, an aging population will increase the demand for arthritis drugs, while a younger population will increase the demand for sporting goods. A demographic with a high level of disposable income is especially interested in making purchases, no matter what the price being charged.
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Seasonality
The need for goods varies by time of year; thus, there is a strong demand for lawn mowers in the Spring, but not in the Fall. Outside of the peak season, customers may not be interested in purchasing your goods, no matter how low a price you offer.
Available Income
If the amount of available buyer income changes, it alters their propensity to purchase. Thus, if there is an economic boom, someone is more likely to buy, irrespective of price.
Complementary Goods
If there is a price change in a complementary item, it can impact the demand for a product. Thus, a change in the price of popcorn in a movie theater could impact the demand for movies, as could the price of nearby parking. This is because increased prices on related products leaves less disposable income to purchase your products.
Future Expectations
If buyers believe that the market will change in the future, such as may happen with an anticipated constriction of supplies, this may alter their purchasing behavior now. Thus, an expected constriction in the supply of rubber might increase the demand for tires now.