Keynesian Pub Economics

Here's some Keynesian economics combined with some sociology for you.

It seems David Cameron is looking to lend his support to a campaign to charge a minimum price for a unit of alcohol. While the economics of this are still open to discussion. Here's another way of approaching the problem of 'binge-drinking' which has been getting the Tories hot under the collar.

Lets introduce a minimum price for alcohol sold in the supermarkets. Let's raise the costs of crates of lager promoted as loss-leaders by the big chains - but let's reduce the price of alcohol sold in pubs!

This has four effects

1) it encourages people to drink in safe environments (ie pubs) and discourages people form sitting at home drinking. In a pub, the measures are controlled so you know exactly where you are and what you are drinking. (at home you do not - and it is quite easy to get through a whole bottle of wine in two or three glasses)

2) It encourages social drinking rather than anti-social drinking - younger people can mix with older people and vice verse

3) It generates income for the pubs which in term provides jobs and employment through the Keynesian multiplier effect. According to the British Beer and Pub Association 2,377 premises have closed in the last year with the loss of 24,000 jobs.

4) If the price of alcohol in supermarkets goes up and the price of alcohol in the pubs comes down - there will be a net positive taxation effect.

More employment, less binge drinking and a more balanced society - what's not to like?

A Good Marketeer or a Great one?

There’s lots of talk in the industry recently about ‘differentiated product’.

Tui Travel’s differentiated product, for example, now comprises 62% of winter sales to date compared with 50% this time last year. In a market (and an industry) where it is historically difficult to increase margins and in a time when ‘austerity’ programmes are exerting even greater pressures on our bottom lines.. this is text book economics and marketing, and a strategy that we all should follow.

A company’s product is a differentiated product if it is uniquely different than those of competitors. If the product is different, the Tour Operator/Airline/Resort can make the case that it is better. Therefore, if it is a better product, the company can charge a higher price because it has more value!

And actually, in many cases a differentiated product doesn’t actually need to be a better product, it just needs to be perceived as a better product by the buyer. And this is where the marketing comes in. Most advertising and promotion tht we encounter on a daily basis, is focused on trying to convince us that one product is better than another. Whether it is actually better is immaterial in many cases; the only thing that counts is if you can convince the consumer that it is better. For example, is Stella Artois really better than Kronenburg 1664 for instance? There are millions who would argue both ways.

Look at your product, look carefully at what you do. Identify the differences and focus on them – make sure consumers can only buy this from you.

Remember, a good marketer can differentiate between products, but a great marketer can create differentiated products!