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The inexperienced consumer will consistently make the decision that is not in his best interest. This is a direct result of consumer ignorance of the product. The consumer will consistently purchase what is cheapest, even if that item in the long run will cost two, three and perhaps even four times more than the original price. Ask yourself this, the last time you were in Wal-Mart, how many employees did you speak to on the sales floor? If you did indeed ask a question, did it relate to the quality of the product you were interested in purchasing? The answer to those two questions most likely will show that Wal-Mart’s strategy has been a lack of consumer consultation.

They want to keep the consumer ignorant, and independent. This was a revolutionary strategy, as at the time of Wal-Mart’s creation, the majority of the stores required you to be dependent on the store itself and the sales representatives within it. This revolution in consumer independence brought about higher profits for the retailer and the manufacturers alike.

The best example to show how consumer ignorance drives up profits is this: Suppose you are trying to purchase a computer. The average inexperienced consumer has little to no knowledge of electronic hardware, and more specifically the inner workers of a computer system. Therefore, the average consumer will buy whatever is the cheapest. Now, several months later the now not-so-new-to-computers consumer finds that his original purchase was not exactly the wise investment he originally thought. The specifications did not meet what he needs to be running at, and overall the computer is not at par with industrial standards. This will result in the consumer purchasing another computer, however this time the consumer is no longer the inexperienced consumer, but now an experienced consumer and will purchase something more valuable to him in the long run.

The ultimate result of this is a dual-sale. The consumer, because of ignorance, has bought two computers in the course of a few months. The first is a decoy product, that intrigues the interest of the consumer. The second is the closing deal, and geared to keeping the consumer satisfied for sometimes years. However, the consumer still is not finished. Products are manufactured so that they malfunction after a given period of time. If a product works too well, then it is sent back to the drawing board in order to find faults it can exploit. These faults are then insured by the company, resulting in rejuvenating profits. If the consumer wants to insure that his purchase remains functional in the future, he must buy this insurance plan on the product.

This idea of consumer rejuvenation is used almost all over the market place. In the medical industry, electronics industry, automotive industry, etc. A lack of product quality will result in the consumer purchasing the same item in the future. Why would a manufacturer make something so good it puts them out of business? Eventually everyone in the world will have the product, and they will be at a loss or future profit. So, if the consumer is forced to continually purchase the same item repeatedly, the company makes an exponential resulting profit.

The medical industry uses the same strategy with drugs. Drugs are meant to treat most ailments, and do not provide a method of curing the ailment. The result, is a continual resupply of consumers profiting the industry. No industry is more blatant in its use of this strategy as the automotive industry. Gasoline is the single most used continuity product out there. It is now at the point where it is considered a necessity item more so than food and water. A result of this is an oligopoly with a fierce grip on the freedom of the market, and the consumer paying more than he needs to.

What can be said about all of this is a lack of business ethics. The loss of ethics in businesses have resulted in a new perspective on the free market. What is good for big business, must be bad for the consumer. As what is good for the consumer, is bad for big business. But isn’t there a medium somewhere? It used to be that small businesses were that delicate medium between big businesses and the consumer. Small businesses act like consumers in that much of their supplies come from larger corporations, and they are in fact dependent to a degree on large corporations. The consumer benefits from small businesses because of better quality in the products, and a one-on-one relationship with the retailer. Small businesses tend to use salesmanship more than larger stores like Wal-Mart do.

If enough small businesses pop up within the new few decades, we could see a dramatic shift on the economy. Because the consumer has more money from having quality products, the consumer can then use that money to invest in more businesses, driving up innovation and research. When the consumer does not have money, there is nothing the consumer can invest in, and thus all investments are controlled by large corporations who may not always make the decision that benefits the whole. A result in increased small businesses would be better business ethics, and better stability in the economy as a whole.

Labels: blog

Labels: blog