Elasticity of Demand

Elasticity of demand is the consumer's responsiveness or sensitivity to changes in price.  If the demand is elastic a change in price will either increase or decrease consumers' buying.  If the demand is inelastic a change in price will not make a significant change in consumers' buying.  The price elasticity of demand is equal to the percent change in quantity divided by the percent change in price.

Products that are considered to have elastic demand are products that we don't necessarily need to have, but rather items that we want.  Some examples of these products are candy, shoes, purses, televisions, etc.  We don't need to have these items so if the price went up a ridiculous amount, the demand for the might decrease and less of these products would be bought.  If the price of these products went down, the demand for them might increase and more of the products might be sold.

Products that are considered a necessity, instead of just a want, are products that have an inelastic demand.  For instance, one product that has an inelastic demand is oil.  Oil is a necessity.  No matter if the price goes up or down oil still must get bought.  Therefore, the demand for oil is inelastic.

Can you think of some other products that have an inelastic demand?  Do you believe the consumer has any control over prices of products with an inelastic demand?  Why or why not?

In Response to Melissa Moriwaki

What is your opinion on these April Fools Day products? Are they helping the brands? Why or why not?

I was amused watching the commercials for "Bacon Flavored Scope" and "Skinny Skinny Jeans." Although I was amused, I'm not sure whether these April Fools commercials are helping the brands or rather hurting them.  As Melissa pointed out although we all believe these commercials to be jokes, the companies give off an impression that keeps them in the back of our minds, which might help gain customers in the future.  I wonder though if this impression for some will be negative and actually work again the companies.  If customers are given the wrong impression they may lose faith in these brands and chose to take their business elsewhere.  On the other hand, with a little bit of a sense of humor the commercials may actually want to shop these brands after viewing the commercials.

I think that these amusing commercials can both help and hurt the brands, it just depends on the customer that views them, and their sense of humor.  After viewing these I wonder if there are any more companies that have created April Fools Day commercials in the past.  If so, what were those brands/commercials and did they help or hurt the company?  What was the end result?

Levels of Distribution Intensity

There are three different intensity levels of distribution.

The first level is intensive.  With an intensive level of distribution, a company aims having their product available at every outlet.  The level of customer service needed to sell this product is reduced.  Products that are distributed intensively often become convenience items.  Some products that are distributed intensively are chips, soft drinks, magazines, etc.

The second level of distribution is selective.  With a selective level of distribution products are distributed by screening dealers to eliminate all but a few in a selective area.  Products distributed at a selective level become specialty items.  Some products that are distributed at a selective level are televisions, computers, iPods, and telephones.

Finally, the third level of distribution is exclusive.  With an exclusive level of distribution products are distributed by one (or very few) dealers in a given area.  Products distributed at an exclusive level are usually specialty/luxury items.  Some products that are distributed at an exclusive level are Rolex watches and Rolls Royce vehicles.

What are some more products distributed at any of these given levels of intensity?  What are some advantages/disadvantages to items being distributed at each level of intensity.

In response to Kaley Deboer

Do you feel one channel of distribution could be more beneficial to a company, or do you feel it will always vary depending on the company, product, or service?

Although all of the channels of distribution could be beneficial to a company because they offer different benefits, I believe that the one that could be most beneficial to a company is a direct channel - where the product goes directly from the producer to the consumer.  

I believe that it is beneficial because it could cut costs for the company.  For example, instead of the price getting jacked up due to transportation costs, etc. a company could sell their product at a lower price if it went directly from the producer to the consumer.  The could also create less inventory because they could create products only when they are ordered by the consumer.

The other channels of distribution are also important, have each have their own benefits, but I believe that because of the cost cutting a direct channel could be the most beneficial to a company.  Do you agree with this, or do you believe that another channel is more effective?

Target Marketing Strategies

A target market is a group of people for which an organization designs, implements, and maintains a marketing mix for.  The organization plans to make the marketing mix meet the needs of that specific group of people, which results in mutually satisfying exchanges.

There are three strategies used in target marketing.  The first is an undifferentiated strategy.  In an undifferentiated strategy there is one marketing mix for everyone.  It is also known as mass marketing, and it satisfies most customers with just one marketing mix.  The second strategy is a concentrated strategy.  In a concentrated strategy an organization targets their marketing mix on one market segmentation.  It is also known as niche marketing and it satisfies a specific group of people.  Finally, the third strategy is known as a differentiated target strategy.  In a differentiated target strategy an organization focuses their marketing mix on  several market segments.  There is a distinct marketing scheme for each of these segments.

A product that can be marketed with an undifferentiated strategy is milk.  Almost everyone drinks milk so it can be marketed to everyone with a single marketing strategy.  On the other hand, baby food is pretty much only consumed by babies, so it would be appropriate to use a concentrated strategy focusing in on a target market of parents.

What are some other products that you can think of that can use an undifferentiated strategy to market their products?

In response to Kaley DeBoer

However, what I question is whether or not one of the market segmentations is more beneficial is establishing a target market or does it depend on the product? Or do all of the above segmentations need to be considered at once when a market is determined?

I believe that all of the segmentations (geographic, demographic, psychographic, benefit, and usuage-range)  play a crucial role in determining a target market.  If marketers were to just focus on one segmentation because they felt it was more important than another, they could miss out on a key factor that is important in establishing a target market, and they could possibly lose out on customers.  For instance, if a company were to focus solely on geographic segmentation (segmenting the market by region or country, market size, market density, or climate) they might miss out on a key factor about the demographics in that area that are key to creating a target market like age, gender, income, ethnic background, family life cycle, etc.  An example would be if a target market was created for a high cost product in an area because it had an appropriate climate, but the income of the people of that area was very low, so the people in that area really would not be able to afford that product.  Therefore, it would be more valuable to consider all the factors when determining a target market.  I also believe that the product also plays a key role in who the target market is.

Are there any examples you can think of when a company focuses too much on one segmentation and eliminated a key segmentation which ended poorly for the company? 

One-to-One Marketing

One-to-one marketing is defined as "an individualized marketing method that utilizes customer information to build long-term, personalized, and profitable relationships with each customer" by our textbook.  The goal of one-to-one marketing is to reduce costs and increase revenue.  It is a huge commitment. but can be an advantage to those companies who practice it.

Although most businesses use a mass-marketing approach, it is more efficient for some businesses to use one-to-one marketing to increase share of customer. The difference between mass marketing and one-to-one marketing is that mass marketing increases your odds of getting customers with a less specific focus on a specific people where as one-to-one marketing focuses on specific communication opportunities with each individual customer.

There are four trends that lead to continuing growth of one-to-one marketing.  Those four trends are personalization, time savings, loyalty, and technology.  Personalization focuses on each consumers specific wants and needs.  Time savings involves consumers saving time because they now longer need to shop around and making purchasing decisions.  When loyalty is earned consumers with continually buy from the same company.  And finally, new technology offers one-to-one marketers a more cost effective way to reach out to their consumers.

Can you think of any companies who practice the one-to-one marketing approach instead of the mass-marketing approach?  Has it been beneficial to that company?  Why or why not?