Market growth is defined as the rise in the demand for a product or a service in the market. Usually, the market growth happens when a company is in its expansion phase. Companies try to increase the value of the product and promote features and sometimes offer attractive pricing to get more sales.
If the product is accepted in the market at a particular price point, then there is a positive growth of the market. If the customers take this price point or if they accept the product, then the market demand increases and if they do not accept the product, then the market demand decreases and so does the market growth. Market growth is directly proportional to market demand.
The customer base decreases as the price of the product increases. High-value products have a niche customer base as the price of the product reduces the number of customers increases. Thus it can be said that the number of customers is inversely proportional to the cost of the product or service. Lower the price, more are the customers and vice versa.
Several factors affect Market Growth like demand and supply of the product, nature of market growth, competitors present in the market. These factors affect Market growth directly. They may positively affect or affect adversely.
Reasons for Market Growth
There are various Reasons for the growth of a Market :
1. Demand:
Demand is the need for the product or service by the customer in the market. The demand for the product depends on various factors, including the price of the product, market condition, competitor products, and the trends in the market. As the demand for a product increases, the market growth rises.
Thus demand is directly proportional to market growth. However, when compared to the competition, if the need for competitor products increases, it will affect the demand for your product, and even if the market may grow, you will not.
2. Supply:
As the supply increases, the price of the product goes down, on the other hand, as the supply reduces the cost of the same product climbs significantly higher. As the price of the product increases the market growth increases because the customers have to pay higher prices for the same product.
As the supply increases, it affects market growth differently. There could be a negative market growth is the price of the product keeps falling down or if the customers find alternative products.
3. Premium pricing
The regular pricing of products will change if it is priced at a premium. There could be differences in the product, or it could be this higher-priced variant of the same product. Premium pricing has a backup reason to differentiate it from other options. For example, in the aviation industry, the price of seats in a flight varies depending on the position. The same flight may have a seat priced at $400 and $800.
The difference will be in additional features such as leg space, priority baggage, etc. As the demand for premium-priced products or services increases, this will increase market growth.
4. Performance
The product which has a higher performance will have a higher selling price. The selling price would boost the market growth. There could be different reasons for high performance, but the matter of fact is it positively affects market growth. For example, in the case of mobile phones, different brands have different variations of the phone and the pricing of all the changes depends on the performance.
In the case of Apple iPhone, the latest model will always be the most expensive one, and the earlier models will be cheaper. The latest models will bring higher revenue to the organization and in turn, increase the market growth.
5. Commoditization
When customer purchases based on the pricing of the product, then it is called commoditization. This happens because the customer sees a few differences in the products. This usually occurs when a new technology or a new product is launched in the market, which makes the current products obsolete.
For example, when DVD players where is launched, the prices of VCR’s and CD players fell significantly. Similarly, when an iPod was launched, the cost of cassette players dropped significantly.
6. Inflation
Inflation is one of the significant influencers of market growth. A market that is growing at a certain percentage says 5% was not necessarily grown in terms of sales of the product. This will affect market growth directly.
Inflation itself is an outcome of unfavourable factors, and it always affects market growth for most products or services negatively. Inflation is a common factor that every product has to tackle at least once, to defend the market growth.
7. Demographics
The target market changes size for different products or services. Diverse populations age will have different demands for products. For example, a young population with a massive demand for the latest products like mobile phones, accessories, latest fashion trends.
On the other hand, the geriatric population will need medical supplies. Thus market growth varies according to population growth and their demand.
