Demand and Supply

Demand and Supply• Demand - The Quantity of a product that consumers

are willing and able to buy at a given price in a period of time.

• Supply – the quantity of a product that firms are prepared to supply at a given price in a time period.

• Marketing managers need to understand free markets to ensure there product meets the market price.

Demand• The law of demand states as the price increase the quantity

demanded will decrease and vice versa. In commodity markets such as steel and some foods the price is generally the determining factor, other products such as clothing there are other factors that will determine what a consumer purchases.

• What are the determinants of demand?- Changes in Consumer incomes- Changes in the price of substitutes and compliments.- Changes in population size and structure- Fashion and taste changes- advertising and promotion spending.

Supply• The Law of Supply states that as the price of commodities increase

the quantity supplied increases and vice versa. Producers will supply less as the price for a product decreases because they will choose to use their resources in another way.

• What other factors could change supply?- costs of production ie change in labor or raw material

costs- taxes - Subsidies - weather conditions and other natural factors- advances in technology

Equilibrium Price• The market price that equates supply and demand

for a product.• This is at the point where demand = Supply.• If the price is higher than the equilibrium point then

there will be excess supply and the producers will have to lower there price. If the price is lower than the equilibrium price then there will be excess demand, producers can make a higher profit by increasing there price.

Market Location, Size, Growth and Share

DO NOW• Activity 14.1 page 249 The Classic Watch Co

Q1 and 2

Market Location• Put simply this is where the business operates, which

is usually close to there target market.• In most cases businesses such as hairdressers and

florists will operate in shopping centers and shopping complexes as this is where there target market will be.

• If your marketing doesn’t cater for the market they are likely to be unsuccessful.

Market Location• Businesses who want to expand will go beyond there

local market (ie Auckland) and sell to the whole of NZ. This will result in increased sales and greater exposure. Ie Living Earth, DE Group and Euro Corporation.

• The greatest sales potential comes from the international markets. Being strategic and picking the right international market is important. Be aware new countries mean different cultures and tastes.

Market Size• The total level of sales of all products within a market.• This can be very hard to determine and does

generally take research and some calculated guessing as competitor information can be hard to obtain.

• Measured in two ways volume of sales and value of goods sold.

• Important to marketing managers as it will determine wether the market it is worth entering and can give you an indication of your market share.

Market Growth• The percentage change in the total size of a market

over a period of time.• Markets grow and shrink at different rates this is

normally related to consumer tastes and preferences, technology changes and economic growth. I.e. cell phone market was non existent and then grew rapidly but has leveled out now, it is enhanced by new innovations such as the iphone.

• Do you think it is always better to be operating in a rapidly growing market?

Market Share• The percentage of sales in the total market sold by

one business.• Market share is the best way to measure the success

of a marketing department, if your market share is increasing then the marketing of the products has been more successful then there competitors and can be considered the brand leader.

Market Share• Market Share can be difficult to determine especially

for a small business as accurate stats on market sales can be hard to come across, unless you operate with in a substantial market such as the FMCG market where statistic companies such as AC nielson do consumer surveys and track the information for these companies.

• Don’t forget Market Share can fall even if sales are increasing, because market sales could be increasing at a faster rate then one firms sales.

Benefits of Being the Brand Leader

• Sales are higher which will lead to higher profits• Greater exposure through retail stores as they are more

willing to stock your product due to consumer demand, they will also give you the most prominent stock positions.

• Because of the greater demand for your product the rebate rate for the retailer may be less which will lead to higher profits.

• Being the brand leader leads to greater visibility and consumers want the most popular products so they will purchase yours such as the Iphone.