Latent demand – definition and meaning

Latent demand refers to demand for a good or service that consumers cannot satisfy for three main reasons. First, the consumer does not have enough money to buy the item. Second, the item is not available. Third, the consumer does not know that the product or service is available.

If a consumer cannot satisfy a desire for something because they cannot point it out, we could say there is latent demand. If the consumer does not realize what is missing until somebody points it out, there is also latent demand.

The Cambridge Dictionary has the following definition of the term:

“Demand for a product or service that a consumer cannot satisfy because they do not have enough money, because the product or service is not available, or because they do not know that it is available.”

Put simply; when there is latent demand, the current business environment or marketplace cannot satisfy that demand.

It is the opposite of effective demand. Effective demand is the quantity that consumers can and are willing to purchase at each conceivable price.

In economics, demand refers to the measure of desire to purchase and own a good or service. When the price of something goes up, demand for it declines. Put simply; demand is how much people are willing and able to buy something.

Latent demand
When something is ‘latent,’ it exists but has not yet developed or become detectable. It lies dormant until circumstances are suitable for manifestation or development. Therefore, latent demand is demand that is there but has not yet come out into the open.

Latent demand – identifying the gaps

To discover latent demand, the marketer needs to identify gaps in the market.

However, to do this effectively, it is necessary for the end consumer to participate. The end consumer may participate in focus group discussions. In-depth interviews with consumers may also be an effective way to access the gaps successfully.

Regarding one of the jobs of marketers, mbaskool.com says:

“One of the jobs of marketers is to figure out the latent demand of consumers and make products that satisfy the same.”

“The marketing task involves measuring the potential market (by assessing the size of the population which feels the same need) and develop a suitable product.”

A major objective in marketing is to influence potential buyers to use available money in favor of a specific product. Another objective is to boost purchasing power through purchase contracts or deferred billing.

There are many terms in business, marketing, and economics which have the word ‘latent.’ A latent market, for example, is a market in which there is demand for something. However, that item is not available, i.e., there is no supplier. If a company created that item and started to sell it, people would buy it.

Video – types of demand

This Tutor 2 U video looks at derived, effective, composite, joint, and latent demand.