Goodwill is concept that many think have intangible effect on a company sales and its reputation. No wonder companies that build a name for themselves and invest heavily into building their company brand have always been able to sustain their growth and have had stable earnings over the period of their operations
An example that we would want to show to you of this on the grass-root level is a case of the most loved Chocolate for about 2 whole generations - Cadbury Gems
From Cigarette Vendors to Pan shops to Malls, the distribution chain being highly integrated and large, The Company having changed its name from Cadbury India to Mondelez India Foods Limited in 2014, enjoys a market share of over 70% in the chocolate confectionery business.
If you go to any grocery shop, today you will get Gems as a product sold at all of these stores. There are 3 packs it usually comes MRP (Maximum Retail Price of Rs. 5, 10 and 20. Now a normal customer, would not care much about the price because it mostly about their children so prices are ignored in these situations.
Looking at the Packs in detail though shows that in terms of the contents in the Packs:
Rs. 5 - Plastic Cover , 8.9 grams of Gems
Rs. 10 - Plastic Cover, 18.69 grams of gems
Rs. 20 - Cardboard Cover, 18.69 grams of gems, Special Tazo/Playing card/Tattoo
Noticing this, see that there is pracitically no difference between the 10 and 20 rupees packs in terms of the number of gems of the contents, except that to woo the children(the main customer target market), the company gives out only an extra added item which might not even cost them as much but still the company has hiked the price of it to Rs. 20.
This shows the pricing power it has on its customers as the company is aware that their target market(children), will influence the buyer(parents), to make them ignore the price difference and make them buy the Rs. 20 packet because of its product design. The company does this at barely no extra cost and thus is very successful at manipulating its customers to buy its extensively high margin products.
The point to note here is that this can happen only when the company has built a brand and reputation that is so strong that it gives them the opportunity to use the market in such a way. There monopolistic stance in the market segment also adds to this element as customers do not have choice of products and thus are less price sensitive in terms of their demands.
An example that we would want to show to you of this on the grass-root level is a case of the most loved Chocolate for about 2 whole generations - Cadbury Gems
From Cigarette Vendors to Pan shops to Malls, the distribution chain being highly integrated and large, The Company having changed its name from Cadbury India to Mondelez India Foods Limited in 2014, enjoys a market share of over 70% in the chocolate confectionery business.
If you go to any grocery shop, today you will get Gems as a product sold at all of these stores. There are 3 packs it usually comes MRP (Maximum Retail Price of Rs. 5, 10 and 20. Now a normal customer, would not care much about the price because it mostly about their children so prices are ignored in these situations.
Looking at the Packs in detail though shows that in terms of the contents in the Packs:
Rs. 5 - Plastic Cover , 8.9 grams of Gems
Rs. 10 - Plastic Cover, 18.69 grams of gems
Rs. 20 - Cardboard Cover, 18.69 grams of gems, Special Tazo/Playing card/Tattoo
Noticing this, see that there is pracitically no difference between the 10 and 20 rupees packs in terms of the number of gems of the contents, except that to woo the children(the main customer target market), the company gives out only an extra added item which might not even cost them as much but still the company has hiked the price of it to Rs. 20.
This shows the pricing power it has on its customers as the company is aware that their target market(children), will influence the buyer(parents), to make them ignore the price difference and make them buy the Rs. 20 packet because of its product design. The company does this at barely no extra cost and thus is very successful at manipulating its customers to buy its extensively high margin products.
The point to note here is that this can happen only when the company has built a brand and reputation that is so strong that it gives them the opportunity to use the market in such a way. There monopolistic stance in the market segment also adds to this element as customers do not have choice of products and thus are less price sensitive in terms of their demands.
