Understanding the Consumer Products Industry

Consumer products companies and retailers know a lot about us. They understand our foibles, our habits, our reactions to marketing and our buying patterns. They also know how to create and sell products that appeal to our deepest needs, urges and instincts.

In contrast, the average consumer knows next to nothing about consumer products companies, and even less about the many pricing, marketing and selling techniques the industry uses.

Back in my old business, we called this a market with asymmetric information. When two parties are exchanging products or services (or worse, risky investments) and there's asymmetric information, it just isn't a fair fight for the less-informed player. And in many ways the world of modern consumer products retailing really isn't a fair fight for the average consumer.

But Casual Kitchen readers aren't interested in wringing their hands or shaking their fists at the evil food industry. We won't engage in whining, and we won't give our power away.

I, for one, am more interested in leveling the information playing field so my readers can understand more of what goes on behind the store shelves where we spend our precious consumer dollars.

And that's what this upcoming post series is all about. It's called Understanding the Consumer Products Industry, and its purpose is to help you understand more of what makes the consumer products and retailing businesses tick, so you can get the maximum value from what you spend.

I'll talk about various marketing, branding and retailing conventions that the industry uses to separate unwitting consumers from their money. And I'll go over various pricing traps and discounting strategies that can signal good value, or a total lack thereof, for the consumer. Finally, I hope to go over some specific financial terms and concepts that can help consumers understand and appreciate exactly what happens to their consumer dollars when they buy the products sitting on their store shelves.

This will be a wide-ranging and multi-part post series that, admittedly, steps somewhat outside the scope of Casual Kitchen's typical subject area. However, as with everything I write here, I intend to make it useful, practical and thought-provoking to readers.

I want my readers to be aware, empowered, savvy, and when necessary, cynical with their spending decisions. And when you've finished with this post series, you should be able to apply the various concepts I discuss to help you do three things:

1) Understand what the food industry, the restaurant industry and the consumer products industry is up to when it offers you a complex range of products at many price points,

2) Use this information to obtain good value for the money you spend, and

3) Make the best and best-informed purchasing decisions you can in all areas of your life.

Tomorrow I'll run the first post in this series, which will begin a discussion of the pricing strategies lurking behind the consumer products we buy.

Going forward, this series will run on an on-and-off basis over the next several weeks (and maybe months, depending on what readers think of it). Below is a preliminary index of the upcoming titles and subjects I'm hoping to cover in the discussion. Wherever you see a live link, you can click it to take you to that specific article. Keep in mind, the index may (uh, will) be subject to change as I come up with additional subjects or ideas in the future.

Finally, readers, if there is a subject or a concept you'd like to see covered that you don't yet see below, please suggest it in the comments!

Understanding The Consumer Products Industry Post Index:
1) Price is Just a Number
2) What Drives Prices? The Secret to Maximizing Your Consumer Dollar
3) The Do-Nothing Brand
4) Ten Thoughts on the Value of Brands
5) Prices, Zombies, and the Advertising-Consumption Cycle
6) Divorce Yourself From the False Reality of Your Grocery Store
7) Three Follow-Up Thoughts On the Realities of Your Grocery Store
8) The Cold Logic of Stealth Price Hikes
9) Three Fantasies For the Consumer Products Industry
10) How to Own the Consumer Products Industry--And I Mean Literally Own It
11) On the "Value" of Low-Calorie Foods
12) Consumers vs. Companies: A Manifesto
13) Understanding the Guys on the Other Side
14) Your Top Favorite Consumer Empowerment Strategies
15) What's Wrong With the Government Limiting Food Marketing to Kids?
16) How Do You Like Your Prices Raised?
17) How to Defeat the Retail Industry's Ninja Mind Tricks

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NMPatricia said...

Yea! I am looking forward to this. I do believe I have become a smarter consumer as a result of what I have read here on CK.

On another note (or maybe not) I have a question. I have paid close attention to the concept of first - second order foods. It affects in a huge way the way I think about my diet. And of course, first order foods and cooking from scratch is usually cheaper (ahh, here comes the pricing info I need). So, I pondered without a conclusion, why w/w OG flour would be $.079/lb and wheat berries I can grind into flour at home would be $1.29/lb. Any insights other than demand?

Daniel said...

NMPatricia, thanks for the feedback! And yes, I will address your question in the "False Reality of Your Grocery Store" post.

But a preliminary short answer is just because a product should be cheaper doesn't mean it always will be cheaper. That's the problem with frameworks like my First/Second-Order Foods concept. They help explain reality, but there will always be exceptions.

Part of it is demand, part of it is economies of scale, part of it is because food retailers are always looking for places to earn extra profits wherever they can, because in general grocery profit margins are very thin. We'll go into much more detail in a few weeks.


Cynthia said...

Will you be covering the coupon bait-n- switch pricing?

Daniel said...

Hi Cynthia, what specifically would you like me to address? If it's an area where I can share some insights, I'll be more than happy to.

Also this goes for all readers--if there's any issue or subject you'd like to see covered, feel free to suggest it!


Jenn AKA The Leftover Queen said...

I was turned on to your blog by Melissa! I am enjoying it so far, and looking forward to more on this topic!

Daniel said...

Jenn, thank you for stopping by and thanks for the feedback. Looking forward to hearing your thoughts as a new reader!


Anonymous said...

I enjoyed your first post. thanks for making basic economics more palatable. For some reason, I ended up with the worst professor for micro economics. I digress...

Please keep these posts coming.

Cynthia said...

What I'm referring to is that prices seem to go up just when the coupons come out, which negates the savings from the coupon.