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Tuesday, October 11, 2011

Mises, Galbraith and Bottled Water

For the better part of 50 years a lively debate has taken place in some advertising and marketing circles. Essentially, the battle lines are drawn between Austrian theorist Ludwig von Mises and his concept of Consumer Sovereignty and John Kenneth Galbraith’s The Affluent Society, which tried to refute it very strongly.

In brief, Mises postulated that, in a free market economy, the consumer was king. The consumer made poor men rich and rich men poor. If the public found a product that was comparable and less expensive or of better quality they would vote with their cash and move to the new product. Galbraith took the tact that many of us who could be described as marketers were very manipulative. Due to marketing tactics, particularly advertising, consumers were often persuaded to buy things that they neither wanted nor needed (for a detailed explanation see Media Realism, 9/15/2009).

Over the years given my free market leanings, I have tended to side fairly strongly with Mises. Having worked on several new products that failed in the marketplace (as has any long term ad executive), I always questioned the concept that marketers were so smart and manipulative. Were advertising and marketing tactics so powerful why do most new products continue to fail?

In recent times, one category has sort of made me review my position. The category is that of bottled water. Most of us who are a bit mature in years remember Perrier as the first bottle water of any substance. It basically invaded the U.S. in the early 1970’s. Since then, bottled water has exploded and is often associated with social status and healthy living.

What most people do not realize is that approximately 40% of bottled water sold in the U.S. is really tap water that has been put through an extra filter or perhaps fortified with a mineral or two. The profit to the purveyors is enormous as tap water is very inexpensive. Often when you buy bottled water you are paying up to 1900 times what you pay for tap water. And, is it purer? Well, the bottled water from tap is usually more than okay. But for those claiming that they are selling spring water or mineral water, there is less regulation and supervision than there is for municipal tap water. In the western world, there are few places of size where the water is not safe. In developing countries, caution is a good idea and drinking a brand name bottled water makes great good sense in remote areas.

Interestingly, major beverage companies control bottled water sales in the United States. Coca-Cola owns Dasani and Pepsico sells Aquafina. Global food giant Nestle owns a fistful of brands including: Arrowhead, Deer Park, Ice Mountain, Ozarka, Poland Springs, and Zephyrhills. So these players have hedged their bets beautifully. If government cracks down on sales or raises taxes on sugared sodas, they will pick up much of the resulting shift to water products. Nestle waters website had a compelling argument that if one gave up a cola habit and switched to water you could save 50,000 calories per year. In a country worried about obesity, it is not an empty comparison.

The marketers have succeeded in creating more than an aura of health when you drink bottled water. There is a certain cache to it—have you ever noticed young people carrying a bottle everywhere? It has almost become a fashion accessory to some and is ubiquitous as a mobile device. In some upscale areas and at very fashionable universities, the branded drink has given way to a refillable bottle presumably filled with clean healthy tap water.

Given my strong free market bias, I clearly still believe in Mises concept of Consumer Sovereignty. The case of bottled water, however, has made me think that the Galbraithian notion of consumer manipulation is not always bankrupt.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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