Seeding Soil Externalities

Ground Wars

Washing dishes the other day I heard and interesting commercial for Scotts Seeding Soil.  It started something like this:  “One of our competitors claims our soil requires four times as much water….in fact their soil doesn’t hold water…is junk…will ruin your plants…etc.”

Scotts marketing gurus made a very good decision in how they worded this ad.

An Eye for an Eye Makes the Whole World Blind

Let’s say Competitor A made the negative claim about Scotts.  Scotts could have responded with “Competitor A says…” and then explained why Competitor A’s product was bad.  But, by saying “one of our competitors” the ad is much more effective.

When you go to the store and see Scotts next to Competitors A, B, and C you don’t know which competitor is the “one.”  Since most people are risk averse, they will want to make sure they don’t choose the bad one.  You have a 1 in 3 chance of choosing the loser.  The only way to avoid it is to choose Scotts.

If Scotts had named Competitor A specifically, then consumers would rule out Competitor A but still decide between Scotts and Competitors B and C.  In this case, Scotts’ ad might actually increase the sales for B and C as customers flee from A.  But, because Scotts didn’t name A specifically, then all the customers will run to Scotts alone and all competitors will lose market share.  Instead of weakening the just Competitor A, Scotts takes the opportunity to weaken every competitor.

Competitors A’s attack on Scotts actually caused what economists term a “negative externality” toward competitors B and C.  Competitor A only attacked Scotts, but such action then gave Scotts grounds (pun?) to respond in a way that would hurt all competitors.  Competitor A’s actions against Scotts had a negative impact on B and C too.

If you missed my earlier post about Starbucks today, read it here.

This entry was posted in Economics. Bookmark the permalink.

3 Responses to Seeding Soil Externalities

  1. Pingback: How “hipsters” are like the pioneers | Not One Square Inch

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s