Paper Example on Increased Prices = Reduced Demand: How Coupons Can Help

Introduction

One of the significant impacts of an increase in the market price for any product is reduced customer demand I would not be happy with the move. Increased price lowers the customer's purchasing power, and thus, smaller sales volumes will be realized after the move. It will mean that I will have lower royalty points from the sales of the book. It is dependent also on the availability of any similar competing book, which will dictate if the book continues to sell.

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The Use of Coupons

Breakfast cereals and household cleaners are one of the widely used consumer products daily. Coupons result in market price discrimination. They allow consumers to purchase products at discounted rates and are thus able to win more customers. The strategy enables manufacturers to act like a monopoly and separate consumers into different price elasticity. When this happens, the shelf prices of the manufacturer's products also tend to fall since the retailers also compete to make sales. The move increases the manufacturer's sales volume and consequently increases the marginal profits. Examples of other products offering coupons are books, fashion, and beauty stores.

Use of coupons in Book Sale

Harry Potter is a well-established book all over the world and is renowned for its huge sales. It has gained a lot of fame among the young and elderly generations. The book is also a form of a monopolistic venture since no other companies are writing similar books like Harry Potter. In this instance, the competition is quite not high, and there would be no significant impacts in allowing discounts for the book with a view of increasing sales volume.

Lowering Product Price Strategy

Lowering product price is a strategy used by many firms when they want to get a market share. A firm can lower its selling price as much as possible. Such a move initiates a price war from competing firms, and in this case, the firms that cannot keep up with the war exit the market. In this way, the firm wins many clients due to reduced prices while their competitor strain to maintain their customers, and in most cases, incur loses. When much of the competition has been dealt with, and more customers have been drawn, the firm can then raise their selling price. With limited competition, the firm would now make enormous profits

Monopolistic Firms

Competition is an essential element in every market as it confers consumers with benefits due to increased efficiency, innovation, and a wide variety of products. If a firm producing margarine is allowed to be a monopoly, then it means the firm has the power to control the market prices for its products. In this case, such a firm may charge a high monopoly price in relation to its marginal cost since it does not face competition. However, some products, such as the railway and electric power firms, are better when they are monopolistic. These are firms that are essential to the economy of a given country. They require regulation from the government. Setting up such firms in most cases is also quite expensive, which would keep off other firms from venturing in. The firms need to be a monopoly so that the government can directly control them to ensure they do not exploit their consumers.

Difference between the Use of Coupons and Lowering Product Price

A manufacturer or a retailer issues a coupon as a part of a sales promotion. Coupons require redeeming and are, in most cases, sent via mail magazines and mobile devices. Lowering prices on the other case is the physical lowering of shelf prices for products. Both mechanisms tend to attract more customers and increase sales volume. When coupons are given out, they require redeeming to claim the reward. Most customers will purchase products with coupons and fail to claim them, which are beneficial to the firm. With lowered prices, customers will only pay for products, and the firm may not enjoy benefits as those associated with coupons. Coupons offer financial discounts to customers who use them, and those who fail to use them essential buy products at the standard market price.

Impacts of Advance Airline Booking

Airlines are in constant competition with each other. When one book for a ticket earlier, it costs cheaper since the firm knows that the client may have ample time to do a market analysis and get an airline whose price will be friendlier. Booking in advance also allows the firms to strategically plan for its flights and thus charge less for tickets.