This brings us to the next question: is this actually a good idea? Well, for us customers, it’s of course a really good idea. The goal of a customer is to pay as little money for as many value as possible, while the goal of a company is to give you as little value for as much money as possible. As such, this rumoured moved would be a win for consumers.
I don’t want to pick on Thom, i am actually pretty sure he didn’t mean this as an accurate economic depiction, or even as an actual argument. But it strikes me that this view is so easily maintained. In this sense: it seems like common sense. Most people would actually expect that phrasing as being an accurate enough depiction of reality.
For example, my condo-mate Fernando wrote an article (whose title i roughly translate as “cost, price and value“) in which this is the underlying model of market relations. His general argument is that if you have a good-enough value proposition you can ask for whatever price you want, and the costumer will not mind paying.
According to this “mutual extortion model” of buying relations, where both parties are continuously trying to maximize a given conflicting goal, this all makes sense. As for me, i can’t help but think that this model is overly simplistic.
There is an old joke about a farmer from Minas Gerais who is trying to sell some cows, and his neighbour comes in, spends half an our in chit-chat, with an occasional remark about the bad quality of the animals, then he gives a very low price, the first guy retorts with a very higher one, and so on and so forth. The neighbour goes away, thinking to himself that tomorrow he will out-bargain the guy about the cows. Then a young farmer from the city comes over, looks at the cows, asks the price. He gives the same price. The young guy picks his checkbook and begins to fill it, but the farmer is insulted, and kicks him away under the premise that “he does not know how to bargain”. And the scene closes with the farmer thinking how he will out-bargain his neighbour the next day.
To buy something is a social circumstance, it is a relationship more than a competition. Even the term “competition” hints to things more complicated than simply trying to extract the most «value» from a given commercial entity.
My contention is that people are not market-machines. People are people. People are more complicated than that — buyers and sellers — even if they can assume those roles, and act according to their model, temporarily.
Even modern-day buying and selling, as abstract as it seems with our electronic money and our huge department store, even those are highly socially-mediated procedures. They are contemporary rituals, if you please. There are rules and conditions and feedbacks much more complicated than simple want-units and offer-units.
Take cars, for example. Cars are not bought for “want”. Cars are bought as part of intricate, delicate, mating rituals. People have cars to try and get some sex. Cars are the Homo Sapiens sapiens equivalent of the Australian bush turkey‘s dung heaps. Thus the car must be expensive to prove that its possession is linked with richness, not the other way around! Obviously having cars does have some benefits beyond this but, in my own biased perspective, the influence of the mating ritual completely dwarfs all other considerations.
Money beats barter not because it is more pure, but just because it is cheaper. In the same way, the extortion model of exchange is very simple, so it makes it easier to discuss. But it is a simplification — i fear, an unwarranted simplification. Assuming the market to be a set of people trying to extort each other might be like the Hubble saving its images in jpeg. As much as money does not make barter disappear, so contemporary market relations do not eliminate the intricacies of human exchange.
And it was exactly to to discover those intricacies that Marketing itself was created, initially. It’s purpose was to explore everything in buying and selling relations that extended beyond “buy low sell high”. And the reason for such explorations, and for their success, is that there are complexities there that can return us huge benefits! In other words, a non-extortion view of markets provides us advantages.
The prime example of that is the very idea of «value» — so important in fact that its nomenclature seeped in both Holwerda’s and Galdino’s propositions, even though i believe they fundamentally misread the concept. The idea of value in marketingland means that there is no connection between money and use. That is, very cheap things can make the buyer very happy and very expensive things might be a thorn. If we can see that, then we can actually create value out of nothing — ex nihilo! — because subjective evaluations are influenced by a series of factors and some of them have no direct cost, and others have cost structures that are completely different than scale manufacture.
That is a powerful thing to realize, but i suspect it does not mix well with the intention of extorting. I fear that either you want to extort money or you understand this idea.
I do not mean that marketing does not want money, i mean that, when fully qualified, marketing reveals us that there is a huge manoeuvre space beyond bargaining where economic relations can happen. Extortion can give short term benefits, but the beyond-bargaining space gives strategic superiorities that are simply impossible to compete with.
I suspect the extortion model has more to do with personal experience than with any theory of markets — and i am not at all someone to underplay the importance of personal experiences — but maybe this is an important enough point, since this half-baked ideology of marketing has gone somewhat out of hand.
Finally, there is one last argument, that, albeit highly speculative, should show how much the whole market-model of society is just another idea, one amongst many, and that this argument’s “explanatory power” might even not be any bigger than others.
Imagine for a while that people (as social animals) had a very low threshold of resistance to peer-pressure. In other words, that people responded a lot to status-related exchanges, like been taken for “commendable” or “gross”. In this model, people do have some individual pulls, but those get strongly regulated by the group’s status-quo, including biases and prejudices. This status-quo might be self-sustaining: Some of its characteristics might exist without any other reason except that “everyone does it, so i’ll do it too, and despise you if you don’t”.
In this case, the very proposal of a “market model” for society might affect the status-quo into making mutual-extortion more acceptable. This would happen not because anyone got convinced that it is good or natural or true, but simply because the idea is circulated and thus makes the given behaviour feel more familiar. And this can accelerate itself: because it gets more familiar the theory seems more plausible. In the end we got such slogans as “everything is a market” and “everyone wants to consume” — and those slogans would be true, not because that’s how reality works, but simply because their existence allows people to adopt those behaviours without being punished by their peers.
My speculative model, albeit formally weak, shows that different ideas of the «market» can explain the data we have just as well as the taken-for-granted idea of the market-über-alles.