How much should we pay

Amazing little discussion today, which brought forth the consumer perception about pricing.

A guy walks upto the apartment across the road & offers to remove the bee-nest. He gets the job for a small sum of money (not sure how much) and the deal says, he will get to keep the honey also. He comes over to our place to ask for a bucket (to collect the honey).

Beehive HoneyDad gives him the bucket- he is back in 15 minutes with almost 20 litres of fresh pure honey. Wants to sell it to us & the neighbors & call it a day.

Bargaining starts & I watch as his would-be-customers negotiate for the right price. They want a steep discount coz they know he has already made a neat sum by removing the bee-nest . The market rate is Rs 200/- per litre & they are not willing to pay more than Rs 80/- (more than 50% discount) !

Once the deal is closed, I try to understand their logic of asking for such a steep discount. I thought its the fact that this guy is not really in a market with too many customers, so given his limited options he can best sell to those who know the honey is fresh etc. But they stick to their logic, that since the man made some money (mind you- none of them know how much he made. That is if he made any money at all) by removing the nest, he has not invested time & energy in rearing those bees.

How do they know that when they pay Rs 200/- in the market, the guy selling it has actually worked harder than this chap. Do they want to reward labor or pay the price thats right for fresh honey? It seems as consumers our satisfaction levels are dependent on the margins our suppliers have . Is this why we have advertisements & neat packaging options- so that our mind can somehow stop doing the margin calculations & be happy with the purchase.

Funny how the human mind behaves.

Value of Marketing

I remember my MBA days when I thought I had made a very smart decision to not take up any marketing courses. I felt as if it was all jargon-wrapped-common-sense. Why sit through classes(& worse exams) for something you can pick up by just keeping the eyes and ears open.

And for a long time I thought I had made a very sane choice. Eight years on, with some experience behind me, I still believe marketing cant be taught in classrooms. But I have definitely learnt to respect the power it has. Most start-ups are selling CVs or the product or the process or the technology. But the one who succeeds is the one who learns to sell the umbrella brand under the guise of all above.

The 3G rollout is a classic case. The sarkari co’s do have the first mover advantage, they have been spending money in telling people about 3G services too (have seen ads of MTNL Jadoo in Gwalior !) but they have failed to create the hype about 3G – that am sure the Vodafone ZooZoos & Airtel endorsers would !

Update: The new Airtel ad(har ek friend zaroori hota hai !) has surely shown how advertising can be a powerful tool in building a superior brand.