Monday, July 12, 2010

This BBQ Sauce Rules, A Tasty Consumer Surplus

There is nothing better than firing up the old grill on a cool summer evening. Sometimes I cook with gas, other days I opt for charcoal, and on special days I'll have both grills smoking the yard.

When it comes to using barbecue sauce on the meat, no serious griller would be caught dead with a brand sauce found at the food store. However when I don't have enough time to make my own, I usually buy Bull's-Eye Hickory Smoke, which is now known as Bull's-Eye BBQ Sauce Kansas City Style.

The new name presented itself several months ago. Nothing has changed about the sauce except the packaging. The ingredients and nutritional information are nearly identical, but I prefer the sauce that comes from the newer packaging. Why does the Kansas City Style bottle taste better to me than the same sauce from the Hickory Smoke bottle?

Perhaps I am a victim of virtual ownership. As soon as you slap "Kansas City" on the bottle, I am immediately whisked away to a mystical land renowned for its excellent barbecue---Missouri. It's a great marketing strategy. Think about all of those toy commercials you saw growing up; kids like you on magical adventures, having the best time ever (Beer ads are infamous for this).

When a product image improves from better advertising or word-of-mouth, we as consumers tend to enjoy it better. Improved marketing and advertising campaigns can increase product demand. In this case, my consumer taste (a non-price determinant) for this BBQ sauce has increased.

At the moment, I am willing and able to pay a higher price than the $4.50 price tag at the food store. In fact, I would pay up to $6 for one bottle. That is a consumer surplus of $1.50. How awesome is that? I have $1.50 of additional income that I can use towards a spare bottle for the pantry, or even put it towards my Iron Maiden ticket at Madison Square Garden.

For the record, I was only willing to pay $4.75 tops for the BBQ sauce with the old bottle design---a measly 25 cent surplus.

Markets create consumer surpluses all the time. Make sure you seize yours when making your economic choices, even if you are only a sucker of a perceived change in a product that you already enjoyed. But beware, producers are constantly seeking ways to take it all away to keep for themselves.

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