Product Placement Produces Sales, Not Scarcity

I’ve stumbled upon a blog by Seth Godin discussing that ubiquitous distribution is overrated and scarcity creates value. To a certain extend, Seth is correct. However, I would warn readers of this post to be careful in applying such an idea in a general form. Diamond and oil are good examples of scarcity creates value. In my opinion, for most products, scarcity is a by-product of careful marketing strategy for a product.¬† Value does not equate sales and profit.

One of the examples Seth gave in the post is Pepsi not available at McDonald’s which is Pepsi’s strategy to produce value by scarcity. However, if the readers analyse this further and look at Pepsi’s main competitor – ie Coca Cola (Coke). The battle between Pepsi and Coke has been around for years, however, one does not perceived Pepsi is any more valueable than Coke. On the contrary, Coke is Number One globally is because Coke uses ubiquitous distribution tactic. You can walk into any shop that sells drinks, 90% of the time you will find a cold can of Coke instead of Pepsi. Supplying a group of people with equal number of cans of Coke, you will find majority of people would be holding a can of Coke instead of Pepsi. Coke has positioned its product such that its appeal to young general as “cool” and “fun” to associate with Coke. On the other hand, Pepsi concentrates on taste hencce the “Pepsi Challenge” started in 1975. You can say, Pepsi is for the traditional taste-oriented individuals while Coke is the the newer generation who craves for fun and excitement. As individuals gettinger older, they would move away from soft drink to alcoholic drinks. As such, les cest fair, you would find Pepsi’s market would be non-increasing (decreasing or stationary) while Coke would be increasing. You would find people drinking “Bourbon and Coke” instead of “Bourbon and Pepsi” because drinking Pepsi is not percieved as fun as drinking Coke.

However, having said that, a recent replay of an episode of the television series called “My Business” on TVS, a local community television station in Sydney, showcased a family-run funiture business¬† that failed due to ubiquitous distribution model. After the failure, they rebuild the business with a different tactic by using exclusivity to build perceived value in their products. Such tactic created a perception of prestigue and artistic nature in their products while providing higher margins for the retailers. The success of the business created employment the immediate family members.

In summary, different products require different marketing tactics. As always, there is no one size fits all. Careful analysis of your product and market before deciding on the tactic. As always, Market is a science as well as an art. Marketing planning has specific process to follow. Do not jump straight into deciding the tactic before you’ve done analyses beforehand.