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An Introduction of Promotional Elasticity of Demand
The promotional elasticity of demand measures the impact of a rise or drop in in promotion on a market. Generally considered positively related, demand for the good, which is the subject of the advertising campaign is inversely proportional to the expenses incurred in the case the advertising is negative.
Generally, promotional elasticity holds other variables and is the percent variation in the demand resulting from the enhanced promotional activity. In terms of retailing, it is percent variation in the customer demand for supply resulting from a percent variation in promotional activity with all other factors being constant.
There are several factors that impact promotional elasticity of demand. They include the type of product, which signified whether the product is new or already existing, the brand name, the number of substitutes and competitors in the market, the tactics of competitors, the mode of advertisements, the frequency of advertisements, the time of advertisements, and additional factors that impact the demand, such as incomes, professions, and tastes.
A promotional elasticity writing of demand has a number of applications. It allows businesses to determine the advertising budget or expenditure, allows withdrawing unsuccessful advertising campaigns, allows building brands, allows assessing the success of promotional campaigns, allows selecting more efficient media for promotion, and allows responding to the advertising policies of competitors due to better strategic management.
There are a few limitations of promotional elasticity of demand. The values of promotional elasticity of demand are not handy to analyze the impact of promotion of a single product. It is difficult to study the effectiveness of advertising tactics in a specific time period, especially with campaigns that extend for a long time period. The objective of the campaigns may be to develop brands and not merely to impact the size of demand. In addition, the promotional elasticity of demand does not consider the impact of additional factors that influence demand.
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