Economics is the science that studies money. However, it is not just about money. It is also about weighing different choices or alternatives. While marketing is a profession concerned primarily about promotion and sales of goods or services. The top marketers will often look into subjects like statistics, psychology, sociology, and, yes, economics in marketing strategies. Because these subjects all help in creating buyer interest and making sales.
In fact, the science of behavioral economics can be extremely useful in marketing, because it sheds light on the conditions and actions that lead consumers to spend more money. Marketing and economics may seem like strange partnerships, but they’re a perfect match.
Difference Between Economics And Marketing
There’s the long-standing tension between economics and marketing. Despite the mere fact that marketing is an offshoot of economics. Marketing is literally the blending of economics and psychology (with a little sociology thrown in). And, it’s the addition of psychology that sometimes irritates economists.
The major difference between economics and marketing is that economists believe consumers are rational and seek products providing the greatest benefits. Marketers accept that consumers (including business consumers) are sometimes irrational.
When it comes to the notion of marketing and selling ideas, products and services to the public, behavioral economics, not traditional economics, offers the most value to the overall industry. Understanding why people choose to buy is key for any marketer.
Behavioral science is being used in all kinds of customer experiences, from gadgets to apps, because industry leaders are seeing such great success in how they frame things to appeal to their end users.
It has paved a road long ago, with mood-boosting encouragements like “buy now, pay later” or “buy one get one free.” You might dismiss these as good examples of behavioral economics, but they are indeed effective, and that “framing” of expenditure should be every marketer’s first rule in applying behavioral economics to marketing. Making the price feel less painful for the consumer. Behavioral economics have inspired marketers to use a variety of ways to influence consumer decisions.
From packaging through to where and when messaging occurs, behavioral economics means marketers have learned how to reach their ideal consumers because they understand who their audiences are and why they choose to buy. Today, every marketing choice in the life of a product or service, from design through to sales, is a reflection of all that’s been learned from behavioral economists.
Economics And Marketing Strategies
By having a strong brand, consumers know what they should expect, and this creates identity, loyalty and word-of-mouth referrals. If you think about the world’s biggest brands like Nike, Pepsi, McDonald’s and Starbucks, then you instantly know more than just the name. You know price points, products, where you can get them, who likes them and some even know where the companies stand on some of today’s social issues. That is what branding is today. It’s so much more than just a logo with a name.
2. Traditional Innovation
Innovation is a good example where blending economics and marketing simply makes sense. Traditional innovative planning involves creating economic forecasts for sales of a product that doesn’t exist yet. There is little room for intelligent exploration in what “might be” preferring more of what “can be”.
Solving a consumer problem (assuming the economics exist for profitability in terms of numbers of consumers with that problem) will always outperform economics-driven innovation. And, innovative products must exist without added pressure to show immediate profitability. Look at 3D printers — it took years before the promise of these printers sparked the imagination of enough consumers to make them a profitable product.
3. Social Media Marketing
Pinterest, Facebook, Twitter, Snapchat, all these sites are so widely used now, with over half the world’s population using social media for staying informed, and being connected. Engaging with audiences has become a huge new avenue in marketing and is absolute gold for market research. It also allows for sharing content created by users to boost marketing efforts. “Influencers” are often used to reach target audiences within their specific platforms.
4. Strategic Marketing
Building scenarios based on blends of econometric modeling and marketing. Consumer behavior, culture, and influence. Makes for better forecasting than either alone. Scenarios should aim towards probabilistic models rather than predictive models. Sure, predictive models provide more concrete estimates, but those estimates may be wrong. Extending your trend line to the future becomes increasingly less accurate as the time horizon grows.
5. Multi-Media Advertising
Advertising of all kinds still dominates the marketing world, radio, tv commercials, print ads, etc. Despite the advent of new media, these traditional formats are here to stay. For instance, affiliate advertising through blogs and major news sites is common practice now.
A brand doesn’t pay up-front for the advertising, but instead compensates the blogger if sales are made. As for commercials, it’s common for brands to create ones that play just once or twice to create a buzz, but then rely on platforms like YouTube for viral, on-demand marketing campaigns.
6. Pricing Strategy
Pricing is another area where using economics alone can fail your business. Some businesses price products to recover their investment or to match competitors. But, such rational pricing models aren’t usually the most effective strategy. Companies that blend economics and marketing see higher profitability.
For marketers who grasp the fundamentals of market economics and how product, promotion, pricing, and location contribute to purchasing choices made daily. They’ll have a leg up in creating ways to get their message heard, no matter what platform or media they employ. Including factors such as segmentation, psychological pricing, and load management all can contribute to improved financial performance.
Marketers need to get creative and use social media, traditional media, and branding to generate consumer awareness, sales, and loyalty. By understanding your audiences through behavioral economics, you will make better choices in where to focus your marketing efforts.