| John Spacey, September 03, 2016 updated on July 23, 2018
Marketing economics is the science of markets including product, pricing, promotion and place. Marketing is often viewed as an art that includes social elements such as influencing and creative elements such as design. These elements are built on top of economic fundamentals such as the forces of competition and customer demand. The following are key economic principles and theories related to marketing.
Developing products that are competitive in the market. The economics of products begin with business models that explain how you capture value. Product economics also includes the basic economics of production such as economies of scale that predict your cost competitiveness.
Pricing is subject to the basic laws of supply and demand. For example, a luxury firm that strictly maintains premium prices will enjoy far less demand for its products. This represents a temptation to discount as any price reductions may dramatically increase sales but potentially damage the status of the brand. Beyond luxury, many firms must set their price below a price umbrella of a strong competitor or accept a market price that they have no influence over.
Generating demand for products and services with communications and relationships. Much of this is based on attention economics, the idea that human attention is a precious resource. This is the economic foundation of advertising and other types of promotion such as direct marketing.
Making a product or service available to customers through physical locations and digital presence. This is based on the economics of trade and open markets.The idea that customer experience is the primary form of competitive advantage in an advanced economy. The global economy is undergoing a long term shift whereby value is increasingly based on intangible things such as brand image and services.
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