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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