Monday, June 02, 2008

Have just started reading this book called "The Under Cover Economist"
It starts with a very good observation...Of how the price you pay for the take away coffee u buy at the vending machine or the cold drinks you get at the retails have a profit markup of about 150% !
If you thought you already knew this (Even i had the same feeling...) what you did not know is that a maximum percentage of the markup goes to "get the competition out"...and this percentage is even more than the cost spent on advertisements!
Now...what i mean by "getting the competition out" is that...the company pays a lot of amount to the retailer or the place owner so that only its brand is kept at the place....especially at places where there is a lot of crowd...
For example....You see that there are a lot of Cafe Coffee Day (CCD) vending machines at CST station...
Ever wondered why Barista never bothered to get in there at a lower priced coffee to give competition...?

Its simple...CCD pays the railways a lumpsum not to allow Barista at the place ...and whats interesting is that...YOU pay the amount for this...
The office going consumers dont really bother when they have to pay a few rupees more for a normal cup of coffee...because its the rush hour n the mornings...and at that moment you dont really have time to think whats cheap...ALL YOU NEED IS YOUR COFFEE!!

Amazing stuff...in a way...what all a company does to stay ahead!
Exclusivity matters...once your are "more like others"....people will fail to notice you...
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