In a recent blog, I talked about elasticity of demand and hopefully demonstrated why it is such an important concept for entrepreneurs to understand and appreciate when it comes to their own business. 

The key conclusions from that business angel blog were

 1) Understand the nature of the demand you are facing.

2) If it is elastic, you need to develop a very low cost business model as the lower you can make your price, the better for your demand - and profit

3) If it is inelastic, try to put up your prices as demand will remain at the same level

4) Don’t take the above for granted!

Of course, if your demand is elastic there are things you can do to make your demand less elastic - ie less sensitive to price.

 The most effective way of making demand inelastic is through branding and strong marketing. Before you start advertising, try to really understand what is important to your customers.

 1) Is it customer service?

2) Is it being associated with a good brand?

3) What can you do to make your product more important to your customer? (Typically a product which has elastic demand is not that important to a customer)

4) How can you make your product or service vital to the success of your customer?

5) What account management can you offer? Remember though that you have to remain a low cost business

6) Can you develop a menu of products so that you can bring the core price down even further? Think of the airlines and Dell breaking down the service into a very basic proposition and then having lots of add-on’s which can be charged for separately. Ryanair’s stated aim is to be able to offer flights for free and then make money from all the other bits and pieces that passengers may need to make a journey

7) Can you imbed your product or service as part of something bigger for a trial period? To make consumers realize how valuable the service you provide is? Think of how Anti-Virus software typically comes embedded or free for 90 days. Not only do you get used to using it - but it also means that you do not have to pay for this when you may be hard up having just bought a laptop!

The above is not an exhaustive list - but hopefully gives you some food for thought on making your demand inelastic.

I would really welcome your feedback on this. It would be great to hear of some cases where the advice from this blog does prove useful!

Here’s to being inelastic!

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