Latent market – definition and meaning
A latent market is a potential market, i.e., a market for a good or service but without a supplier. In other words, there is demand for something but it is not available. A company that can identify a latent market and subsequently supply that market can earn significant profits.
The term may refer to the market or specific consumers that a company has identified. Specifically, it has identified them as potential customers for a product or service that is not currently available.
Monash University has the following definition of the term on its website:
“A potential market that has been identified for a product or service that is not yet offered. The identification of latent markets can help a company decide what new products or services will be most in demand.”
“Being the first to tap into a latent market can provide a company with significant opportunities for profit.”
Business terms with ‘latent’
There are several terms in economics, business, and marketing which have the word ‘latent.’ Latent demand, for example, is dormant demand for a product.
That demand is not active because consumers do not have enough money or the product is not available.
Latent demand may also remain dormant because consumers think the item is not available.
Identifying a latent market
The identification of a latent market can help a business decide what new product is most likely to sell well.
Latent markets are also important for providers of services. A service provider that detects potential demand for a new service has the opportunity to make healthy profits.
However, the new service provider or product maker needs to get two things right. First, it must sell at the right price. Second, it must meet consumers’ expectations regarding quality.
A latent market is an untapped one
A latent market represents an untapped market. An untapped market is one where no supplier has met a specific demand.
Untapped markets are often the impetus for product customization or innovation.
AllBusiness.com gives two examples of untapped markets:
“The personal hygiene market was an untapped market for the makers of baking soda until they developed a baking soda toothpaste.”
“There was an untapped market for athletic brassieres until the first jogging bra was developed.”
Robot companions – a latent market
One latent market that is likely to expand is the demand for robot companions. We are living longer, and at the same time, artificial intelligence (AI) and robotics are becoming more sophisticated. In countries where life expectancy is high, such as Japan, there is a serious and growing shortage of caregivers. Robot companions could fill this gap.
As we increasingly become comfortable with technology in our daily lives, we will probably be more receptive to robots as companions and helpers when they arrive. Robot companions will provide company and conversation to the elderly and disabled, and offer educational support and supervision for children. They may even provide entertainment.
Some residential and nursing homes in Japan and other advanced economies are adopting a small number of robot companions. However, these robots currently have limited roles and remain expensive. The market has not yet reached a level of production and sales indicative of mass-market adoption.
Businesses are likely to welcome robot companions, especially in customer service roles. Once companion robots are sophisticated enough to meet human requirements and are also affordable, the market will grow dramatically.
Video – What is a Latent Market?
This educational video, from our sister channel on YouTube – Marketing Business Network, explains what a ‘Latent Market’ is using simple and easy-to-understand language and examples.