What Are the Four Factors That Cause a Shift in Demand? by Lee Grayson, Demand Media The introduction of new products might reduce your demand if you fail to evaluate the competition. Digital Vision./Digital Vision/Getty Images Related Articles What Can Make a Demand Curve Shift? What Factors Impact the Elasticity of Demand for Products? Supply & Demand Analysis What Factors Force a Shift in a Demand Curve? What Causes the Demand Curve to Shift to the Left? Importance of Good Communication in Business The key to making the most profit for your business means accurately estimating demand for your products or services. Calculating demand involves an intricate balance that includes supply and pricing, as well as correctly reading customer wants and needs. Inaccurately judging any of the demand factors reduces your profits. Paying salaries for your idle staff or storing excess inventory cuts your company profits. Demand for all industries and services shifts based on several factors. Ads by Google Planning & Forecasting Retail Merchandise/Assortment Planning & Demand Forecasting www.7thonline.com Income Demand shifts when your customers don't have income to purchase your products or services, and businesses making essentials aren't immune when income dips. People do without necessities during economic crunches, but adapting your production to offset reduced demand allows you to continue production and provide services. People forgo luxury items when income declines, and businesses providing high-end luxury also feel the pinch, according to the Wharton Business School. Sales of fine jewelry, exotic foods, high-end kitchen appliances, expensive clothing, motor homes and high-priced cars feel the economic pinch first. Creating items of lesser quality, such as substituting silver for gold in fine jewelry or using inferior goods to make less-expensive clothing lines, help businesses adjust to the demand shift when income falls. Prices Prices influence the demand for your products and services, but reducing your prices to rock bottom doesn't always mean sales. Customers love to find bargains, but buyers must perceive the product has value and is worth buying. Competitors might undercut your product by introducing similar, but inferior, products at lower prices and this also shifts the demand for goods or services for both companies when consumers can't tell the difference between the original and the cheaper, but inferior, imitation. Related Reading: What Factors Impact the Elasticity of Demand for Products? Preferences and Expectations It's hard to judge what your customers will enjoy from the products and services you provide. Fads and styles change and, unless your company follows the trends, the demand shift may catch you investing in products or services that once sold well but customers now find out of date or unnecessary. Market and insight surveys help you evaluate demand shifts and adjust your production and services to reach buyers at peak interest periods. Your competition also influences the demand shift when firms make similar items and saturate the market. This helps meet the current fad, but it also cuts your demand. Population Shifts Shifts in population create changes in demand. A population shift takes place when people move away from a geographic region, impacting your company sales, and when the population you serve ages or outgrows your product or service. Baby boomers once purchased items related to their growing families but now buy things for grandchildren. This group has a new interest in geriatric medical services and single-story home designs. Many no longer have the energy, or the need, for stairs in twostory houses. A baby boom in the younger generation expands the demand for baby gear, including infant clothes and car seats, and also hospitals supplying maternity services.