At the end of the day, the goal of every business is to make a profit from the goods and services they provide. However, that’s not their morning goal. Their morning goal is to break even and survive long enough to make a profit. The businesses who don’t break even don’t survive.
For example, a hotel with one hundred rooms needs sixty rooms to be occupied to break even. Every room above sixty that’s occupied is profit. Every room that remains empty above sixty is wasted opportunity, and that’s why people who are prepared to wait and gamble can get a better deal. It’s in the hotel owner’s interested to have all the rooms occupied. It’s better to get a hundred bucks for an occupied room than nothing for an empty one. The hotels who fail to fill sixty rooms on a regular basis go out of business.
The same example applies to airlines except they’re selling seats, not rooms.
The same example applies to every industry in the world. It’s the only reason branded and non-branded products exist. The branded products are equivalent to the sixty hotel rooms or break even, the non-branded products are the profit. Of course, if you have a brand like Apple who have acquired a cult like status amongst their customers, there is no value brand. They can charge what they like, and people will pay the price.
The car industry uses the same approach. There are a limited number of car manufacturers compared to the number of available car brands. For example, Volkswagen manufacturers Skoda cars.
And that’s why you need people to waste money for value to exist. If everybody only bought the value brands, all the prices would increase. I’ll leave you with one final thought.
If you’re the kind of person who likes value for money? Wave and say thank you to anyone who’s buying a branded product because they are saving your money by spending theirs.
