Advocacy for Formal Language Instruction

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As we have discussed the emotions that motivate our decisions and the framework that identified personality types, we now move on and see how these two can be integrated in order to help us apply these in practical ways.

It would make sense to push the right emotional button when dealing with people of a certain personality type. This way, the success rate of convincing the target individual to respond favorably increases.

While a salesman may throw every trick in the book to close a sale, his sales presentation may very well be delivered to suit a particular personality by wrapping the presentation with the appropriate emotional lures.


Pitching to a Dominant Driver Type

When dealing with dominant drivers we should be mindful that these people think highly of themselves, they want to be in control, and they value family relations. Thus, an astute salesman would pitch on prestige and love. 

To achieve this, the salesman may show how the product he is offering could reinforce the dominant driver's elite image. He would use catch phrases like "reserved for the privileged few" or drop big names and say "oh, the CEO bought the same model from me.." But hard selling to a dominant driver may backfire because these people want to be in control and they do not want others to decide for them. Knowing this, the clever salesman may very well show his product line up and say "these are the common models but over there are the high-end models" and let the dominant driver pick his choice.

When all things fail the salesman would always know how to spin to the other weakness of the dominant driver--family relations. The salesman could very well inquire about the kids, the in-laws and then convince the dominant driver to buy a present for them and say "they will love you for it.."

Also, due to the inherent impatience of dominant drivers anything that will save time and make them perform more efficiently--and have more time for family--will be appealing.


Pitching to a Researcher Type

Keep in mind that researchers are cautious, calculating, very meticulous, and they take personal failure and criticisms seriously. Thus, a good salesman would pitch on guilt and fear of loss.

Researchers do not like other people to decide for them as well so it is better to give them brochures and data sheets to analyze and compare. The salesman might very well show graphs and literature that show trends and then let the researcher decide that the product is essential considering the external conditions.

The worse fear a researcher may have is to make the wrong decision or to underestimate a problem and be blamed for the outcome. A shrewd salesman would then play this up and sell the product on its safety features. He would push points like "it may cost more but at least it is safer and more durable.." Some salesmen would even draw catastrophic scenarios and then show how the product could save the researcher from all those. However, dealing with researchers require patience because these people take time to decide unlike dominant drivers who are confident in decision making.


Pitching to a Sociable Type

Sociables are stylish people known to crave attention, to desire to be the first in whatever they fancy, and to hate complicated operations and boring routines. A focus on the love of self, beauty, and less frills will prove to be very useful.

Crafty salesmen may very well capitalize on these traits by showing a product that will make sociables "the talk of the town.." Salesmen may very well offer their most stylish and hip products that will help the sociable stand out with a designer's sense.

Also, products that are simple to use and convenient would appeal greatly to these people.


Pitching to a Caring Person Type

The caring type is described as reserved, timid, selfless, and love-oriented people who prefer tried and tested ways. Salesmen may pitch by showing how cute and simple a product is. Salesmen could also show how their loved ones would love them more if they would give away the product as presents; or how her husband would love her more if she uses the product; or how the girl of his dreams will love him for doing this or that.

Another way to make a pitch with caring people is to focus on "the tried and tested way". As caring people are reluctant to try new things they would rather go for reliable products and time-tested approaches. They simply would not want to experiment and expose their loved ones to risks.

Pitching on popular endorsements could also work for caring people. Anything endorsed (or simply used) by their favorite celebrity will surely be patronized by caring people.


Pitching with Greed and Fear of Loss

Greed and fear of loss usually work with any of the personality types as long as these are coupled with another emotion, for example greed plus prestige, fear of loss and love, fear of loss and guilt, etc.

Usually, greed is used in promotions that show people could get more for paying less like "buy one, take one", "three for the price of one", "buy four take one free", discount promos, etc. However, all this will depend on whether the product appeals to the personality in the first place.

Fear of loss is normally used in promotions that involve a sense of limited time or some short lived precondition so people will have the sense of urgency to buy the items while they can. These are evident in phrases like "limited offers", "good while supply lasts", "one day sale", "first one hundred customers will get..", etc.


