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Law of Demand

by dustinthetoucan
11 replies
The law of demand states that if one good's price goes down, its sales will go up. This is pretty much proven. But I pose a question to those willing to answer...

Does the law of demand effect your conversion/buy rate of a product? Do you $20 products sell more often than $40 products? I've read many discussions around this all over the internet, but I'd like to see this forums results and or statistics.
#demand #law
  • Profile picture of the author CDarklock
    Originally Posted by dustinthetoucan View Post

    The law of demand states that if one good's price goes down, its sales will go up. This is pretty much proven.
    Giffen good - Wikipedia, the free encyclopedia

    In economics and consumer theory, a Giffen good is one which people consume more of as price rises, violating the law of demand. In normal situations, as the price of a good rises, the substitution effect causes consumers to purchase less of it and more of substitute goods. In the Giffen good situation, cheaper close substitutes are not available. Because of the lack of substitutes, the income effect dominates, leading people to buy more of the good, even as its price rises.
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  • Profile picture of the author mcmahanusa
    The law of demand, while true in many respects, is not an absolute rule. So much depends upon perception of value. If an item is perceived as having a certain value, to price it too low will diminish its value in the eye of the consumer and can actually decrease the number of sales. Which at least partially explains the value of the "one time offer".

    In the online arena, I have observed several marketers actually see an increase in sales when they raised the price of their product. Sort of "If it's that expensive it must really be good" perception.

    What is also true is that higher priced products are not always more difficult to sell than lower priced ones. Again, it comes down to perception of value.
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  • Profile picture of the author Don Schenk
    An offline product I sold for $19 gave me an average back-end sale of $125.

    I raised the price to $39 and my average back-end sale became $688 and it held for several years.

    I then tried $49 and had trouble getting people to buy the thing in the first place.

    Go figure.

    :-Don
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    • Profile picture of the author CDarklock
      Originally Posted by Don Schenk View Post

      An offline product I sold for $19 gave me an average back-end sale of $125.

      I raised the price to $39 and my average back-end sale became $688 and it held for several years.

      I then tried $49 and had trouble getting people to buy the thing in the first place.
      Similar experience here, though without a backend. I sold a product for $17, then raised the price to $37 and sales didn't budge. Raised it to $67, and nobody bought it until I lowered the price back to $37.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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  • Profile picture of the author Kurt
    Originally Posted by dustinthetoucan View Post

    The law of demand states that if one good's price goes down, its sales will go up. This is pretty much proven. But I pose a question to those willing to answer...

    Does the law of demand effect your conversion/buy rate of a product? Do you $20 products sell more often than $40 products? I've read many discussions around this all over the internet, but I'd like to see this forums results and or statistics.
    I don't think the "law of demand" has been stated properly. I believe it's as demand goes down, price will follow.

    IMO, the demand sets the price, not the price setting demand. It's up to us as marketers to increase the demand.
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    • Profile picture of the author CDarklock
      Originally Posted by Kurt View Post

      I don't think the "law of demand" has been stated properly. I believe it's as demand goes down, price will follow.
      The law of demand in classical economics is indeed that as price rises, demand falls, and vice versa. You're thinking of demand shifts - as demand increases or decreases, so too does the price, in the absence of supply alterations. Supply shifts are the opposite; supply increases, cost goes down... supply decreases, cost goes up.

      A lot of the scarcity model for infoproducts comes from the general consternation that we don't really have a supply curve.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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      • Profile picture of the author Kurt
        Originally Posted by CDarklock View Post

        The law of demand in classical economics is indeed that as price rises, demand falls, and vice versa. You're thinking of demand shifts - as demand increases or decreases, so too does the price, in the absence of supply alterations. Supply shifts are the opposite; supply increases, cost goes down... supply decreases, cost goes up.

        A lot of the scarcity model for infoproducts comes from the general consternation that we don't really have a supply curve.
        The "shift" is caused by lack/increase of demand, which can occur for a variety of reasons. And I wasn't refering to "classical economics", but instead what I believe is real.

        You can price your product at any price point you want. But unless you tell at least one other person (creating the possibility of demand, aka "marketing"), your price is totally irrelevant and won't affect (or be affected by) the market one bit.

        Only once there is demand can a fair market price be established. If there is zero demand, price has no influence.

        And since demand can exist without price, but price cannot exist without demand, I conclude that demand is more important and is the essential factor in the equation.
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        • Profile picture of the author mcmahanusa
          Demand is certainly important, but it might be good to remember that demand can be created through innovative and creative marketing.

          Originally, there was no demand for a $70 athletic shoe. But thanks to creative marketing, a demand was created, and so was a market.

          Originally, there was no demand for a round plastic circle with no moving parts and no obvious purpose. But through clever marketing, one of the most successful toys ever created was born - the Hula Hoop.

          Numerous examples exist in the IM world.
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        • Profile picture of the author CDarklock
          Originally Posted by Kurt View Post

          I wasn't refering to "classical economics", but instead what I believe is real.
          Oh, I see. Then we cannot possibly have a productive conversation.
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          "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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  • Profile picture of the author MaxHunt
    I don't think theres much of a difference in purchasing ebooks based on their price. Its more of a matter of the content of the ebook and the reviews of it.
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  • Profile picture of the author dustinthetoucan
    Wow, I like what everyone said... I'm glad to know all of your thoughts and experiences in the situation.
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    Thanks in advance... :)..... -Dustin

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