What’s it: Demand density measures the extent to which the potential demand for goods and services is concentrated in a particular area. We measure demand density by dividing the potential demand of a product by the square kilometer of a specific area.
In addition to square kilometers of area, we can also measure density based on specific census areas or zip code areas. Sizes are usually associated with other demographic variable measures such as income, population growth, and consumption patterns, thus giving us a map of the distribution of potential customers.
Why does demand density matter?
Demand density is important for sales success. The higher the density of an area, the more profitable the area is for companies. They can generate more revenue in high demand areas than low demand areas.
A denser area is also more efficient to serve. Companies could save on transportation costs, relative to the sales generated. Likewise, outdoor advertising can reach more potential customers to buy company products.
