Category: Blog Entries

I don’t know if this has ever been written or theorized about. Perhaps it’s basic economics 101. However, I don’t think most people see a relationship that I’ve noticed for years.

There is an inverse relationship between the value of a product transaction how much effort is put into it’s sale.

Am I saying all advertising is an indication that a product is not a good deal? Not at all, however, I am saying an excessive amount of advertising of a product might be an indication that the cost of the product is much more than it’s value.

An extreme example would be a timeshare. Your not going to find any financial counselors who will recommend a time share as a purchase with high value. Most people who own them are sorry they every purchased. A critical look at the cost of “maintenance” fees would show for the amount of these fees you could probably buy a similar vacation each year anyway. If you look to buy a time share from an individual, you find they sell for about 10% of the original price down to free. People are anxious to get rid of them. How are they sold? GREAT effort where you are one on one with a high pressure sales person for hours. This is an example of a product with minimal value, maximum price and maximum effort required to sell.

A pencil is another mater. You walk into the store, nobody is going to twist your arm, urge you purchase, tell you 50 reasons why the pencil will make your life whole, health, improve your personal life. Nobody cares. You’ll never see a pencil commercial. You buy it or you don’t.

Think of popular TV products. It’s occasional fun to watch the info-commercials for me as I enjoy watching the salesman work. I like listening for the hot buttons, how he makes you want the product. I recently watched a commercial on the Ninja Blender. Hey, I would like to have that, or should I say, I’d like to have what I saw in the infomercial, the enjoyment and fun of the smoothies and ice drinks. If you buy this blender, the promise is you can have the healthy food, the pleasure and enjoyment of quick and each healthful food. What could be wrong with that? Notice however, the infomercials are 10 minute to 60 minute long sales pitches. Those infomercials don’t come cheap. When you buy that product, your paying for the commercial, the harder a product is pushed or advertised, the more of a gap must be between the cost of manufacture and the retail price of the product. For this statement not to be true would assume the company selling the product is doing it for a loss. In other words it assumes there is no profit motive and without a profit motive, nobody does anything. Look at the impoverished history of Russia where socialism demanded that very little of what a worker did was for his own benefit, nearly all of his effort was taken away to give to others. People set their tools aside and did as little as possible. Shortages of everything ensue. What proposes to have a “classless society” value ends up with a great devide between the rulling class and the poverty stricken working class. Ok, I’ve gotton off topic….

I will occasionally look one of the products up on Google. In this case, the blender is sold for about 3/4 the price (about $150) from retailers and mail order suppliers. If you respond to the infomercial, the price is about $200. So immediately we see the infomercial, (big sales effort) has a higher immeadiate price. We must also understand that because of many people that view the infomercial and are sold the idea the product is worth $200, the price does not need to be alot lower than that to sell in the store. It’s perceived value is $200 but hey, Joe’s Appliances has it for $159. It’s a great deal! We’ll, maybe, maybe not. Without the Infomercial, it might sell for about what most blenders do, $40-$100. I don’t know for sure, but it seems obvious to me.

We’ve all heard of supply and demand economics. Just remember that producers and sellers of products to some degree and for a short period of time are able to play with the supply and demand equation. Remember the oil embargo? Oil was held back from the USA in order to drive up prices. Supply was altered for a period of time. Altering demand is not hard, you can create demand if you have enough expected profit in the product to advertise it strongly. Temporarily the demand will be higher. Remember Ginsu knives and Ron Popeil’s Pocket Fisherman? These are products past their advertising driven temporary demand period.

The value of a product has an inverse relationship to the effort put into selling it.

Happy Shopping!
Dave