Question

Some goods are normal goods at lower income levels and inferior goods at higher income levels. One example is the fast food category in the US restaurant industry (e.g., McDonalds). In this case, lower income consumers will purchase more fast food if they earn small increases in income. However, the consumers will substitute other types of food and purchase less fast food as their income rises to much higher levels. Can you think of a second example from some other industry in the US or another country?

Suppose you are the marketing manager for a company that faces this sort of demand response from the customers of its major products. How would you develop an advertising program that adapts to this behavior over the growth (increasing income) and recession (declining income) stages of the macro economy? For example, would you change your pricing policy as the economy grows or declines, or would you change the target audience for your ads? Are there other things your could do in this situation?

Answer 1

1)

Cell phone industry can be taken for instance. For this situation bring down wage shoppers will buy base model or keypad cell phones in the event that they win little increment in wage. The customers will substitute advanced cells and will purchase less keypad cell phones as their salary to a significantly higher level.

2)

Accepting that the organization is an automobile producing organization then we should initially complete a PESTEL examination to comprehend the market, pay level to settle on promoting system. As underneath

Car industry PESTEL investigation for an organization in the US advertise. Essential 5 factors are-

Trump administration (Political)- Since the day Trump administration took office of the US government the condition of the economy has been constantly changing. With the change in the Visa requirement and immigration rules the domestic industry has been promoted but the companies have taken a hit as importing talent has become difficult.
Impact- with such rapid evolving political scenarios it has become difficult for the companies to function and this may lead to a higher manufacturing cost for the auto industry. The fall in consumer income may lead to fall in demand for premium automobiles.

2.Electric vehicles (Environmental)- the deteriorating environmental condition of the earth has forced the manufacturers to come out with innovative electric vehicles and vehicles working on renewable source of energy.

Impact- the impact of the above can be on the existing line of vehicles as the consumer now preferring more of e-vehicles rather than conventional vehicles and hence impacting demand and profits of conventional automakers.

3.Cost to the society (Social)- the auto maker has to contribute to the society and with companies like Tesla focusing on societal development has led to the automobiles working not just on increasing profits but also benefitting the society at large.

Impact-Increase in cost of the auto maker on Corporate social expense and product development will have top keep society at heart rather than solely profits or revenues.

4.Cost of manufacturing (Economic)- There has been a constant innovation in the auto industry and because of which the cost of manufacturing has been going up. The labor supply in the US has fallen and this has led to increase in variable cost. Also due to sanctions and import restrictions the cost of import and export has varied to a vast degree affecting the auto industry.

Impact- The company will have to focus on not importing raw material for the car and exporting cars more to nation that have subsidies and security. The company should closely monitor the labor cost.

Rapid innovation (Technological). Companies like Lexus, Audi, Tesla have been looking at not just innovation in the fuel type but also in engine and design. This has lead to increase or change in market capturing abilities of the companies.
Impact- The Company has to be updated with the market development and the change in the market demands. Also the competitor analysis is at core and the technology of the competitors must be followed and innovated in the company.

5.Ethical duties (Legal) For all the companies it is required that they follow the legal compliances and abide by the code of ethics. We have seen a major case of Volkswagen defaulting on pollution norms hence facing tough times.

Impact- The Company need to comply with the law and ethics and thereby should not put itself in any complicated situation and hence saving its reputation and cost.

Apart from above if the campaign is ready to go then we can do the below-

Creates new market opportunities- By selling globally the website will makes loads of popularity and income as, visiting this website will be turned the one stop shop for the customers across globe and it becomes imperative upon them to buy good products from this website and hence the company automatically creates a bigger and new market.

Level uneven income streams- If the income from one market is uneven or is decreasing the company can clearly increase the income from other small or new markets by following aggressive strategies.

Local buyer needs- By identifying new markets globally Website can categorize and identify needs of several buyers based on the region, age country etc. By doing so the company will be able to service to local buyers needs and also offer variety of products as the offering will increase with the market and the categorization.

Hence if the economy if going through recession then the company can target global market or in the local market launch the same product with modified features at a lower cost and if the economy is booming then we can increase prices to average out the cost and profits in the long run.

The audience will depend upon the sales data and market segmentation strategies of the company.