How Important are Marketing Promotion Strategies in the Success of a Monopoly - Term Paper Example

How important are Marketing ‘Promotion’ Strategies in the Success of a Monopoly? Introduction Monopoly refers toa market structure whereby there is only a single producer or seller, such a producer or seller often maintains control of the market by making it difficult for other producers or sellers to join the same market. The tactics often employed in such a structure include maintaining high prices for commodities or embracing economies of scale that allows a producer or seller to deal in large-scale production and services at an affordable price for consumers. This makes it difficult for small-scale producers or sellers to make it in the same market structure. Monopoly can be created as a result of social or political inclination whereby consumers are influenced to prefer a particular producer or seller. This is evident where nationalism dictates what is produced and sold in the market. For instant, there are certain market economies that advocates for protectionism where consumers in that market are influenced to buy products from a particular producer or seller. This strategy often restricts other producers or sellers with intention to invest in the same market structure. In a monopoly market structure, the government often plays a greater role in selecting the producer or seller to dominate a particular market for products and services. For instance, the government often maintains monopoly in selecting firms the favor in a particular sector. In most markets, the sectors that monopoly structure is dominant include the telecommunication sector or the pharmaceutical sector (Amadeo, 2014). This paper explores how marketing promotion strategies are important in the success of a monopoly. Strategies used to achieve success in a monopoly Maintaining monopoly over a product means that the producer or seller has to stay ahead of other firms in terms of coming up with strategies main to retain their customer base. This is because the demands from customers or consumers are dynamic and maintain a static strategy may result to a backlash from consumers who can decide to look for other sellers or producers willing to meet their demand or reject products from a monopoly producer or seller (Freire, 2009). The drawback with a monopolistic structure is that a product or service often becomes monotonous in the market and customers may lose interest in their products if the monopolistic producer or seller is not creative enough to keep consumers enthusiastic about their products or services. As a result of globalisation and a pressure to liberalize the global market, maintaining a monopolistic market structure is becoming more difficult as similar products are finding their way in a monopolistic market. As such, a monopolistic market needs to come up with a strategy that appears unique to avoid competition from prospective entrants willing to usurp the power enjoyed by a single producer or seller (Freire, 2009). In most cases, a monopolistic structure in the market is often influenced politically or socially and such a producer or seller has to serve the interest of both the public and politicians. As such, it is important to come up with a strategy that will keep both parties happy. On one hand, the politicians play an important role in ensuring that there are barriers that prevent new entrant while; on the other hand, serving the interest of the public or consumers will ensure that they remain loyal to a single producer or seller. On another note, promotion strategies used in sustaining monopoly play a role in ensuring that consumers are frequently informed about a product or services that enjoys monopoly in the market. This involves investing heavily in advertisement especially during prime time to ensure consumers are updated about the single producer or seller. A key characteristic of consumers is that they are often eager to experiment with new products in the market. This means that a single producer in the market has to maintain a trend where there is a constant improvement of the product that enjoys monopoly in the market. This will ensure that consumers are not bored about the same product over time since they are offered a variety to choose from by a single producer or seller (Camenisch, 1998). Price is also an important factor in a monopolistic market structure since consumers are attracted to a product because of the price. While a seller or producer may enjoy a monopoly in a market due to barriers to new entrant, globalization has created a situation where similar products or services can infiltrate a monopoly market. In this regard, a single producer or seller needs to set a price that can entice consumers or customers their products. However, a challenge may emerge in terms of setting prices because in most monopoly markets, prices are often high to prevent new entrants (Rowley, 2009). Conversely, the infiltration of products sold in the black market means that while a single producer or seller deals in goods that fetch high prices, these goods have to exhibit quality since most customers prefer quality. Alternatively, when the goods in the black market are of good quality and sold cheaply, a single producer or seller in a monopolistic market structure can embrace a strategy such as economies of scale where they produce or sell in large quantity and at a cheaper price to remain ahead of other prospective competitors. Economies of scale can be achieved through mergers and acquisition, which allows a single seller or producer with the required business acumen to produce or sell quality goods in large quantity and at a lower price (Rowley, 2009). Promotion strategies in a monopolistic market structure are also important for its success in the sense, the consumers are only aware of a single producer or seller. As such, they will often be eager to know the activities of the single producer or seller in the