Week 12



This week, marketing concepts focused on the idea of generating demand. By doing this, the concepts touched on simplistic economic theories and graphs. This of course is the notion of Supply and Demand. First we can discuss supply, which is the supplying firm or seller's willingness to sell a product at a particular price. When price is high, supply is high, and vice versa. On a graph, it will look like a downward sloping curve. The exact opposite is true for demand. Demand is the buyer's (customer) willingness to purchase a good. In almost all cases (disregarding such unique modifiers like the Snob Effect) demand is high when price is low, and is low when price is high. On a graph, it will appear as an upward sloping curve. In both perfect competition and monopolistic competition market structures, the intersection between these two curves is quite important. This intersection, the Market Equilibrium, will set the price and quantity of goods sold in these market structures. It is very important for a firm to set the price at or very close to this equilibrium otherwise revenue will suffer.
Image result for supply and demand
Another economic topic that was mentioned this week is the idea of Price Elasticity of Demand. This can simply be calculated at the % change in quantity demanded divided by % change in price.
Image result for price elasticity of demand formula

Price Elasticity of Demand refers to how quantity will change for a given good as a result of a particular price change. This responsiveness of quantity  allows for firms to know if they are able to easily raise or lower prices to increase revenue.

If E > 1: Demand is relatively price elastic
If E < 1: Demand is relatively price inelastic
If E = 1: Demand is unit elastic
If E = ∞: Demand is perfectly elastic
If E = 0 Demand is perfectly inelastic

In most situations, a good will either be elastic or inelastic. In  microeconomics we learned of specific goods that fit each criteria. An elastic good is typically a normal good that can easily be substituted such as cheeseburgers. An inelastic good would be something that does not have perfect substitutes such as oil. While yes one can switch to an electric car or take public transportation, most people are not willing to switch goods unless price becomes extremely high. Finally, I would like to bring up perfectly elastic goods. These are goods that have no known substitute and is needed simply to live. A great example of this is insulin. For those with Diabetes, it is something that is needed to live. They are forced to pay the price for insulin no matter what. The only other option is death.

A third concept that must be discussed is Push vs. Pull Strategies. Push strategies involve taking the product to the customer. This can be done through trade shows, personal selling, promotional package design, point of sale advertising, and direct selling. Benefits of Push strategies are usually increasing demand through distribution and provide sales incentives to the middle man. To incentive this type of strategy, customers will typically receive deals or discounts. The other type of strategy is Pull strategies. The goal of this is to get the customer to come to you. This is done through advertising, brand, word-of-mouth, relationship marketing, content marketing, and B2C sales promotions and discounts. These strategies are done in order to establish loyalty and raise awareness.

One thing I would like to learn more about how to efficiently use pricing objectives and strategies.

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