Here are $2bn. Can I have some respect please?

Yesterday I went shopping for food supplies and I have used my powers to send an important message to the Italian government.

On a bottle of cooking oil I found a certain message which made me alter my entire shopping approach. The message read: "Imported from Italy".

Now, I am no fan of economic programs such as "buy American/Romanian etc", but because the media in Italy is currently balking at the entire Romanian people, I have decided that at least for the time being, I will spend my money on a cooking oil made in a different part of the world and not in Italy.

Today, I have checked some statistics and found out that Romania's trade deficit with Italy was just a hint above $2 billion. (2007 figures from the UN)

Now, my €3 for cooking oil might be less than peanuts to Italy's exports to Romania BUT someone talking to the Italian government should keep in mind, that if everything else fails, we could try to convert the trade deficit in image surplus.

Just repeat after me: "Here are $2bn. Can I have some respect please?" :)

Patent on Improved Price Discrimination

The guys at Microsoft recognized that "elasticity curves [for PC sales] are based on the pressure to maximize profits on a one-time-sale, one-shot-at-the-consumer mentality".

One of their ideas - now patent application - implies the introduction of the pay-per-use PC with an option of scaling computer performance. This idea would bring us closer to a situation of price discrimination of 1st degree.
Wow, Microsoft's got the patent on it :)

via Cnet news

View This Data (Ep. 7)

Prices For Gas Vs. Prints
Originally uploaded by brandlyyours

Look how marketing, PR and politics manage to obliterate basic economic facts.

Printing ink costs 514 times more than gasoline due to (at least in part) the low transparency of the printer industry.

More info here

Flash News for Brands

The news: 2009 will show you just how successful your brand is.

Strong brands have lower price elasticity levels. This means that the stronger the brand is, the less share it loses when the company increases prices.

This theory has been around for quite a while: The Business of Brands

However, now it's a good time to see just how true the theory is.
Strong brands should lose less market share in the coming year. However, cross price elasticity within category and within substitutable goods will be tested as well.

Update from the New York Times

"

The price cutting could begin before Black Friday, the day after
Thanksgiving when stores offer one-day bargains. According to
DisplaySearch, a market research firm, prices could go as low as $400
for a 32-inch LCD, and $600 for a 42-inch plasma set — about $200 off
current prices.

While Stan Glasgow, president of Sony
Electronics, said his company will not match those prices, he said,
“those numbers do not shock me.”

"
Click for entire article

View this Data (ep. 6)

This interactive feature compares previous plans to help ailing economies to the currently debated one.

If you're not an economically inclined person, just think of this feature as a way to browse through history and get a bit of comfort from knowing that we've been in similar situations before. Ok, it might be a bigger issue now (at least money-wise) but we've dealt with stuff like this before.

Let's hope we do the right thing.

"Since Hank Paulson, the Treasury secretary, unveiled his $700bn plan to rescue the American financial system all manner of alternative models have been debated. Here we take you through some examples of past bailout structures, drawing from the US, Sweden and Japan."
(FT.com)

FMCG Spending In Romania

From ACNielsen via adevarul.ro

Top 20% Economic Research Institutions in Romania

Judging by number of citations, number of papers written and other similar academic key performance indicators, the most respected academic authors in Romania are:

• The National Institute of Economic Research (Romanian Academy) - 1st in Institutions

and


• Mr. Catalin Pauna (The World Bank's Mission in Romania) - 1st in Authors
  

To see other Romanian top economic research click here, or click here and choose your country / region.

Economic Turn-Offs

People respond to incentives, right?
But what about turn-offs?

An Albanian refinery entered a restructuring program and decided to only keep employed one member of each family. So... a few couples working at this company decided to ... get a divorce in order to keep both jobs.

Via capital.ro, liberation.fr

Thoughts on... Doing Business in Romania

As today's news regarding Mercedes plans to build a new car plant in Hungary and not in Romania shows,
Romania really needs to build its infrastructure if it still wants to be more than a consumption based economy.
By the way, retailers in Romania should soon see important pressures on their margins as road infrastructure will hinder their stock management strategy.

Tips for Price Increases via HBS Working Knowledge

The 7 steps seem intuitive, even too general at some point:
(1) Know thy customer
(2) Invest in Market Research
(3) Redefine Value
(4) Use Promotions
(5) Unbundle
(6) Monitor Trade Terms
(7) Increase Relevance

Now, 1 and 2 generate 3, 5 and 7 and are related to consumers because you know them you will be able to serve them and to convince them to keep their business with your company.

4 is the all-time favourite pain killer for inflation and price increases. I remember that a few years ago soft drinks in Romania used to hide price increases by organizing a promotion. So, by counting the number of promotions for cola, I was able to estimate whether the Leu is doing better or worse than it used to do a year before. I know, it's not a scientifically sound method but it worked. :)

While 1-5 are focused on defending top-lines, 6 and 7 are aimed at profits. Brands and bundles are profit generating vectors.

Letting aside all these musings regarding the steps described above, I think that the end of the article is really funny. Especially because it's very unorthodox. I would not apologize for price increases... and I have never heard of a company apologizing for charging more.

"The key here is to educate the consumer, apologize for the uncontrollable price increases, give price-sensitive consumers some promotional options, and reemphasize product benefits."
Seven Tips for Managing Price Increases

Local Perspectives

Every time I travel by train to Sibiu I tell myself that I have to write something on this blog.

It's just a personal idea, something often mentioned by smarter people. However, every time I'm in Sibiu (or any other location outside Bucharest) I notice differences in people's behaviour.

For example, people in Sibiu have totally different shopping baskets. The combination of fmcg goods is considerably different from the one I'm seeing in Bucharest. Two of the possible reasons identified are:

• distribution. i.e. there are important meat producers simply not present on the supermarket shelves in Sibiu
• buying behaviour. i.e. people in Sibiu seem to behave differently with respect to certain fmcg categories: relying more on taste and promotional package than on brand

Now, simply looking at some shopping baskets is not representative in terms of market research but it sure ads colour to market share and consumer reports. So, as just mentioned, smarter people urged marketers before, and I also recommend that every marketing - and brand manager takes time to visit cities across Romania.

The only 'new' part of this piece of advice is that - now that regional development starts gaining momentum, Romania might be ready for a marketing strategy customized in terms of geographic differences. Simply put: local perspectives could make or brake brands and marketing initiatives.

Thoughts on... Parking in Bucharest

Even though I have never driven a car within Bucharest, I also suffer from lack of parking space.
This is because as a pedestrian I have to:
(1) slide through tiny little spaces between crammed parking lots
(2) jump over impromptu placeholders such as beer cases transformed into parking place-holders
(3) pay attention to cars riding on side-walks in search for a parking space

However, having said all these, I wonder:
Would solving the parking space problem in Bucharest trigger a spike in petty theft?

Or putting it in another way: There is a number of people making money as "freelance"-parking agents in Bucharest. Should parking spaces abound tomorrow, what would you recommend that all these people do in order to get money?

Derived Demand