Dealing with Crossovers

As mentioned in the preceding post there are crossover personalities like part dominant driver and part researcher, part caring and part sociable, etc.  When dealing with crossovers a salesman may very well make a sales pitch based on the two personality types involved and then observe which part the customer responds better to in order to know where to focus on.


Group Presentation

If you think dealing with crossover personalities is complicated they try presenting to a group of people. While salesmen would advise keeping things short-simple-and-sweet, presentations usually try to appeal to various personality types simultaneously. 

If a salesman is aware that the people who are attending will be from the marketing and finance departments, the salesman might very well customize the presentation for sociables and research personality types. If people from IT and engineering are attending then the salesman might as well present for dominant drivers and research personality types.

However, if a salesman or even a politician is presenting/speaking before of a mass audience then you could just imagine how they try to appeal to all personality types simultaneously.

Next, we will discuss some hurdles commonly faced by salesmen and how to properly deal with these.

 

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Before anything else allow me to greet everyone a belated Valentines Day and a happy Chinese New Year.

In previous posts, we have tackled the emotions that influence decisions, the various personality types, and how clever people match the personality type with the right emotional approach to make convincing easier.

At this point, we shall begin to discuss the Five reasons why people do not buy:

(1) No Money
(2) No Need
(3) No Help
(4) No Hurry
(5) No Trust

Let us keep in mind that while these principles were developed for use by salesmen these are just as applicable to other endeavors that require convincing people.

Now, before I go into details allow me to show at which point these objections normally occur. To do this, first I have to acquaint you with the sales process. In a normal sales environment the following are considered as the common stages in the sales process:

(1) Prospecting
(2) Appointment Setting
(3) Sales Presentation
(4) Trial Closing
(5) Objection Handling
(6) Closing The Sale

Note: There could be more trial closings depending on the number of objections made.


(1) Prospecting

At this stage the salesman goes through directories, his collection of calling cards, referrals from friends, and just about any possible way he can come up with a short list of high potential prospective customers. The rationale behind this is while many salesmen would agree to casting-the-net-wide or give presentations indiscriminately to just about anyone at arm's length, the wise salesman knows that he could only conduct so many presentations in any given day. Therefore, he might as well optimize the use of his time and exert his effort with select people who are more likely to buy.

Here is where demographics come in. A salesman knows his product and the target market which is defined by age, sex, marital status, disposable income, occupation type, lifestyle, etc. So, even if a salesman is merely standing by a booth in a mall you can bet that he is looking out for someone who fits the demographic profile judging by the looks before he considers making a sales pitch. This way he can save time and energy as well as increase the probability of making a sale.


(2) Appointment Setting

In some line of business individualized presentations are essential. Therefore, after the salesman has come up with a short list of prospects he would then contact them and try to "sell" the idea that the prospect needs to see the presentation. However, the salesman has to do this without giving enough information to allow the prospect to make a rejection over the phone. This is very tricky but a highly experienced salesman would know when and when not to insist on the face-to-face presentation, or when to close the sale over the phone.

And then there are the gatekeepers. The gatekeepers are the people other than the decision makers who may stonewall salesmen from speaking with the prospect/decision maker. These include the spouse, phone operator, and even the personal secretary depending on the situation.  Overcoming these gatekeepers is just as important as making the actual presentation when selling to large companies or organizations.


(3) Sales Presentation

This is the part where the salesman presents the product in a manner that he thinks would appeal to the prospect considering all the personality and "need" assessment he had conducted earlier. It is here where the salesman also discusses the benefits and advantages of the product. Usually, this is done under the guideline KISS (keep it short and simple) in an environment with the least distractions in order to keep the prospect focused on the selling activity.


(4) Trial Closing

This is where the salesman tries to test and see if the prospect is interested in buying the product. Normally, the salesman would ask the prospect what color he prefers, how many pieces he wants, what are the features he liked about the product, and so on. These questions are actually attempts to mentally condition the prospect to buy the product by slowly inducing the him to make decisions normally associated to the process of buying until the he loses all resistance and makes the purchase.


(5) Objection Handling

It is normal for prospects to have additional questions and sometimes outright objections to the product or sales presentation. Under these circumstances a salesman's duty is to address the points raised. It could be as simple as highlighting a feature of the product that was missed during the presentation, but sometimes it could me more serious.

