Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
"Everybody" wants a Ferrari because so few can have one, for example

It seems to me these examples do a good job illustrating one way an advertiser cultivates the perceived value of a good or service among consumers in order to differentiate its client within an industry. (My favorite example is comparison of toothbrushes, say, Oral B versus P&G across competitors for market share and the cannibalistic tendancies across units within each company.)

Exclusivity of the offering, rather than the scarcity of its material components, translates to a premium (e.g. value-added, fair value, margin) appended to the cost of its production --including highly skilled labor, as in the case of Ferrari or Porsche and BMW for that matter, all of which are distinguished within the industry from "mass producers" by being niche producers.

Such manufactures optimize "consumer choice" theory (reinforced by advertising) according to "preferences" associated with a group of characteristics, namely disposable income, but also with greater frequency ever so droll, purchase patterns of complementary goods and services statistically correlated to income. ("You might like ..."; "People who bought X also ...") The predictive power of price elasticity cannot be understated however.

Unlike a price mechanism (S/D) postulated by fungible commodity clearing, the niche manufacturer's suggested retail price (MSRP) determines demand. And the premium engrossed by it poses no limitation to what a "status conscious" buyer is either willing or able to pay for the "privilege" of yoga practice or driving an automobile or personal grooming. In a saturated market the producer will NOT increase production (this would defeat the "value" of exclusivity) but will simply increase premium in order to qualify new profitable clients.

A hilarious discursion on "Causes of Luxury Goods MARKET COLLAPSE: M&A Dilution or Savings Glut?" is worth pursuing. Some other time.

Diversity is the key to economic and political evolution.

by Cat on Tue Jan 13th, 2009 at 02:00:13 PM EST
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Bloomberg staffers join Paul Roberts: This morning's headlines, in particular, altogether illustrate opprobium of the press. With respect to the perceived value of exclusivity,

Paulson's Georgia Investment Rises as Blind Trust Becomes Joke | Bloomberg | 14 Jan 2009

Paulson and his wife, Wendy, paid $32.65 million to accrue a majority stake in Little St. Simons Island since 2003, county records show. Property values in the area have risen about 10 percent in five years, said Ann McCann of Sea Palms Realty Inc.

The island has five cabins that rent for $600 to $1,200 a night. Occupancy remains about 70 percent, even with the recession, said Joel Meyer, general manager. [compared to 'mass market' accommo] U.S. hotel occupancy fell 5.6 percent in the fourth quarter to 49.6 percent, according to Smith Travel Research in Hendersonville, Tennessee. ...

"It's heaven on earth," said Byron Brown, 57, an Atlanta advertising executive who with a group of friends has rented the entire island for visits of several days during the past 15 years. "It's the most peaceful, serene place I've ever been to. How do you put a price tag on that?"

A full-island rental costs $8,000 a night. Only 30 guests can be accommodated, so the cabins often sell out months in advance, Meyer said. The business about breaks even, with rental revenue covering the cost of year-round staffing, he said. No new development is allowed on the 10,500-acre (4,200-hectare) island, which is designated an "important bird area" by the National Audubon Society.

NB. 100% occupancy, 48 weeks x $8K "island rental," or $384K p.a., is the estimated total operating cost of this hospitality venture.

Little St. Simons has a conservation easement that reduces taxes in exchange for not developing the land, which locks the assessed value at $3.75 million for 10 years, said Bobby Gerhardt, Glynn County appraiser. ...

he Paulsons own three-fourths of Little St. Simons through Whimbrel LLC, a holding company named for a migrating shorebird. Paulson's disclosure forms for 2007 valued his half-interest in Whimbrel at $5 million to $25 million, and his wife owns the other half.

Pencil Maker

The rest of the island [25%] belongs to descendents of Philip Berolzheimer, an Eagle Pencil Co. executive who bought the land almost a century ago.

Diversity is the key to economic and political evolution.
by Cat on Wed Jan 14th, 2009 at 10:33:30 AM EST
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Sorry. I misread that 'graph: $8K/night, not $8K/week. $2,688,000 p.a. total estimated operating cost, leading me to wonder, How Whimbrel LLC pays the property tax? Perhaps amenties such as meals and staff seminars are billed to guests additionally? Bwah!

Diversity is the key to economic and political evolution.
by Cat on Wed Jan 14th, 2009 at 12:51:39 PM EST
[ Parent ]


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