Bhoo wears the thinking cap!

As if that is possible!

Price vs quality!

Posted by bhoo on August 11, 2010

I have been wondering why there is a dearth of organized multiplexes in Chennai, while Bangalore, Mumbai, Delhi, Pune seem to have them in plenty.  My questions were answered in 2 doses.  My rotary friend Abirami Ramanathan opened what he calls as a 7-star theater in Chennai.  But, ticket charge?  Rs. 90.  Why?  There is a limit to what maximum ticket price can be.  Price control – where all can that be?  Education is price controlled, transport is price controlled, petrol is price controlled, we are controlling prices of literally everything.

The second answer came to me yesterday, when I had 2 hours of time before taking a train from Bangalore to Chennai. I watched an utterly-unwatchable-for-anyone-other-than-die-hard-fans-of-the-genre-movie:  Predators.  Ticket price?  Rs. 160.  They say they charge more for weekends, and release weeks.  No wonder, the theatre was all polish and shiny.  The cost of a small pop-corn was Rs. 70, and I was happily buying it.  Of course, if you cannot afford it, you have options elsewhere, and that niche will be served by someone else for sure.  But, why restrict when some people are ready to pay, and there is a profitable business model with low volume high-price?

What is the result of price control?  We get great quality at cheap prices?  A HUGE no!  We get mediocre quality at medium prices in Chennai for movie tickets.

Same reflects in terms of low quality for cheap price in terms of bus & rail transport in Chennai.  We want to pay Re. 0.5 or Re. 1 per Km, but want the frequency to increase (read it as capital cost), drivers to behave (HR & training costs), seats to be better (capital and maintenance costs), and more space in the bus (Lower occupancy rate).  It is such a conundrum.  Can it be done?  Yes!  But, it can be done only through competition, not through monopoly and price control.

We have always price-controlled cell-phones.  But, there, it has worked wonders and cell phones in India is a success story.  We need to learn from there – but, IMHO, price control was not the reason for success, it probably worked “in spite of” price control.  I will think further on this and write.

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2 Responses to “Price vs quality!”

  1. Bhoo,

    I hope you watched this movie as well – http://en.wikipedia.org/wiki/Kattradhu_Thamizh. I don’t agree with all what the director says in the movie, however, it talks about a few realities which we don’t like to talk about when we are talking about “India Shining” , “Stock Indexes” “Price Control vs Quality” and so on. Yes, as said in the movie – there are two types of people – those inside Satyam theatre and those outside Satyam theatre, those inside Tidel park and those outside Tidel park.

    There are people who are ready to sell their services, products and whatnot to people who are inside the Satyam Theatre & Tidel Park, but how many are ready to offer the services to those outside. There are a few, but they are dying to move up the market segment , offcourse , developing the business is what any business man has to do.

    I am wondering what it takes for those outside to watch a movie in Chennai / Bangalore. Not many choices, if they have the money they can watch the movie: price controlled or not. If they don’t have money (or a penny less), either they should be content with the serials on the free color TV given to them or go loot who goes to watch the movie. I pray that people don’t try the later.

    Like it not or not, India is heading in growth direction by excluding a large segment of people, a majority of them outside the Satyam theatre. Until such time – the time when those outside are part of the growth , these price controls, reservations , ration shops, regulations and whatever you and I think are hindering the growth /quality etc; has to exists… And I agree, the competition will be good for those inside the Satyam Theatre, but it is only a few (minority if you like to call). Looking at the cost of real estate, education etc, I have my doubts – Is competition really bringing the so called quality even to those inside!!

    Finally, if you are of the thought that the Rs.70 small popcorn is of better quality, please wake up from your dreams.. it was sourced from the same vendor where the niche market also buys. And yes, the recent UN report says – “More people in India, the world’s second most crowded country, have access to a mobile telephone than to a toilet” (http://www.un.org/apps/news/story.asp?NewsID=34369&Cr=mdg&Cr1) and I don’t have comments on that.

    PS: I know it is your blog and you have all the rights in the world to say whatever. If I don’t like it , I have to walk way from it and I don’t have any right to write a long comment. Sorry!!

    • bhoo said

      Azagu: Nice to hear from you. I tried watching Katradhu Kalavu, but could not stand for a long time – the moment he killed the ticket vendor, I could not stand the movie, went away.

      Thanks for your comment. If I did not want a comment, I would not post. So, absolutely fine with your comment.

      Your comment needs several blog posts in response, which I will do one after another.

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