market. This places the single producer or seller in a situation where they have to behave with decorum in the market as a way of promoting their image to the customers. On the same note, it means that a single producer or seller has to come up with a strategy that promotes efficient customer care and a fast delivery of goods and services to their customers. Monopoly has a disadvantage in the sense that the single producer or seller may become complacent when dealing with customers because there is no competition. This often leads to a situation where a single producer or seller neglects the needs of the customers. Success in a monopoly market structure requires a seller or producers to interact positively with the consumers or customers. Neglecting their needs will lead to boycotting products or services offered by a single seller or producers (Viani, 2007). Maintaining a monopoly require huge investment and as such, a producer or a seller in a monopoly needs to invest heavily as a way of ensuring that there will be no duplication of the services offered by a single producer or seller. This market structure requires inhibiting competition in such a way that the services and product offered become important to the society. Conversely, since in the market today there are generic or duplicated products, the strategies for promoting monopoly products needs to convince the customers about their originality. This is important in terms of creating a discriminatory trend where customers are persuaded to maintain loyalty to a product coming only from a single producer or seller (Brust, Fesmire & Truscott, 2008). A monopolistic market structure often leaves a producer or seller in a precarious situation as the only entity in the market that serves the customers. For instance in providing utility service such as electricity, there is often demands and protests from the customers regarding the service. This is because as the only supply of electricity, the monopoly firm has to ensure customer satisfaction concerning the service that it offers. On the same note, any changes done by such a firm has to be communicated to the customers to avoid complains or boycott of services. For example, rise in the price of oil can result in an increase in electricity charges. To maintain good relations with customers, the service provider has to give prior notice with regard to impending price increases; otherwise, consumers will not understand reason for increasing the price. Promotion strategies in this sense is important for the utility firm selling electricity because they need information regarding the services they are receiving and any other changes by the firm that might affect service delivery. In essence, providing information creates understanding among consumers in a monopolistic market rather than demystifying changes meant to generate profits for the firm (Gelan, 2009). In a monopoly, maintaining customer loyalty means that, the single producer or seller has to come closer to their customers. Regardless of the high prices of their products, customers prefer searching for products or services that are close to their reach. Distance often affects negatively in terms of retaining customer loyalty since they will be attracted to goods and services that are closer to their homes or neighborhood. On the other hand, while governments through a legal process often approve most of producers or sellers enjoying monopoly in the market, the regulator often implements the prices for the goods or services, which is the government. This situation may lead a single producer or seller to incur losses in case of harsh economic situation that result in a low consumer spending. In this sense, promotion strategies play an important role in terms of attracting customers back and expanding other regions in their jurisdiction. This helps in offsetting the losses incurred during harsh economic times; in addition, promotion strategies in a monopoly should aim at maximizing profits as a result of the monopoly position not being permanent. Since it is the government that establishes a monopoly structure in certain sectors, it could also rescind this decision to adopt a liberalized market. Such a situation will make it difficult a producer or seller that has been enjoying a monopolistic position to maintain a competitive advantage in a free market environment (Posch, 1995). Conclusion Promotion strategies are important in ensuring the success of a monopoly since, customer loyalty in such a situation will depend on the service delivery. As such, a single producer or seller should take advantage of this position to maximize profits by using various promotion strategies to entice more customers in a short period since this is often a temporary position depending on the political and social climate associated with various market competitions. References Amadeo, K. (2014). Definition of Monopoly in Economics. Retrieved 30 July, 2014 from http://www.useconomy.about.com › News & Issues › US Economy. Brust, P., Fesmire, J & Truscott, M. (2008).The Impact of Incremental Cost Increases in Successive Monopoly with Downstream Promotion. Journal of Applied Economics & Policy, Vol.27 (1), 33-46. Camenisch, P.F. (1998). On Monopoly in Business Ethics: Can Philosophy Do It All? Journal of Business Ethics, Vol. 5(6), 433. Freire, C.L. (2009). State Monopoly or Corporate Business: Warfare in Early-Modern Europe. The Journal of European Economic History, Vol.38 (2), 219-253. Gelan, A. (2009).The monopoly power of multinational enterprises in the service sector of a developing country. The Journal of Developing Areas, Vol.42 (2), 1-29. Posch, R. (1995). Your future in a monopoly dominated market. Direct Marketing, Vol.58 (1), 54. Rowley, J. (2009). Superpoly: monopoly in the twenty-first century. Management Research News, Vol. 32(8), 751-761. Viani, B. E. (2007). Monopoly rights in the privatization of telephone firms. Public Choice, Vol.133 (1), 171-198. Read More