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by gord288
2018 days ago
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Products/services are typically priced according to what the market can bear. If advertising costs become cheaper for a given company, for whatever reason, who's to say this decreased expense is going to be passed down to consumers in the form of lower prices? Living in an advertising-saturated and/or privacy-deprived world is also a "cost" borne by members of society. |
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Because economics. I know this intimately. I have a product we manufacture and sell on Amazon along with other channels. And if I am saving $1 on a customer acquisition, I am lowering my price one dollar because that would mean I can sell more at the same profit. Because if I try to keep that extra dollar, my competition will lower their price. Basically the cost of keeping that saved dollar is more than the gain from lowering the price a dollar. That’s how competition is supposed to work.
I know my cost of goods sold and my cost of sales down to the penny and have a pretty good idea of the elasticity curve for my product: if I lower my price by $1, I would sell x more bottles. However if I lower my price by $1 right now, I would decrease in profitability unless my costs also decreased by $1. There is a point on the curve that represents the optimal price.
It would seem that fundamental microeconomics is something not taught in many schools and that’s tragic because you get statements like “who’s to say this decreased expense is going to be passed down to consumers.” Because competition is what makes this statement silly in principle.