Introduction
For understanding how the corn industry and the industry of water, I have interviewed with the marketing professionals from these two industries. Considering that marketing departments monitor the demand conditions, they can give us adequate information about their market.
Interviewer: What type of industry are you operating in?
Marketing Professional 1: Producing corn requires using large lands, machinery, and knowledge of cultivating corn. Therefore, a company needs to have a high amount of financial resources to enter this market. Also, producing corn requires having the scientific knowledge for agricultural production. Changing climate and worse environmental conditions force us to use more and more new scientific methods every new day. Therefore, we need to invest in research and development. Only some companies can afford these costs, and subsequently, only a few companies are in the corn production industry. On the other side, considering that there are many other companies and farmers in the world producing corn. Therefore, in the international corn market, we can assume that there is a market type close to perfect competition (Good, 2014).
Interviewer: How the price changes influence the demand in the world market?
Marketing Professional 1: The corn price is expected to increase in the future options. Corn is relatively cheaper to the substitute agricultural products, and the demand for corn does not change a lot when a price increase occurs. In the past, we have seen that corn has had an inelastic demand. However, the climate change has increased the cost of production, and many agricultural products are relatively more expensive today, and we see that the consumers have started giving relatively higher reaction to the changes in price. Also, the campaigns against the corn syrup because it is unhealthy for people, we have observed that some consumers have become more sensitive nowadays. Subsequently, we see that the demand for corn is relatively more elastic in the recent years. Corn is relatively more inferior product because it has been a cheap product, and when people get richer, they prefer purchasing relatively more expensive substitutes of corn (Good, 2014).
Interviewer: What is your strategy in marketing?
Marketing Professional 1: We have started providing information about corn as an agricultural product not harming our health. The misinformation about corn products is making the producers weaker in the markets. In the past, we could easily increase the price and maximize our profits; however, nowadays, increasing prices receiving a relatively higher reaction from customers, and we cannot increase the price for maximizing our profits. In the long-run, it might be relatively more challenging (Arnold, 2008). Also, we invest relatively more in research and development to reduce the chemicals used in the production of corn and produce relatively healthier corn products for consumers.
Water Market Script
Interviewer: How are the competition conditions in your market?
Marketing Professional 2: We supply water to the people living in a certain geographical area, and we are the only company with permission to supply water in this region. Therefore, we are a monopoly in a geographic area.
Interviewer: How do you evaluate being monopolist in your market for developing your business?
Marketing Professional 2: Maximizing profit is relatively more straightforward in the other markets. Many assume that monopolist companies can make the highest profit. It is true that some monopolists can do this, but it is not guaranteed. Also, it is a relatively more difficult task to achieve in monopoly because you face customers directly, and they are quite strong against the monopolist company. Also, the legal authority regulates our market, and our company cannot move freely.
Interviewer: How do you determine your price by taking the reaction of your customers into account?
Marketing Professional 2: We have some regulations placing limits on the price of water because accessing to clean water is a human right, and it is regulated. Also, there are some quality conditions for supplying drinking water. Therefore, our price determination process is limited from top and bottom. What we do is to develop a detailed explanation why we charge our determined price and why we change this price sometimes for customers and legal authorities. If we can convince them, then we can implement our pricing strategy. Otherwise, we face very difficult challenges including some punishments, strong reactions from customers, etc. The legal punishments can be understood easily; however, you might wonder how customers can influence our pricing. Customers can create pressure on the legal authorities (Arnold, 2008), and the legal authorities might purchase this service from another company in the next term. Therefore, for a sustainable business, we need to convince them.
Interviewer: So are you saying that your demand is quite inelastic and you cannot change the price much? Is that right?
Marketing Professional 2: That is almost right. The demand is inelastic because customers cannot purchase from this service from another company; however, that is true for the long-term. We might lose our production rights in the next term. Therefore, it is a limited monopoly in the short-run, but there is an entirely elastic demand in the long-term.
Interviewer: What is your pricing strategy to maximize your profit?
Marketing Professional 2: It is possible for us to implement a price differentiation in the different regions. The rich people’s price elasticity is less than the poor people’s price elasticity. Therefore, by differentiating the price, we might increase our profit. Also, water is a normal product, and the rich people use more water than the poor people do. We might implement a quota pricing strategy. If someone uses a high amount of water, he or she pays more for water. Considering that the rich people are less sensitive to the price changes, and they use a high amount of water, by implementing quota pricing and price differentiation, we can increase our profit (Pindyck & Rubinfeld, 2005).
References
Arnold, R. (2008). Microeconomics (1st ed.). Mason, OH: Thomson/South-Western.
Good, D. (2014). Who's Right about Corn Prices?. farmdoc daily. Retrieved 1 February 2017, from http://farmdocdaily.illinois.edu/2014/02/whos-right-about-corn-prices.html
Pindyck, R. & Rubinfeld, D. (2005). Microeconomics (1st ed.). Upper Saddle River, N.J.: Pearson Prentice Hall.
