Premium Essay

Elasticity

In: Business and Management

Submitted By mnabors
Words 502
Pages 3
Subject: Elasticity
Date: May 1, 2013

Business Brief

Opening
The article The Double Jeopardy of Sales Promotions assesses market influences that have steered US marketers to increase sales capacities and increase market share through the use of sales promotions (Jones, 1990). This concept was based on theme advertising. Many firms during this time lacked foresight of the expense and the earnings that were forgone while attempting to increase short-term cost. It has been argued that long term promotions reduces future sales by 'bringing forward' sales, and diminishing of the brand. They also promote competitive retaliation; and cheapen the image of the brand in the customer's eyes. Promotions can never improve a brand image or help the stability of the consumer (Jones, 1990). This process actually pushes the firm into a nasty cycle of promotion, commotion, and then demotion. According to the article by using mathematical techniques companies are able to maximize the efficiency of their marketing plan (Jones, 1990).

Analysis
Knowing Price Elasticity of Demand (PED) helps the company opt whether to raise or lower price, or whether to price differentiate. Price differentiate is when the company charges the consumer different prices for the same product (Jones, 1990). According to Boyes, a good with price elasticity stronger than negative one is said to be "elastic;" goods with price elasticity’s closer to zero are said to be "inelastic" (Boyes, 2008). Goods that are more crucial to everyday living, and that have fewer substitutes, typically have lower elasticity’s; staple foods are a good example. Goods with many alternatives, or that are not considered essential, have higher elasticity’s. Goods that are considered indulgences, or whose purchase can be easily delayed, often have elastic demand. If demand is elastic, revenue is gained by reducing price, but...

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