Promotion to Ruin
Faced with reduced sales price promotions are often an immediate response. The price promotions then add to sales and relieve the pressure that was caused by reduced sales. A more fundamental solution would be to develop product innovations to actually increase demand for the product, though this is an approach that requires both time and an investment of money. A couple of side effects that actually work against the longer term product innovations are that price promotions tend to result in brand image erosion and because they have been shown to work, price promotions tend to create a dependence on promotions to resolve the reduced sales problem in the future.
Fig. 1 is actually a depiction of a Shifting the Burden structure for which there are well defined strategies to address the structure.
- Diagrams developed with Vensim
- Kim, Daniel and Anderson, Virginia (1998) System Archetype Basics: From Story to Structure. Pegasus Communications
Systems Thinking World Discussions
Systems Thinking World Q&A * Gene Bellinger