How to Manipulate Supply and Demand for Profit

How to Manipulate Supply and Demand for Profit

According to basic economic principles, the price of your product or service is determined by supply and demand. This is an unfortunate fact that many of us try to deny, but the science is there.

According to basic economic principles, the price of your product or service is determined by supply and demand. This is an unfortunate fact that many of us try to deny, but the science is there.

The movie, “The Wolf of Wall Street”, starring Leonard DiCaprio, was based on the life of Jordan Belfort. In my favorite scene from the movie, Jordan thrusts a pen into the hands of his sales team and says “Sell me this pen.”

One guy says “This is the best pen ever made,” another “This is the last pen you will ever buy,” but none make a convincing enough pitch.

Finally, after Jordan takes his pen back, one salesman grabs the pen from Jordan. He hands him a piece of paper and says “Write your name on this piece of paper.” When Jordan realizes he no longer has a pen, the salesman says “Oh, you don’t have a pen anymore… supply and demand, bro.”

I love this scene because it demonstrates a fundamental selling mistake made by most salespeople who try to present a product’s features and benefits.

It does not matter how good your product or service is; the customer will not be inclined to buy it until a need for it is recognized. First, you must create the demand for your product or service, then you can sell your supply.

In another example, Fred Bear created a market for his archery products where none existed by convincing the state of Michigan to create a separate archery hunting season.

If you think strategically, you can manipulate the laws of supply and demand. By manipulating the laws of supply and demand, you can make more profit in less time and with far less effort.

Most entrepreneurs fail to realize that they can manipulate supply and demand. By gaining control over these two variables, businesses can gain control over pricing and profit margins.

Control Supply

Some companies have successfully leveraged an oligopolistic market structure, such as Opec and cell phone providers, or have established virtual monopolistic market structures, such as De Beers, Standard Oil, and Carnegie Steel to control supply.

As a business owner with a limited budget, what steps can you take to control the supply of your product or service? Is it realistic for you to think you could ever control supply? The answer is “YES!” You must carefully consider your position in the market.

You control your schedule and determine when and with whom you can meet. When you get a call from a customer and your reply is “My calendar is wide open, when can we meet?”, you are saying that supply is high… and as every economy 101 student knows- with high supply, prices fall.

Instead, ask some questions to pre-qualify the prospect and only offer up a few times where you can meet. This sets the expectation that you are in high demand and have limited resources, even if this is not the case.

Having a personal brand in a niche market will act as a multiplier. I encourage every business to find its Blue Ocean by going through the exercise of creating a Business Model Canvas. Being in an uncontested market blue ocean means that what you offer is unique in some way, and therefore, supply is limited.

Create Demand

Consumers like purchasing and doing business with businesses that are in demand. In-demand products and services all have premium prices associated with them. These brands have successfully manipulated the law of supply and demand by creating a demand.

To succeed in most businesses, you have to be scalable, which means creating a word of mouth epidemic. Therefore, you must locate, attract, and nurture “social agents” to help spread the word about your product or service.

Social agents, sometimes called social influencers, are people that share your message with others. While a social agent may never do business with you, they love recommending you to others.

How can you create an urgent demand for your product or service?

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Author: Steven Imke

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