The Central Dynamics Of A Marketing Equilibrium
Competing brands interact with each other all the time, whether by a comparison created by a customer, a similarity in advertisements or promotions, or providing the same offering and benefits.
Competing brands interact with each other all the time, whether by a comparison created by a customer, a similarity in advertisements or promotions, or providing the same offering and benefits.
The market competitors create the rule of the game played over the attraction of the customer; sometimes the customer participates in such games by being the rule creator (if the bargaining power of the customer is higher than the brands) and the offering is homogeneous
Other times there is a single brand that creates the rules of when to supply its products/services, when to change the prices, when to introduce new products, and when to create a shortage in order to increase future demand.
These governing dynamics created by the companies/brands are related to a source of power either in the hand of the company(s) or the customers – creating a non-equilibrium state in the market place – a state of creative chaos.
If Porter’s Five Forces Model of the bargaining “power” theory is considered to be valid, it means the market conditions are not in equilibrium; me as a company can act as the governing body (if having the power) to increase or decrease the price so as the customers.
Adam Smith’s theory of the invisible hand discussed the maximization of profit between companies without the intervention of governments – creating a self-regulatory governing dynamics of the market place. But governments in Adam Smith’s theory were defined as countries, now companies became the governing bodies creating countries inside countries and so as customers.
Thus, it is critical to understand that for the profit maximization aspect discussed by Adam Smith to take place, a marketing equilibrium should take place – the true invisible hand discussed by Adam Smith.
How to Achieve a Marketing Equilibrium
The “Game Theory” discussed by John Nash created a supplementary equilibrium to the theories of Adam Smith; if a member in the group devised strategies in a game situation while knowing the other members strategies and no player has anything to gain by changing only their own strategy.
If each player has chosen a strategy and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a “Nash equilibrium.”
The same concept is ought to be applied in a marketing situation – if an equilibrium is to be created. The key concept to any marketing plan/strategies created that it is not always in the best interest of a brand to overachieve other brands in the market place to attract customers.
For a marketing equilibrium to be created (the winning state of all: brands and customers), companies/brands should start creating marketing plans and strategies towards the benefit of the competing brands considering the customer as the opponent in the game theory and cooperating as companies/brands in order to sell their products to that party.
The point of equilibrium occurs when customers buy equally from the competing brands creating a non-winning situation for any, but rather a win-win situation for all brands and ultimately the customers.
Advantages of the Marketing Equilibrium
The marketing equilibrium ensures the well-being of both the customers and the brands in a market situation; it is important to understand that if a brand/company is the main controller of the market conditions (prices, supply and demand, products/services) price wars will be the determining factor which will be towards the benefit of the customers to a certain time-period – which will later result in low-quality products, the discontinuity in the buying process, and the delusion of brands/companies.
There will of course be no continuity of such winning situations but the gains achieved by creating equality between the powers of both the customers and the brands will certainly contribute to the overall well-being of the market/marketing process and the community.
Disadvantages of the Marketing Equilibrium
When considering the winning state of both the customers and the brands, a previous non-winning state occurs where either the brands/companies and/or customers will be in a situation where they compromise on their own market gains or bargaining powers in order to achieve that (all-winning) equilibrium.
At this point of a bargaining loss, it is tempting for the other party to eliminate the other part of the equilibrium and pursue with just the personal gains achieved by a certain market state.
In all theories, equilibrium states are just explained but the burden of creating such states is the responsibility of the market parties - the various players who exist within the boundaries of the market on cross it.
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