Tuesday, 22 November 2011

supply and demand

It recently came to mind that "supply" is to "demand" as "production" is to "consumption", but is that really the case?

Certainly you can't have one without the other, and they are very similar.

But the fact that goods or services move from one party to the other is the only thing they have in common.

Let's see where they differ.

1. a producer produces, whether or not there are consumers, whether it's a by-product or a waste product. Plants produce oxygen as a by-product of photosynthesis. As far as plants are concerned, oxygen is a waste product.

2. a supplier has a market in mind when they decide what to supply and how much to charge for it so they can make a profit from their customers.

It's very easy to confuse the two, consumers and customers.

Some producers will project an image of themselves as suppliers in an attempt to raise the price of their products, projecting the role of customer onto their consumers, and they can sometimes forget that without consumers, they've got a hill of product that will only get larger.

This is called fashion.

Once they get a few customers to associate the purchase of these items with social status, you've got a fashion trend.

Then other producers will engage in production of similar items in order to "get on the band wagon" and profit from the trend.

If a producer chooses to identify themselves on the product as a guarantee of quality, then you've got a brand name.

The distinction between a supplier and a producer becomes starkly clear when one considers marketing.

Consumers don't need marketing hype to know they want something, but marketing can affect who they go to for it.

Customers are all about the brand, how much it costs, and how prominently they can display their purchases as a status symbol to others.

The fact that they're acting as walking bill boards for a producer usually doesn't enter into it.

Just food for thought.

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