Remember the late night cram sessions thinking that it’s all a waste of time. You’re never going to use the business theories, so why bother learning them.
I’m in my final semester of a Master of Communication and thinking back over my education and wondering if it was worth it. Should I have skipped college and grad school? It cost a lot of time and cash and put me on a non-traditional career path. Was it wrong?
Then I looked at my undergraduate and realized what I learned there was really useful (not that I saw it at the time). Sure, work and life experience taught me to apply the business theories without naming them so non-business grads can understand me, but they are there.
Supply and Demand
The mainstay of economics: if supply goes up, demand will decrease. It can be reversed, inverted, or left the same. It’s a basic pricing model for an industry or existing product. It’s very simplistic but useful. Look at Apple’s iWatch launch. Pre-orders sold out within hours for a $349 watch that is really just an expensive bangle and will likely to be nearly useless within three years. Limit supply and see demand skyrocket.
Price Elasticity of Demand
This is a tricky one to understand, and it took a retail management course for me to “get” it. They taught it as a pricing formula, hiding the scary name from the class.
The price elasticity of demand formula tells how many more (or less) of a product you can sell by changing the price. Will having a sale increase total revenue? Hopefully, the increase in units sold means you will. The formula gets a little messy and wiki covers it well.
Porter’s Five Forces
My undergraduate degree had so many mandatory strategy subjects that I was bored. But it did give me the same skills of many MBA graduates, so I appreciate it now. It felt like all my lecturers had crushes on Michael Porter. They all thought they were teaching us this for the first time. It was worth it, though.
No product exists in a vacuum. To use another Apple example, the iPod wasn’t the first portable MP3 player. To access the wider competitive environment, Porter’s Five Forces model looks at the potential threat of new competitors and substitute products, as well as the power of suppliers and customers. When I use this, it’s heavily simplified and more a reminder to look at the wider environment.
Many marketers have tried replacing AIDA with other customer purchasing path models. Some also say that buyer behavior has changed so much that purchase path models are no longer relevant. I think that’s why I like the simplicity of AIDA.
The AIDA model details the steps the customer goes through to make a purchase. They have awareness, then interest (in the product). The desire it, and then take action to purchase it. This is even more powerful when over-layed with a purchase or conversion funnel.
I thought this was created by my first marketing lecturer when I learned it. Cash cow, dog? But this was in Marketing 101. Cute names don’t apply in the grown up world.
The BCG Matrix plots products or companies on their relative market share and growth potential. It can be useful when deciding which products to focus your time and resources on. We want stars, but cash cows are rather useful.
A Bonus on the Business Theories List
I feel I need to include the Four Ps marketing mix theory here. It’s another that’s still applicable despite how often it’s been criticized as outdated. But I just don’t use it. Product, place, position and price are all factors, but I need to go intentionally out of my way to use this. There’s another Porter model that I don’t recall the name of currently that’s more inclusive of the factors impacting a product. But I find myself simplifying the Four Ps even further to the marketing premise of “the right product/message, to the right people, at the right time”.
Does this match your thoughts on formal marketing education? Did you have a formal marketing education?
Note: If you’re going to point out that I’ve used the US terminology for my Australian education, yes it’s changed for my primary audience. But when professor is such a distinguished title in Australia, I can’t bring myself to standardize that part.
Featured image credit: Creative Commons by Jeffrey Smith via Flickr.