How Consumer Expectations Affect Demand is discussed in this article with 5 of such ways listed and carefully explained.
Consumer expectations systematically affect the demand for products or services; these expectations are simply the predictions that the consumer reflects on before or after purchasing a certain good or service.
Read Also: 9 Principles of Subrogation in Insurance Law
Consumer expectation is based on the purchase of luxury goods, the price of a product, the customer’s income, consumer tastes and preferences, number of consumers purchasing a particular commodity.
The demand curve is a principle that explains the relationship between the demand for a commodity and the price. The demand curve is a better phenomenon when one seeks to explain how customer expectation affects demand. This relationship is a direct relationship or can be termed as being directly proportional.
The demand curve ideally shows that when the expectation of a commodity will rise, the demand curve moves to the right.
On the demand curve which is negatively sloping, when customer expectation is rise the demand curve will automatically rise and when customer expectation declines, the demand curve will fall. It shows that customer expectation has a positive effect on demand.
When consumers expect that the worth of a product or service will rise, then the demand simultaneously rises. Hence this article will explain significantly how customer expectation affects demand.
1. Purchase of luxurious and Luxury goods
Customer expectation can cause customers to purchase luxurious Luxury goods with the thoughts that these goods will be helpful or that are not usually or always available.
Luxury purchase is a consumer trend that happens when customers buy goods that are not important at that moment. When these goods are bought, it’s a clear indication that the consumer is wealthy since an inferior consumer will only operate according to his immediate needs despite customer expectations.
For example, if there is an expectation that the rice rise will increase, a luxury customer will buy one or two more buys of rice whereas an inferior consumer will keep buying in bits. Despite the expectation that luxury buying will become a habit for the luxurious customer.
2. The price of a product
The price of a product or service has a significant effect on customer expectation, this is because the price of a product is a major determinant of the demand for that product in question.
When there is an expectation that the price of a product will increase, the demand for that commodity also increases and vice versa.
3. Consumer income
Consumers’ income is another factor affecting demand. When a salary earns say X naira, he demands goods based on that value. If there is a sudden expectation that there will be an increase in his income, his demand changes.
Also, a civil servant who receives his salary in a specific week may increase his demand that week or even borrow to satisfy his needs with the expectation of receiving his or her salary soonest.
If a consumer who was paid #10,000 suddenly increases his income to #80,000 this demand will equally change including their purchasing power.
Read Also: What are the 5 P’s in Insurance?
This indicates that the expectation of demand for a product or service can be influenced by a customer’s income over time.
4. Consumer tastes and preferences
Consumer tastes and preferences directly influence the demand for a commodity. Once there is an expectation that a new product or fashion is revolving, the taste and preferences of the customer constantly change.
For instance, the expectation of the Christmas festival or season influences the customer’s preference making a large population demand cloth and accessories of red appraisal.
5. Number of consumers
The number of consumers is a huge determinant in the market. When there are greater liable consumers to buy an available commodity, this will lead to an increase in demand despite the expectation.
Customers’ expectations increase the number of consumers within the market and cause a majority of people to switch their demands at any point in time.
Consumer expectations significantly influence demand for a particular commodity. These expectations are the customer’s prediction such that if the consumers expect the amount of an available product or service to rise, then the demand also rises automatically and follows the direct direction of proportionality.