Tuesday, April 24, 2012

Do be do be do

Small step for a man, a huge leap for a rubber chicken.


How can targeted consumption change public policy to improve society (or improve society without policy)?

Well, by purchasing certain products and/or services and not purchasing certain other products and/or services, a large number of people can manipulate the demand and hence influence the supply. This can be applied almost anywhere, and is. When people found out that McDonald’s was not using proper meat in certain burgers, the sales dropped significantly. That is, until they announced that they were reverting to ‘proper’ meat.

However, this requires a rather large number of people and their success depends on other people’s greed and cooperation. Manipulation requires an unified front. If there are too many ‘traitors to the cause’, the sales won’t drop as significantly, and, as a corollary, the supplier has less reason to change the product or service according to the demand as this may cause a drop in the profit margin – after all, they must fund the change and perhaps the new ‘improved’ product or service requires more monetary resources to be used for them to be supplied. Sure, an increased price could help, but it has a slight problem.

When a supplier is dealing on a small market – with little competition, the supplier can dictate the terms on which products and/or services are offered. Basically a monopoly – people won’t stop buying if they have no other option and they are able to afford the goods. Hence market manipulation is practically impossible on the consumer side, and practicable only on the provider side. This applies to a large number of cases, because even in markets with larger competition, loyal customers and the sheer amount of supply dictate the rules – a small supplier can hardly keep the market satisfied when a larger supplier raises its prices and the number of customers for the little guy increases very quickly. Hence, the small supplier runs out of stock and the larger enterprise can continue with the high price tag, as it has removed other options for a lot of its customers. This, in general, is considered bad business strategy. This is why the prices go up a little at a time, but often (as opposed to sharp raises very rarely). The effect is the same, but with a lesser loss of customers. And henceforth the consumer loses anyways.

Let’s be honest, this strategy applies in markets with several larger providers as well. It is enough to take Microsoft and Apple – basically the same product, slightly different design, but one costs about twice the price of the other… and makes a neat profit. Unfortunately this means changing the consumption habits of a large number of individuals has little effect. Sure, there can be some effect, but usually it is insignificant enough to be pushed aside.

In reality, the consumer can do little by targeted consumption. Using pressure groups to influence political powers appears a more viable option, which is why it is (I assume so) the most popular weapon of choice. But I wonder how can targeted consumption benefit the society. One can’t deny the existence of the influence it has over corporations and governments.


But I feel good, I had a brainwave.

Brainwaves are cool. Like bowties and fezzes.

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