FACTORS AFFECTING DEMAND

 CONSUMER SEGMENT
Consumer Segment can also be termed as potential composition of the population (end
consumers) which can also be one of the determinants of the demand. In other words, it’s a non-
price determinant which affects the demand of a product/service significantly. Apollo
Hospital’s consumer segment or target market is heavily interlinked and dependent on its
branding and USP as an organization – which is providing high quality healthcare services as a
hospital & catering to people who require highly specialized treatments. The consumer segment
can be outlined via the followed chart –

CONSUMER
SEGMENT

UPPER MIDDLE PEOPLE WITH

CLASS SPECIAL CONDITIONS
WEALTHY
CLASS

The above 3 segments can be classified under 2 main broad categories – Demographic Variables
& Psychographic Variables.
 DEMOGRAPHIC VARIABLES involves factors like ‘location’ and in Apollo’s case it
targets the urban areas where most of the Wealthy and Upper-Middle Class are located.
 PSYCHOGRAPHIC VARIABLES involves ‘liking/preference’ of specific set of
consumers who want high quality & specialized treatment and in return are willing to
pay more money.
These variables and segments affect the demand of Apollo Hospitals either for the better or for
the worse. (Leftward or Rightward Shift). For example – if population in the urban areas
decreases than so will the amount of upper-middle and wealthy class people. As a result, there
will be a leftward shift of the demand curve. Similarly, if there is an influx of specialized
conditions/diseases in the market, there will be a rightward shift.
 SUBSTITUTES
All the alternatives that a consumer could resort to instead of the organization’s
product/service are referred to as substitutes. In Apollo’s case, all the multispecialty hospital
chains which offer high quality health services and specialized treatments are its substitutes.
The following chain of hospitals are regarded as close substitutes to Apollo Hospitals Ltd –
 i. FORTIS HEALTHCARE LIMITED
ii. MAX HEALTHCARE INSTITUTE LIMITED
iii. MEDANTA
As of now this non-price determinant has a weak control over the demand for Apollo
Hospitals. This is because even with such substitutes available, consumers still prefer ‘Apollo’
over any other multi-specialty hospitals. This is again down to the fact that it was a pioneer in
starting super-specialty and high-quality chain of hospitals in India. Thus, it has established a
strong long-term affiliation with doctors and health practitioners which attract consumers. Also,
due to its long-term presence it has been able to extend its distribution network over Tier 1 and
Tier 2 cities, reaching more people than its substitutes are. The above coupled with the fact that
they have superior technology, equipment, and overall facilities has made them the market leader
and thus substitutes are struggling to gain any sort of power. But this doesn’t mean things can’t
change in the future. For example, if in the future substitutes offer same treatments at a lower
price, consumers may switch brands and it might lead to the leftward shift of Apollo’s demand
curve.
 COMPLEMENTS
Complements refer to those complementary products/services for which the demand is
directly dependent with the primary product/service. In the hospital industry or in any
hospital (Pvt or Public) the demand of it is interlinked with complements like Pharmacies,
Diagnostic centers, Dialysis centers, etc. In the case of Apollo Hospitals, it follows such an
integrated business model that it has its own subsidiaries which acts as complements to its
primary product (multispecialty hospital). So, in a way Apollo hospital Ltd directly influences its
subsidiaries demand (complements). It is a unique business and revenue model. The subsidiaries
can be elaborated in the following manner –
 Diagnostic & Clinics – Apollo Clinic, Apollo Diagnostics, Apollo Sugar Clinics, Apollo
White Dental.
 Pharmacies – Apollo Pharmacy
 Provider – Apollo Dialysis, Apollo Spectra, Apollo Cradle.
A rise in demand for the primary product in this case - Apollo Hospitals will lead in increase
in demand for its complements as well in this case – For example – ‘Apollo Pharmacy’ and
vice versa. Thus, it will result in a rightward shift of the demand curve.
 ELASTICITY OF DEMAND

1. PRICE ELASTICITY
Price Elasticity refers to the degree of responsiveness (in quantity demanded) towards change
in price. There are two types of price elasticity – Elastic (high responsiveness) and Inelastic
(No responsiveness). In Apollo Hospital’s case there in minimal price elasticity or in some
instances no elasticity, i.e., it is inelastic in nature. This is down to the following two
factors-
 a) Intensity – If the intensity of the illness and treatment required is high and thus
demands specialized form of treatment, then the person will be inelastic to price
changes if the hospital is providing that niche form of treatment and saving its life.
b) Location – Generally one would prefer to treat his special condition within the
country rather than bearing extra costs of going abroad since most of these
specialized treatments are frequently conducted abroad.

 INCOME ELASTICITY
Income elasticity refers to the degree of responsiveness (of the QD) towards change in
income (real income). In the case of Apollo Hospital’s there exists a high-income elasticity.
For example, if there is a surge in the level of total consumer’s real income then more
amount of people will be able to afford Apollo’s high-quality hospitality and world class
facilities (both labor and infrastructure) via either cash incomes or health insurance
companies. Also, as result there would be influx of population from lower middle class to
upper middle class (target market) and so on in the hierarchy which will result in Apollo’s
demand curve to shift rightwards.
Similarly, if people start losing money that will result in fewer overall real income due to
their high responsiveness to income in the market and as a result the demand curve will
shift to the left.

 CROSS ELASTICITY
This refers to when a change in price of one variable/commodity affects the quantity
demanded of another. In Apollo’s case, for example - if the price of medical tourism
increases then there would be less demand for Apollo Hospitals Ltd. As a result, there would
be a leftward shift on the demand curve.
Medical Tourism refers to the travel, accommodations and incidentals cost to consume
Apollo’s healthcare services. Their rise in price causes the above situation but the decrease
in their prices will result in more people being able to consume their services (due to their
high cross elasticity) and thus the resultant increase in demand will force the demand
curve to shift right.