Microeconomic Analysis Of Tide Pods

1261 Words 5 Pages
Introduction This paper focuses on the microeconomic concepts of price elasticity as it relates to supply and demand of a given product; non-price factors that affect supply and demand; and finally market equilibrium and the effects of changes in supply or demand on it. The product selected for this analysis is Tide PODS®, launched in 2012 by Procter and Gamble (Procter and Gamble, 2016a, para. 11). Tide PODS® is an innovative product that Procter and Gamble introduced to the laundry detergent market as a “multi-benefit, multi-chambered new concept” (Branna, 2012, para. 1). According to Procter and Gamble (n.d.), the “revolutionary new three-chamber liquid packet form is an ultra-convenient, 3-in-1 laundry product that cleans, fights stains …show more content…
2). In its market research, Procter and Gamble (n.d.) found that only sixty-eight percent of consumers were satisfied with the laundry process and after using Tide PODS®, ninety-seven percent were satisfied with the laundry process (p.2). This indicates a taste and preference of consumers to save time and effort on a task that many considered a chore. This also indicates market size as a non-price factor. In a study on Procter and Gamble, researchers concluded that “developing, maintaining, and enhancing organizational market orientation influences innovation and is a promising route to firm performance” (Chang, Franke, Butler, Musgrove, & Ellinger, 2014, p. 247). These factors increased the demand for Tide PODS®, at least initially. However, not long after the Procter and Gamble launched the product, it faced significant legal issues possibly affecting the market size. Several consumers filed lawsuits against Procter and Gamble because children and older individuals have suffered ill health effects, and in some cases death, from ingesting the pods because they resembled candy (Ng, 2015a, para. 4). One would expect the market size would decrease because of these …show more content…
Specifically, the author related these concepts to Tide PODS®. However, realistically, a discussion of these concepts must occur in relation to each other to understand how the product will perform in the market. When the supply curve and demand curve are combined on the same chart, the point in which the supply curve and demand curve intersect at a particular price is the market equilibrium price. This is the point in which the amount of product a firm produces meets the demand.
The North American Industry Classification system classifies Procter and Gamble as a soap, cleaning compound, and toilet preparation manufacturer (Procter and Gamble, 2016b). Tide PODS® is a cleaning agent, specifically a laundry detergent. In 2015, Procter and Gamble reported $1.5 billion in sales of Tide PODS® (Procter and Gamble, 2015, p. 2). While sales seem to be strong, ongoing lawsuits regarding the safety of the product may decrease the demand of it. As such, if this were to occur, there would be a surplus of the product on the market and the company may be forced to lower the price to ensure that the product would still perform and generate revenue. However, Procter and Gamble did not lower the price of Tide PODS®, the firm took steps to increase the demand of the product, in light of safety concerns. Procter and Gamble agreed to change the containers from clear to opaque

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