Economists are usually understood to be people who are working with Governments and International bodies like the United Nations to churn out huge quantities of data that talks about the conditions of human life. These reports, which are largely ignored , contain a large quantity of data that is usually difficult to interpret and understand. In reality, the work done by economists defines the strategies that are decided by companies.
The information that an economist has is truly priceless. For a corporate that is strong in a certain geography (in a state or a country or a continent) and aims to expand to another major geography, it is the economist who does the first survey about which market is most suited for them. An economist assesses the reasons for a product’s success in a market. He maps the per capita income, the state of the economy, the demand & supply situation of basic goods in the country/ market. An economy with similar market conditions is what an economist suggests for the company’s expansion.
On identifying the conditions in which our product has been successful, an economist tries to locate other markets with the same market conditions, thus, setting up the brand for success in that market.
A certain product/ service may be successful in a market for various reasons, but it primarily depends on the income of the citizens and the health of the economy. People who have a lot of disposable income are the only ones who can spend. Economies which are in good health are the only ones, which will allow luxury items to be sold in their markets. Similarly, our products have to be focused only on those markets which can satisfy the above conditions.
A great example for this is FMCG majors like P&G, HUL. Consumer products like soaps, shampoos, detergents, toothpastes are used by consumers across the World. However, most people choose the brand according to their budget. A well off person chooses a premium brand, while a person from a lower SEC chooses a mass market brand. For an FMCG company, it is important to assess if the market has a lot of people who can afford their premium brands and thus allow them to launch these new brands. This assessment is done by economists – who highlight the right markets for a brand to be launched in. For large countries like India, China & Brazil identifying the exact state/ market for launching the product is important as even the largest state is equal to a small nation.
Hence, an economist allows corporates to target the exact market and consumers who will be willing to pay a premium for their brands and earn more.
A lot of market studies are conducted by corporates to help economist gather this data and identify the next markets where these products can be successful. The senior management of most organizations is full of people who have worked their way up from sales & marketing. They may not always be conversant in the data being shared by economists. However, it has become necessary for all to understand the data &know how of this industry.
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Business economics, market economics may all sound technical and difficult, but from a business perspective, it is useful to first understand a market in detail and then invest in it. It is much cheaper to go through data and then take a decision about launching our product than to launch the product and then wait for results. The latter can be a very expensive strategy and could result in heavy losses.
It is always better to look before you leap, but with economists – you look & measure before you leap!