Market Pricing

             A Parable about Soup, Profits and Power
             Once upon a time, Kahn's Chicken Soup Company was faced with an
             interesting challenge. The company discovered that if it raised the price
             of its chicken soup products to $1.25 per can, it made an extra twenty-five
             cents of pure profit on every can, bringing the profit per can to a
             Marketing geniuses at the company set about using a small portion of
             that new profit to advertise the nationwide' availability of the soup,
             although, of course, consumers who wanted soup already knew where to get
             it. And the factory's 1,000-gallon vats were augmented with another set of
             At first, the farmers were happy to sell all their chickens at a good
             price; shortly, the farmer realized Kahn's really needed their birds, so
             they plumped up the prices. This caused a slight drop in the Kahn's profit
             margin, until Kahn's realized that it could shrink the cans by one ounce
             and the consumers wouldn't notice, or, if they did, wouldn't complain.
             (This lesson was learned from the airline industry, which had added more
             flights to have more to sell to consumers at higher prices, while shrinking
             seat size and cramming more cranky passengers in each cargoâ€.uh, passenger
             For a short time, Kahn's Chicken Soup Company enjoyed a remarkable
             return on its investment in bigger vats, a little advertising and higher
             prices. It was winter, after all, and consumers thought chicken soup cured
             But then spring arrived, and the market was glutted with soup;
             consumers can only eat so much chicken soup, no matter how widely it is
             available or how well it is advertised. So, in an effort to move the now-
             excess soup off the shelves, Kahn's began doing two things; advertising it
             as a garden fertilizer, and running sales nationwide.
             Still, consumers just didn't want or need as much soup as before,
             partly because the cold and f...

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