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Promotional Elasticity is a concept popularized by an Economist, John Hicks. Understanding this concept is highly useful in today’s globalized and competitive world because promotions of services and products are highly vital.

This is an important topic in Economics and students are often given assignments to write on it. We, at BookMyEssay have hired economic experts who are always there to help you. We can help you secure the highest grades in your examination.

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Understanding Promotional Elasticity

Promotional Elasticity of Demand measures the sensitivity of the market to decrease or increase in advertising saturation. It measures the effectiveness of the advertising campaign to generate new sales.

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This is calculated by dividing the change in percentage in quantity demanded by a change in percentage in advertising expenses. If the promotional Elasticity is positive it means an enhancement in advertising can increase demand for advertised services or goods.

The effect of an increase in advertising expense on sales differs according to industries. Many companies review the advertising to sales ratio for measuring the effectiveness of the advertising strategies. Promotional elasticity can lead to a change in demand for products and services. This is valuable because it quantifies the demand change by spending on advertisements. It shows that how a one per cent increase in advertising expense can affect sales when other factors remain the same.

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The Factors that Affect Promotional Elasticity

Promotional Elasticity of Demand is a vital concept while deciding promotional activities. Promotional Elasticity is influenced by several factors that are explained in our Promotional Elasticity homework help service as follows:

Product launch: During the launch of a new product in the market, promotional elasticity of demand is higher than unity. It is because the objective of advertisements is to create awareness of products among the customers. When the sales increase, promotional elasticity decreases. After the products are properly established the objective behind advertising is to attract new customers and creating more demand. The advertisement expense shall increase when there is less demand.

Advertisement by competitors: Promotional Elasticity is influenced by advertising that is being made by competitors in the market. if the market structure is highly competitive, the advertising effectiveness of the company is decided by the effectiveness of advertisements and the amount spent.

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What are the Applications of Promotional Elasticity?

The applications are stated below as follows:

  • It can help to evaluate the success of advertising campaigns.
  • It can help to build brands.
  • It can help firms to determine the advertising budget or expenditure.
  • It can help to withdraw ineffective promotional campaigns.
  • It can help to select effective media regarding promotion.
  • It helps strategic management response to the promotional policies of competitors.

The Effect of Advertising on Promotional Elasticity

Due to the demand in advertising expenditure, the demand curve changes to the right. It can be considered that if the demand enhances, the demand curve shifts its direction to the right, the demand elasticity remains the same at each price, rises or declines. The basic objective of advertising is to influence the consumers to purchase a specific brand instead of substituting brands. This is explained in detail in our help for assignment on Promotional Elasticity.

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