The way we buy water…
There is a very interesting article on BBC News that my colleague Inna has referred me to. It talks about how the small bottled water industry has managed to grow in the last 40 years. This looks nothing special unless you think about the fact that water is essentially free. You can quite easily drink tap water and will not feel any difference from the bottled water. However, people still spend billions of pounds each year on this natural beverage. So here is the irony, we are paying for things we can get for free. Is economic theory about rationality failing here? It is not according to the article.
So, where does the trick lie? Apparently, it is all about branding and marketing (although some bottles water executives disagree). Apart from the convenient packaging, people are supposedly buying trendy brands. I guess in the end we do derive different types of utility from the same resource. Marketing in this case plays a huge role in the market growth.
This paradox does not completely ruin our perception of Economics, but it does make us realise that there are still many things we do not understand.
December 1st, 2010 at 8:04 pm
Reminds me of the subliminal message played at the beginning of the cinema saying “eat popcorn”. During the interval popcorn sales doupled! Or so the story goes. The power of the marketing techniques used by these big companies is incredible. Just look at how many times washing powder has been re-invented!
December 3rd, 2010 at 8:20 am
The trick to selling any product is good branding and marketing. There are some terrible products that sell like crazy thanks to a good marketing strategy and PR team. Water been one of them
December 7th, 2010 at 9:12 pm
I agree. Marketing and advertising create awareness of and demand for the benefits of bottled water.
As demand increases, so does the industry.
October 9th, 2014 at 7:34 am
Marketing and advertising plays a big role in selling something that was already free, most people will buy big brands because they have history of suppling well made goods and in the past they have proven to give reliabillity.