Sunday, October 14, 2012

Do all Product Prices Inflate?

I was sincerely wondering about Product prices and it's characteristics over the last few years. Is Inflation applicable to all Products?? i guess NO00oo.
 Below is one major example which i came across in my life:

Drinking water vs Newspaper: In the good old days we used to get quality drinking water for free, today can you imagine that? hell NO. Today we have a situation in where most cities have polluted river and ground waters. There are various drinking water solutions available to us in the name of brands or types like Mineral water, Distilled (De-Mineralised) and Spring water. Can this be called Inflation???? or just that our standard of living has risen up. On the contrary there is the example of newspapers. Most newspapers were very expensive to buy some 10 years ago but today thanks to the Print advertising that has made newspapers super cheap and now it doesn't really cost a dime. Can the reduction in the prices of newspapers (print) be called as Deflation?  I don't think so.


My Insights: In Marketing perspective, there is one answer for it. Every product has a Product lifecycle. In the initial stages of a product coming into a market, the product will be expensive due to various reasons like low consumer base, high R&D costs and low economies of scope. When the number of people adopting a product tends to go high, the product prices lessen down. In the event that if the prices doesn't go down during the product lifecycle, the product will start having substitute products. Example: Petroleum/Diesel fueled cars are trying to be replaced with Electric cars. Gold jeweleries are trying to be replaced by Platinum,Silver or other precious metals. Print Media was replaced by substitutes like TV/Online Media and also operational efficiencies of Print Media improved over years. That is the precise reason why Print Newspapers are cheaper these days than before. Of course more people in today's world are educated than ever before which improves economies of scale for newspapers. On the very contrary Bottled Water business is relatively still early in it's lifecycle and the fresh water resource itself is limited depending on the geographic location. The print Media got cheaper to produce due to the recycling of paper technology. The bottled Water business is yet to be hit with a big technological innovation like that. Will the sea water recycling technology be the one the disruptive technology to bring the prices down? Possibly.

There is no hard fast answers for the above dilemmas but it is a way look at things. Please feel free to post your comments.

Regards,
Keshav

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