The Concept of Value, or Why Price Cuts Can Fail

[Sqrl]

Pk9394 said:

Sqrl said:

Are you even speaking English?

"demand line is always have negative slope, as price fall quantity demand will increas, the better question of the topic is will a $50 drop be significant enough to increase the quantity demand."

Normally I ignore bad grammar since its the internet but in this case what you're saying is damn near unintelligible.

 

Responding to what I could make out:

"consumer have a fixed value to everything they are willing to purchase"

Wrong, what the consumer values can and does change, this is precisely why the Wii is doing so well.

"every price drop will always gauranteed an increase in demand either is a small increase or big increase, its still an increase value."

Almost right...but still wrong. A price drop will increase the value proposition, but not the value. The value is the consumer purchase threshold. The value proposition is a relation of that threshold and the actual price.

"your dogs illustration fails, you should be cow's shit instead. or using the Gamecube or Xbox. something that is 0 value to start with does not apply here."

This again illustrates that you do not understand what you're talking about.

The very point of the example was that something that has value to one consumer doesn't necessarily have value to another. Let me try another example, this one is based in my real life experience:

I currently know someone who sells medical testing equipment to hospitals in the US. Whenever he pitches them to a hospital they almost always buy. His company, noticing that they sold 3 -5 units to each hospital decided to lower the price 10% to try and use it to sell the hospitals even more of them and to help convince more hospitals to hear the pitch. What they found was that they sold the exact same number of units on average and simply made 10% less. So they went and not only reset to the original price but increased it by 40% and guess what? Yes they continue to sell at the exact same pace.

Why you ask? Because hospitals have values that favor good quality equipment and the stuff he is selling is considered to be the highest quality on the market. Furthermore when values of 'affordability' and 'prompt care' are compared a hospital will always choose 'prompt care', and thus the number of units purchased has to do with the expected volume of traffic they would recieve and not the price.

Consumer values can override the importance of price, plain and simple.

 

Now this is where you either reject this example or you just say its an exception to the rule again proving you don't understand in either case. The values of a product to the consumer determines the effectiveness of a price drop. The reason you are so stubborn..even obstinate to recognize this is because in many cases those values equate to increased demand in response to a price drop...this is not the rule, it is merely the most prevalent case. Ignoring that doesn't change it.

 

 

again another bad example, you are comparing a small sample to a product that sell to millions of consumers. your example show it have reach a max quantity demanded from the hospital, but have we reached the max on console market yet??? people value change have nothing to do with losing demand, it just simply shifted the whole curve and shrink its market share, but the demand concept still apply here, price drop and demand will increase.

I say cow shit because it have value unlike dog shit, then I say gamecube and xbox is a better example of what you trying to show with your dog crap, because consumer know both both system hold no value anymore when they stop supporting it and any price drop will not matter much. but there are other place on earth people will willing to buy these two abosulete product at a low cost point. e.g. old TVs you think its garbage?? people from the poor country will disagree.

 

 

Its almost like I can predict the future.

In any case you're now backpedaling and attempting to change the topic to a specific case where only things that sell millions of units are to be considered...but the OP never made that restriction, you only add it now because you hope it will allow you win some small victory.

In either case it doesn't matter since even products that sell millions of units have the exact same situation.  At the very heart of the issue is the fact that "affordability" is in fact one of the consumer values in and of itself.

Essentially you're entire position is based on the logical fallacy that since you've never seen it happen it can't happen. 

Ultimately this discussion is pointless though since you're not going to listen to reason.