Everything has an effect on the economy, and the economy then has an effect on everything else. However, when it comes to marketing, can the economy guide businesses in the right direction, or help explain trends?
This piece will discuss the influence that the economy has on marketing and what insight businesses can gain from it.
Employment and Wages Affect Demand
When the majority of consumers are making a consistent and stable income, they are much more likely to purchase the more luxurious items or items with higher price tags. The opposite can be said for when the economy is taking a tumble.
With a stable economy, businesses are more likely to drive up demand with the confidence to purchase, which usually translates into making a sale.
However, when the economy is not as sturdy, it is harder to get consumers to part with the hard-earned cash, not only because of unpredictable times but also because the amount of wages consumers earn has a direct correlation with how much they are able to spend.
If wages fall and employment decreases, this leaves little room for consumers to purchase any luxury goods, so in turn, businesses may then create lower price points to entice consumers into buying more than just the essentials.
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Supply and Demand – How Does it Affect the Market?
One of the main goals of marketing is to drive up demand for a product or a service. That being said, how to go about this is usually dependant on the economy. If a product or service is in high demand, businesses usually market a price higher which can create a sizable profit, however, if a product or service is in low demand then prices are usually lowered to match this.
There are ethical concerns that businesses should take seriously when it comes to supply and demand, especially if an economy is struggling due to unforeseen circumstances such as a pandemic. It is morally and ethically questionable to drive up prices for essential goods in order to make a profit. When there are shortages due to something out of both consumers and businesses control, it is important to take that into consideration with marketing campaigns.
Budgets are Reduced Through Recessions
Recessions affect everyone. Both consumers and businesses have to navigate through such uncertain times and this will affect and change both spending and marketing efforts.
During an economic dip, consumers have less money to pay for goods that are not deemed essential and businesses may lay off those who are in marketing because of the costs and also the assumingly lower demand for impulse spending.
During something as difficult as a recession, marketing is not futile, but it is important that consideration goes into products or services that are advertised and that there is a good argument as to why the consumer might need it.