Driving Demand: the required action of the "Demand Drives Price" lesson

 

Lessons from Economics and Real-World Examples

“Driving demand” sits at the heart of the concept that “demand drives price.” This principle, rooted in fundamental economics, shapes the way businesses, industries, and even institutions operate and grow.

A Lesson from Micro-Economics

Fourteen years ago, I wrote an essay recounting a powerful lesson I learned on my first day in college Micro-Economics, way back in 1982. The lesson—titled “Demand Drives Price”—has stuck with me for over four decades and continues to inform my thinking today.

My Econ Professor illustrated this truth using three copies of the local newspaper, The Daily Record: yesterday’s edition, today's, and a hypothetical “tomorrow’s” edition. Today’s paper cost 25 cents in those days, and everyone agreed that was a fair price. It could be purchased on campus or at a local convenience store, and it was always $.25.  Yesterday’s paper, now outdated, was worth little—maybe a nickel for practical uses like lining a cat box or cleaning windows. But the hypothetical “tomorrow’s” paper, filled with future sports scores, world headlines, and stock prices, sparked excitement. Someone suggested it could be worth a dollar, then ten, then $100, and finally someone shouted, “Maybe $100,000!” The cost of production for each paper was identical, but the value varied astronomically, all because the "demand" was so different.

The Importance of Driving Demand

That morning lecture has stayed with me throughout my career. Whenever I face business challenges, I remind myself of the vital importance of driving demand. This isn’t just a theoretical concept—it’s a practical imperative for growth.

Supply, Demand, and Market Equilibrium

Across industries and organizations, the basic principles of supply and demand always hold. Every market has an equilibrium point where supply meets demand, determining the price and quantity the market will support. Yet, it’s surprising how often organizations forget that to foster growth—in both price and quantity—you must actively drive demand. Put simply, if you want to “sell more for more,” you need to create and nurture demand in your marketplace.

Real-World Examples: When Demand Falters

Let’s look at a few examples where the failure to drive demand led to decline:

• Frozen Concentrated Orange Juice (FCOJ): Once a staple in American households, FCOJ recently disappeared from Minute Maid’s product lineup. The decline wasn’t just about changing consumer preferences; it was about the inability—or lack of action—to drive demand for the product. Without demand, even long-standing brands can fade away.
  
• Film Photography: Despite a surge in picture-taking, Kodak, once synonymous with photography, became irrelevant. The industry failed to adapt and drive demand in the new era of digital photography. Kodak’s slow response to digital cameras—and later, smartphones—meant missed opportunities and lost relevance.
• Higher Education: Colleges and universities today face a “demographic cliff”—fewer college-age seniors and fewer foreign students. Without strong demand for their offerings, institutions struggle to attract incoming classes, leading to lower prices (more financial aid,) lower class sizes, and a downward spiral or cost cutting and "right-sizing" that don't address the core issue of "demand."  Only those institutions with compelling value propositions can maintain or grow demand and avoid “selling less for less.”

Learning from Success: Apple’s Turnaround

While these stories seem bleak, history offers hope. Consider Apple Computers in the late 1980s and 1990s. The company tried to cut costs to halt declining sales, but it wasn’t until Steve Jobs returned in 1997 that Apple began its turnaround. Jobs invested heavily in R&D, innovation, and marketing. With the launch of the iPod in 2001 and the iPhone in 2007, Apple became the growth juggernaut we know today. The lesson? Forget “saving your way to success.” Instead, focus on driving demand through innovation and marketing.

Conclusion: Make Driving Demand Your Priority

Remember the story of the three newspapers: if “demand drives price” is a core truth (and i deeply believe it is) we must all push ourselves—regardless of role, title, or industry—to drive demand in any way we can. It’s the key to growth, relevance, and lasting success.

 

The “Promiscuous” Consumer… disrupting legacy brands faster than ever!!

 

 

I have commented over the years in this forum about the “fickleness” of consumers.  Many years ago, I wrote an essay (https://fylegacy.blogspot.com/2014/11/brand-loyalty-dangerous-and-outmoded.html) expounding on the idea that the “brand loyalty” and the “brand adoption model” were dangerous and outmoded ideas.  Writing this in early 2026, I am convinced that those musings were not only true, but the dynamic of “promiscuous consumers” disrupting legacy brands is actually accelerating.

This idea/concept first hit my radar in the late 1980’s.  In those years, before I found my way to Coke, I was the brand manager for Breyers Ice Cream, in those years owned by Kraft Foods.  In 1988, Phillip Morris (the tobacco giant) which owned General Foods acquired Kraft and combined the operations into a large food conglomerate name KGF.  As part of the integration process, I went to meetings in General Foods HQ (White Plains NY) to meet their marketing teams and work on integration plans.  On one of those trips, I just happened to “sit in” on a meeting being held by the V.P. of Marketing for Maxwell House Coffee, one of General Food’s historic and iconic brands.  The team was discussing an upstart “coffee shop” brand emerging from Seattle with an odd name….. yes, Starbucks.  They laughed at the “burnt taste” of the dark roasted coffee, the fact you could only buy it at a Starbucks store ( it wasn’t until 1998 that Starbucks coffee became available in grocery stores) and that there was a whopping 50+/- Starbucks locations in the entire U.S. at that time!  The final “mockery” was the V.P. prognosticating that NO ONE in America would ever pay $1.00 for a cup of coffee.  The team laughed, dropped that topic and moved onto what seemed to them the bigger challenges of the day.

I think back to that moment today, with 16k+ Starbucks locations in the U.S., 40k+ across the world, and reflect on Starbucks as the legacy brand today that is being disrupted from every angle.  This cycle/dynamic is accelerating in the food and beverage space and indeed is true across a wide array of consumer facing categories.  The consumers that I described as “promiscuous” are doing the logical thing… assessing their current choices of food, beverages, restaurants, cars, technology, clothing, and even lawn and garden brands and are wondering ( or doing live AI driven research) looking for “better” options.  We will dig deeper into this “better” definition in a future essay, but for today think about “(Q+C)/$” or Quality and Convenience delivered, divided by price.

Consideration for Disruptor Brands:  The headline hear is “go for it!”  I deeply believe that there are NO legacy brands that are invulnerable… regardless of category.  Now many legacy brands have incredible “moats” and can play defense or counterattack very well, with lots of resources so disruptor brands shouldn’t be naïve about the fights ahead.  Remember the “Differentiation Formula” that I shared years about the D/P/A model: “Distinctive” in the market/category you are competing, “Preferred” by core consumers/users, “Advantaged” vs competition.  If your disruptor offering hits the D/P/A model well, play hard and play fast… most legacy brands are slow to respond.

Consideration for Legacy Brands: The headline here is accelerate your work and your market awareness and always operate with a “pebble in the shoe”.  Be paranoid and imagine that you are surrounded by a myriad of brands that wont to destroy your brand and source their volume from YOUR business.  Don’t assume ANY competitor is too small, too niche, too obscure, or too expensive (remember those $1 cups of coffee.)  Work the D/P/A model hard on your side of things… and keep building/strengthening the competitive “moats” that will help you defend…. but you can’t stay purely reactive and defensive!  EVERY brand and business always needs to be “re-recruiting” its consumer base and be sure you are clear why a “promiscuous” consumer who has never tried your brand should try it tomorrow!