In today’s uncertain and
competitive business environment, one of the strategies adopted by firms is to
tap and provide latent demand or hidden demand. This enables firms to secure
competitive advantage over their competitors.
Latent demand can be defined as a
desire or preference which a consumer is unable to satisfy at present, either
due to lack of information about the product or deficient purchasing power. It
is a desire which the consumer is unable to satisfy due to absence of
satisfactory goods or services.
It is worth to study a few
examples to understand how identifying and satisfying latent has helped firms
in securing and strengthening their market share.
In India, for the very first time,
CavinKare’s Chic shampoo was made available in a sachet format. This packaging
innovation helped Chik shampoo to reach beyond urban elite users to rural
consumers.
Similarly, the hidden demand for
a small, affordable car by masses was identified and catered to by Tata Motors,
through Nano. The suit is being followed by other automobile manufacturers as
most of them have plans to lauch smaller, affordable versions of their models.
In the telecom sector, Tata
Docomo made a late entry, as compared to its competitors. It tapped that the
existing subscribers feel confused about how they are charged by operators. In order to attract subscribers from its
competitors, Tata Docomo introduced a per second billing plan. This initiative was
well accepted by subscribers as they experience greater clarity about their
billing. Very soon, most of the operators introduced similar type of billing
plan.
These examples indicate that
identifying and providing latent demand not only helps a firm in capturing a
larger market share but also in establishing leadership in the respective
industry.
Questions:
Q.1 Present two case studies,
wherein identifying latent demand has helped a company.
Q.2 As a business executive, how
would you assess latent demand for your product/
service category. Discuss this with
reference to Managerial Economic Analysis.
Q.3 Which market structures rely
largely on tapping hidden demand, as a business
strategy? Explain with suitable
examples.
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