Surely, you've never even thought about what substitute products.Meanwhile, we, their customers, play an important role in changing market supply and demand.What is it?
So substitute products - these are products that can replace our usual products in the event that the value of her suddenly increased or decreased dramatically proposal.For example, if more expensive beef, we will replace it with pork.If cheaper juice in cartons, then we will buy soda is much smaller.If coffee suddenly becomes too scarce, we, what can you do, let us drink tea.Thus, to substitute a direct relationship characterized by one commodity prices and changes in connection with it the demand for the other with a homogeneous consumer properties.
How are substitute products with elasticity of demand?
According to the fundamental law of the economy, the demand for a particular product (service) is inversely proportional to the change in its value.How big is this relationship?Everything depends on this indicator as "elasticity of demand".So, if even a small change in the price of goods provoke significant changes in the demand for it, then we say that this product has an elastic demand.If the price of goods has changed, but it is virtually no effect on the number of sales, thus the demand for such a product "inelastic".
So what kind of goods with elastic demand?For example, you can take the apples.Imagine that suddenly, for some reason, the price of these fruits has increased.Of course, fans of Apple will continue to buy them as they are not worth it.However, a large mass of consumers simply switch their attention to the pear or kiwi fruit, for example, ie substitute products or substitute products.But the demand for footwear, medicines, gasoline, light bulbs, etc.elastic will not, because like it or not, and to replace them, we have nothing.
Sometimes, in exceptional circumstances demand it is replaced with an increase in commodity prices it is only growing.So, in the last century in Ireland after a poor harvest of potatoes increased the price of this root crop.And since he was the main and favorite product in the diet of local residents, a worthy replacement to it in principle, it was not, and the people did not frighten high price.They just started to allocate less funds from its budget to buy more expensive food (fruit, vegetables, meat), resulting in increased demand for potatoes.
substitute products constantly create a threat for the product, as to replace it with something, it is always possible.Managers and marketers certainly should pay due attention to this issue.So, if the factory, for example, decides to raise the price of a box of chocolates, it is not certain that it will achieve this revenue growth.Such a move would provoke a reduction in demand for sweets and sales growth much cheaper caramel and marshmallow.But not the fact that the total income from that factory will increase.You've got everything carefully calculate and analyze.
Each company wants to demand for what it produces, have minimal flexibility, because under such a condition becomes possible from time to time to raise prices without fear that buyers will find a replacement in the form of more affordable products.One of the measures that can achieve the desired - is conducting "educational" activities with respect to the buyer as a result of which it will be put to is the production of the company, its brand.High quality products, their durability, reliability, sustainability, continuous improvement techniques, and most importantly, the presence of some unique characteristics allow to earn the popularity and trust of customers.
