July 14, 2000 (Ira Pilgrim)


The best mental effort in the game of business is concentrated on the major problem of securing the consumer's dollar before the other fellow gets it.

Stuart Chase

People who grow food will never go out of business because their product is consumed. The consumer needs as much food tomorrow as he needs today. This is true of all commodities that are consumed. But what about products that are not consumed? A person buys an automobile and he may not need another one for many years. The same thing is true of computers, cameras, clothes(but not socks), houses, TV sets and many other products.

To build and sell houses, manufacturers and vendors need to have a continually increasing population. In most places these days, that isn't a problem. We live in a country that many people want to live in, so even if the birth rate goes down, there will not be much slackening in the demand for houses. The only thing that will depress the housing market is a depression, when people won't have much money to spend.

The electronic people seem to have no difficulty because, with every new development in technology, the older products become obsolete. It doesn't matter when someone buys a computer; within a year there will be something more advanced that will make that computer obsolete, even though it will probably still work perfectly. I am very conservative, so I will only get a new computer every 10 years or so. I think that the computer that I am typing this on may be my last computer, but I have said that before. Some people want the latest and will get a new computer every year or two. The same thing is true of the people who buy new automobiles. This is true even though there really haven't been any big advances in automobile technology for many years. A forty year old automobile in good condition will get you where you want to go just as well as a new car will.

Another trick is to "create" demand; to make people who don't own an item believe that they just have to have one. I have seen this happen with radio, television, and now, mostly because of the internet and e-mail, to computers.

Suppose that a time comes when the advances in computer technology reach the point of being trivial for most potential purchasers, as it eventually must. How will the manufacturers and vendors get next year's customers?

The answer that some manufacturers have used, and use now, is to make sure that their product breaks down soon after the warranty has expired. They also design the product so that it can't be repaired and must be replaced. This is called "planned obsolescence." They can get away with this only if there isn't any significant competition. If there is a competitor who makes a better product that doesn't break down so soon, they may lose all of their business. I know of one manufacturer who gets away with it because of superior marketing. They also managed to run their competition out by cutting prices and setting the price for their crappy product just low enough so that most customers will not balk at replacing it every year.

The quality of a product doesn't matter much as long as there is lots of money around. Should money become a bit more scarce, people will be a bit more discriminating in what they purchase . They will look for "value," which is a combination of price and quality.

Skillful advertising can overcome resistance to purchasing a product that is no better than its cheaper competition. It can also convince people to purchase drugs or so-called food supplements that do absolutely nothing. Billions are spent on things that have no benefits whatever for the purchaser. That doesn't seem to matter to the vendor; nor many consumers.

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