Aviation Leadership and Management Skills Development - Marketing Economics
Sofema Online (SOL) www.sofemaonline.com considers the relationship between marketing & economics.
Introduction
The price of a product is determined by the law of supply and demand. Consumers have a desire to acquire a product, and producers manufacture a supply to meet this demand.
The equilibrium market price of a good is the price at which quantity supplied equals quantity demanded. Graphically, the supply and demand curves intersect at the equilibrium price.
Essentially we can consider that Marketing is a bringing together of economics and psychology. We could even consider that marketing may be considered as a sub-element of economics.
Economic considerations have a direct impact on the way marketers channel their products to consumers.
By understanding the connection between marketing and economics we can ensure we allocate the appropriate marketing resources as well as continue to react to the various changes driven by economic impact.
One Tangible difference between The Economic View & The Marketing View is the Perception :
» Economists consider consumers are rational and seek products providing the greatest utility.
» Marketers (may be considered as more pragmatic) accepting that consumers can potentially act with an irrationality
The Law of Diminishing Return
When the cost of marketing or advertising a certain product meets or exceeds the revenue generated from selling that product, we reach a “tipping point”
Reasons for this to happen include:
» Competitor Enters the Market
» Consumer Focus & Interest Changes
» Customers Failure to Purchase in Sufficient Quantity
Mitigations Include
» Ensure the product remains fairly priced
» Focus on staying competitive
» Respond actively to your customers' tastes
Economic Utility Considerations
Always keep your marketing plan in line with what your customers are demanding and what the economic climate supports.
» Consumers will buy things that increase their personal satisfaction.
» Economic utility explains why high-value products dominate the marketplace.
» The focus on utility must be balanced with knowing your customer demographics.
o Consider the economy's effect on your price point and customer base.
o Can you charge a higher price and still retain your customers?
Product Demand Considerations
Consumers are typically willing to pay a particular price for a product depending on:
» Their income levels
» The intensity of desire to own the product.
This relationship is expressed in economic terms by the demand curve.
Reality Check - If the price of a good goes up, consumers will buy less of it. Conversely, consumers will purchase more of a product if the price goes down.
Next Steps
Please email team@sassofia.com with any comments, questions, or suggestions
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