The difference between substitutes and complements
Posted: Sun Jan 19, 2025 9:56 am
Let's try to figure out: how do interchangeable goods differ from complementary ones? It's simple: the first category satisfies a common need, that is, one product is completely replaced by another. The second goods complement each other, they must be used together.
Examples of such products are tea and sugar, dresses and shoes, a car and gasoline, etc. It is an indisputable fact that complementary goods that cannot be used without each other have a close relationship, expressed in demand and price. That is, if the cost of one product increases, then the demand for the second one falls. You cannot buy a shuttlecock without a badminton racket, a SIM card without a mobile phone or tablet.
Complementary goods, or rather their relationship with each other, can be characterized as negative: when the price of one increases, demand for the other falls sharply. It is easy to understand why this happens: the first product is bought much worse due to the increase in its cost. Without it, there is no particular sense in buying the second product, which is why demand for it falls. In economics, this is called the negative type of cross elasticity of demand.
Let's look at an example. Let's cash app database assume that the price of an iPhone has increased by 5%, which has led to a decrease in people's need for it. If a person does not buy a phone, then he does not need cases for it - the demand for accessories has also fallen. It is this fact that allows us to consider the goods as complementary.
Download a free selection of tools for calculating KPIs and increasing marketing metrics
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have conducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you 6 of the most valuable documents that we have developed for our clients.
Download for free and implement today:
Step-by-step guide to creating marketing KPIs
Template for calculating KPIs for a marketer
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
How to make KPI for the sales department so that profits grow by 20% or more?
Step-by-step template for calculating KPIs for OP managers
Checklist of 12 main indicators for website promotion
Find out what metrics are needed to properly optimize your website
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How to define your target audience without mistakes?
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Examples of such products are tea and sugar, dresses and shoes, a car and gasoline, etc. It is an indisputable fact that complementary goods that cannot be used without each other have a close relationship, expressed in demand and price. That is, if the cost of one product increases, then the demand for the second one falls. You cannot buy a shuttlecock without a badminton racket, a SIM card without a mobile phone or tablet.
Complementary goods, or rather their relationship with each other, can be characterized as negative: when the price of one increases, demand for the other falls sharply. It is easy to understand why this happens: the first product is bought much worse due to the increase in its cost. Without it, there is no particular sense in buying the second product, which is why demand for it falls. In economics, this is called the negative type of cross elasticity of demand.
Let's look at an example. Let's cash app database assume that the price of an iPhone has increased by 5%, which has led to a decrease in people's need for it. If a person does not buy a phone, then he does not need cases for it - the demand for accessories has also fallen. It is this fact that allows us to consider the goods as complementary.
Download a free selection of tools for calculating KPIs and increasing marketing metrics
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have conducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you 6 of the most valuable documents that we have developed for our clients.
Download for free and implement today:
Step-by-step guide to creating marketing KPIs
Template for calculating KPIs for a marketer
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
How to make KPI for the sales department so that profits grow by 20% or more?
Step-by-step template for calculating KPIs for OP managers
Checklist of 12 main indicators for website promotion
Find out what metrics are needed to properly optimize your website
40 Services for Working with Blog Content
We have collected the best services for working with content
How to define your target audience without mistakes?
A proven guide to defining a company's target audience
Download the collection