Tuesday, October 13, 2009

reinventing price?

Following on the earlier post of aug 3 (bailout anyone) - the evolution of business is to reprice itself going forward.

So how would we define this process of repricing? is it just lower pricing (as in the case of airlines and now more recently mobile telephony) or is it pricing for the use of the individual bits and pieces of infrastructure as opposed to paying for the whole?

let me put this in perspective - historically all companies used the government way of pricing (maybe thats why nobody is happy with the govt anywhere) ie you pay a global tax and in exchange you get security, roads, water etc etc.. but what about the ordinary joe who doesnt use a car - why is he contributing for the road the same way as the car user who actually wears down the road as opposed to our pedestrian?

similarly private companies price products "globally" - customers who dont want certain features end up paying for the others and in times of competition actually end up subsidising others use of features that they dont use. for example the airline industry as it created excess capacity willy nilly cut its "global" prices to attract customers and also expand the base by converting users of other modes of transport to take to the air. now if they had along with the cut in rates separately charged for luggage (as some US airlines are doing now), food on board and pay per view movies in flight etc etc they would have been less worse off than they are now.

similarly if the government were to collect user fee for urban infrastructure from those living in cities and these were tendered out - i am sure people wouldnt mind paying these fees as opposed to taxes which all evade. of course as the private operator doesnt have a blank cheque like the govt to keep paying salaries if the user doesnt pay up, you can bet the enforcement of bill collection will also be right up to the mark.

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