A very basic Marketing lecture. . Have been hearing a lot of people criticizing potato chips companies and soft drink companies for selling regular products at very high prices. . Potato chips at Rs 400 a kg and sweetened carbonated drink at Rs 50 a litre. . Also see many nodding their heads in agreement and accepting that its foolish to buy such products at such exorbitant prices. . I myself would have nodded if it was potato chips or sweetened carbonated water that the customers would have been buying. Its absurd to buy potato chips at Rs 400 a kg, and equaly absurd to buy sweetened carbonated drink laces with chemicals at any price at all. . But, then, I dont object to such prices. Why? . For a simple reason. . People buying that pack of potato chips or that bottle of soft drink are buying anything but the products in their basic form. They are also buying hygiene, happiness of their child, and loved ones, and a certain taste that is not otherwise available in homemade chips or locally produced chips. . They are actually buying lifestyle. The money is being spent at buying a lifestyle. That is why it cannot be sold cheap. Why do you think why a poor Rikshawallah would buy a chips or soft drink bottle for his son or daughter. He buys a temporary belongingness to certain lifestyle for his son or daughter. And for this reason I believe a chips packet and a soft drink bottle are a great social leveler, because they offer the lifestyle at a very low unit cost, that too, the same chips or soft drink that is eaten and drunk by rich kids. . You can get local chips and soft drinks in the market at almost one tenth the price, but, those products do not bring in the benefit of having a specific lifestyle. And to create that lifestyle image companies spend a lot of money. Those companies selling that pack of chips or that bottle of cola are not earning obscene profits. At the most they are earning a margin of around 8-10 percent. Most of their costs come from marketing and distribution costs. . Please stop criticizing everything for the sake of criticizing or just because you cannot understand it.
Posted on: Fri, 01 Aug 2014 03:07:59 +0000
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