Marketing (Part two)
Yvonne Harvey, Contributor

Hello again. It is a pleasure for me to continue the lessons on marketing. This week, the lesson will surround the factors that influence consumer behaviour.

Factors that Influence Consumer Behaviour

• Price
  Consumers will adjust their demand for particular goods and services as the prices of them change. Generally speaking, the lower the price, the greater the quantity demanded.

• Price of substitutes
  If the price of substitutes is lower, then consumers will switch from the relatively dearer goods and services to the relatively cheaper goods and services.

• Quality
  Consumers will gravitate towards the better quality products and may even be willing to pay more for them.

• Taste
  People differ in their preferences for goods and services, so the marketer has to identify these preferences.

• Tradition
  Long-standing traditions and customs may influence demand. For example, some households purchase Grace products because their mothers and grandmothers purchased this brand and they see no reason to stop.

• Income/affordability
  The amount of money earned affects one's ability to purchase goods and services, therefore, some highly priced goods and services will only be purchased by the higher-paid wage earners.

• Spending patterns
  Some consumers are accustomed to spending a certain amount of money. If prices fall, they may not spend any on those goods and services, because they have already established a pattern of spending which they are not willing to change.

• Brand loyalty
  Marketers often try to create loyalty for their products among consumers. The hope is that the customer will stay with their existing product because it has satisfied them for sometime.

Customers who are loyal to certain brands cannot be easily wooed or enticed away from these products since they are satisfied with them.

Market structures

Now, we will consider another aspect of marketing - market structures. We will start the topic this week and continue it next week.

Definition

This refers to market classification according to the number of firms in the industry, types of product, the existence or non-existence of barriers to entry and the level or degree of competition.

There are four main market structures:

• Perfect competition
• Monopoly
• Monopolistic competition
• Oligopoly

For each market structure the candidate should know the following:

• Definition
• Characteristics/features
• Advantages
• Disadvantages
• Short-run and long-run profits

Perfect competition

Definition: Perfect competition refers to a market structure in which there are numerous firms in the industry each selling a homogeneous product. There are no real examples of perfect competition in real life. However, some markets approach near to perfection. These include agricultural markets, stock markets and markets for foreign exchange.

Characteristics: Some of the key characteristics of perfect competition are:

Numerous buyers and firms in the industry: This means that neither one firm nor one buyer can affect the price in the market. Each is a price-taker.

The product being sold is homogeneous: This means that there are no differences in what each firm is selling, whether real or imagined. Thus, if a firm increases its price, its sales will fall to zero as the buyers will buy from the other sellers who have exactly the same product.

Perfect knowledge of the market: Both buyers and sellers know exactly what is happening in the market. For example, if prices change they are immediately aware of it.

Perfectly elastic demand curve: This indicates that the firms cannot control price, but can sell any amount at the ruling price.

Firms are independent: This means that they do not take into consideration what the other firms in the industry do.

Very high levels of competition: Competition among firms is due to the fact that there are numerous firms selling exactly the same product, each competing for the same consumer demand.

No advertising: Advertising is not necessary since every firm sells the same thing. In the space of competitive and persuasive advertising there may be a small amount of informative advertising.

Your task in preparation for next week's lesson is to continue to look at perfect competition in terms of the headings listed above. See you next week.

Sandra Swyer Watson, principal of St Jago High School, presented Christopher Powell, brand manager of P.A. Benjamin Manufacturing Company, with a St Jago High School T-shirt recently. - Contributed

Yvonne Harvey teaches at Glenmuir High School.