The Economics of a Shampoo Commercial

Every hour, the television is deluged by numerous shampoo commercials that it has become difficult for viewers to tell them apart or to even remember their brand names. Thus, a successful TV commercial campaign will have to take the use of gorgeous models and the promise of visible results up a notch in order to be recalled by the consumer when he/she goes to the supermarket to grab a bottle of shampoo. The campaign must be able to convince the consumers that the product is “not just another shampoo” and that it is worth their hard-earned bucks.

Ultimately, the goal is to increase the revenue of the company by attaining a “preferred bundle” status, or being the good that is preferred over others (Varian 1999). As a first step in achieving this goal, it is important to identify and to get to know the target market. Consequently, market research must be done. A deeper understanding of consumption patterns will allow the company to aptly design the commercial. Focus group discussions and surveys will uncover what consumers are looking for and what appeals to them. If the consumer wants the product, then he/she will buy it.

Therefore, the findings of the research must be incorporated to the commercial to show consumers what the benefits of using the product are. Price elasticity of demand is defined as “the ratio between the percentage change in quantity demanded of a given product and the percentage change in its price” (Appleyard & Field 2002). Simply put, the demand for shampoo is heavily dependent on price. Figure 1 shows that a decrease in price of the good will increase the quantity demanded for it.

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Figure 2, on the other hand, shows that an increase in price will decrease quantity demanded. Having a variety of options, a consumer can easily switch to another brand if the price of the shampoo that he/she is currently using goes up. Hence, the consumers must see in the commercial that the price for the shampoo is reasonable. A good tactic to employ is adding something extra so consumers will feel that they are getting more than what they paid for. It can be a sachet of the shampoo, a scrub, or a discount on the next bottle. People love freebies. A little bit goes a long way.

Lastly, the commercial must focus on a specific feature of the shampoo. Even if the market for shampoo is highly competitive, a company can still “monopolize”. To do this, the company needs to decide what kind of shampoo they want to put out in the market. Is it for dandruff control? Is it for hair color? Is it for extra shine? The bottom line is that the idea must be fresh. A shampoo company can be a monopolist if it is the only one that offers a particular gain to consumers. When one takes a stroll on the personal care aisle of the supermarket, he/she will see bottle after bottle of shampoo that comes in a wide array of colors and sizes.

The purpose of the TV commercial campaign is to make their shampoo stand out and to be the bottle that the consumer places in his/her grocery cart. Hence, the company needs to find out through a thorough market research what will maximize the utility of the consumers. In addition, the price should be set at a level that fits the budget.

References

1. Appleyard, D. R. & Field, A J. , Jr. (2002). International Economics (4th ed. ). New York: McGraw Hill/Irwin.
2. Varian, H. R. (1999). Intermediate Microeconomics: A Modern Approach (5th ed. ). New York: W. W. Norton & Company.

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