Intriguing marketing costs paradox

Ok, first answer this question:

If a product costs $15, but you're able to find the exact same product sold elsewhere for $10, what are you going to buy?

....the one that costs $10, obviously.

Ok, what if you're paying fees or added costs in the $15 that you don't need. Let's say that the product's true price is $10 but the fees cost $5.

....you'd still demand to pay only $10 because you're unwilling to pay for the added fees.

So why are consumers willing to put up with paying for the added costs of marketing?

Think of our $15 product like a cd. How much does the artist actually make on a $15 cd? Probably only 10 cents because the balance is record company profit and expenses for marketing, production, and distribution.

And consumers are getting wise to this.

Now think of it like buying cereal. You'll always purchase Count Chocula. For your entire life you're going to purchase Count Chocula. If you never saw another Count Chocula ad in your life you'd still buy it.


So why are you paying a price for the cereal that includes marketing expenses? It's really unfair when you think about it. You're not receiving any benefit from the advertising for Count Chocula, so why are you paying Post cereal for the expenses it incurs when marketing to others?

Let me repeat this cause it's important- why are you paying Post cereal for the expenses it incurs when marketing to others?

This is the weird scenario that's been floating around my head for a while.

Consumers are going to demand greater measurability of the costs of production for them, not some overhead costs that may/may not include them. With greater sophistication and fragmentation of buyer behaviors, consumers are seeking to maximize the value to them of everything they buy. It's not only smart consumerism, but it's also saavy financial management.

I'll happily pay your price for the product, if I know that I have fairly incured the costs you shouldered to produce the product for me!

This is why no one is buying records anymore. Because they are willing to pay the least amount possible (free) and still receive the product.

But what about marketers?

Their costs are actually increasing because we're on a weird cusp where absolute targetability is not yet a fully internalized expense. The value per customer created from a CRM program has not yet dropped enough to equal the value per customer from running mass advertising.

Targeted customers are valuable, but expensive (per person). Mass customers are of poor value, but talking to them is cheap (per person).

So our action items? Think about this marketing paradox:

1. Consumers are not willing to pay more than they have to, and they're angry at having to pay unnecessary marketing expenses in the products they buy.

2. Marketers are faced with a declining margin for marketing on the products they sell. If consumers were previously willing to pay $5 to shoulder the costs of being sold, now they're willing to pay $0.

THEREFORE, how can marketers continue to target the valuable customers? This is expensive. How can they continue to build relationships with customers when their actions are under greater scrutiny, from both their clients and their customers, to reduce costs and be measurable?

Just something to chew on. Comments are appreciated here with any insights.

BTW, Count Chocula is scary delicious.