Here a salesman may selectively conduct another presentation designed directly to address the points raised. If all else fails, a salesman may even dangle some freebies or bundle a special offer just to seal the deal--who knows what additional deal sweeteners he may have under his disposal.


(6) Closing The Sale

By the time the salesman reaches this point the prospect would have been fully convinced about purchasing the product. The last thing the salesman wants to do is to fumble with unexpected lapses and spoil the sales attempt, otherwise, this stage should be smooth sailing.



Now, keep in mind that depending on factors like the product/service being offered, the sales organization, the sales culture, the trade practices, and others, all these steps may vary. Furthermore, there are cases where some steps might not be necessary at all (like stages one and two), or perhaps the processing of the transaction is more brisk with less need for detailed discussions on some parts.

Going back to the five reasons why people don't buy, be aware that these reasons could occur at any point in the sales process--except stage one unless the salesman hears voices in his head. However, these five reasons occur more frequently on stage three and four; and occur least likely on the final stage.

Next, we will discuss the nature of the "five reasons why people do not buy" and see how mastering the countermeasures could sometimes bring more benefits than the sales presentation itself.


<watch out for the continuation  >

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As the national election date draws closer allow me to discuss the Five reasons why people don't buy in the following order:

(1) No Trust
(2) No Need
(3) No Help
(4) No Hurry
(5) No Money


(1) No Trust

This is perhaps the biggest hurdle to anyone who is trying to sell something critical, life changing, very expensive, or very radical on a personal level. 

Trust wouldn't be a big issue if it were a matter of purchasing a ballpoint pen, a plastic bracelet, or any unessential item below PHP 20.00 at today's prevailing exchange rate. The obvious explanation here is anybody could spare the small amount and losing these items an hour after purchase wouldn't matter much to anyone especially if the items are easily available.

Also, trust wouldn't be a big issue if we were transacting through a machine. We would assume that machines are impartial and reliable; in contrast, humans are prone to bias and could deliver goods and services in varying degrees of reliability and consistency.

As decision makers, people are more cautious if the purchase involves things that will directly affect what they value. People generally exert caution (regardless of personality type) if the decision involves a great amount of money, if it risks one's life/career/source of income, if it could alter one's relationship with his loved ones, if this involves affecting one's status in society, or if it involves the possibility of reducing liability or accountability.

If we think about it the situations above are traceable to the five emotions that drive our decisions (e.g. love, fear of loss, prestige, greed and guilt) as discussed in previous posts.

At this point, we examine how companies and other entities develop trust and how this helps in their endeavors through time.

In old societies, the importance of dealing with people and institutions that could be relied upon is as critical as losing money to thieves and not having any chance of getting it back. Even in today's society where there are laws designed to protect consumers, I don't suppose people would hire lawyers and attend several court hearings to bring to justice the vendor/manufacturer of, say, one defective piece of ball point pen worth PHP 12.00.

It is simply ridiculous, and the time and money spent for the legal proceedings would not justify the amount that could possibly be recovered from the supplier or manufacturer unless the amount of the transaction is in the thousands of pesos for a large volume purchase order.

This is why people are afraid of losing money unnecessarily through unscrupulous traders and/or manufacturers. The trust and reliability that characterize a trader/service provider/manufacturer give peace of mind and convenience to the consumer and saves him from the hassles of dealing with product defects and inconsistent service.

This is why a good name is worth more than a ton of gold, as the saying goes. In Latin countries, the title of "Don" was given to individuals who are known for being straight forward and honest in their dealings with others. Unfortunately, the title was abused and liberally used to the point that even the heads of organized crime were given this title.

In most western countries, there were people who took this matter to a point where the names of the founders themselves were used as the company/trade name. This is very common among financial institutions (JPMorgan, Morgan Stanley, Bear Stearns, Dun and Bradstreet, Barings, etc.) and companies in the fashion/cosmetics industry (Donna Karan, Giorgio Armani, Lacoste, JCPenny , Sara Lee, etc.)

In fact, this phenomenon is the subject of much study and members of the business academe refer to it as Brand Management. You would be surprised to see trade books on the topic if you visit the nearest bookstore chain in your area.

Brand Management is the study of how organizations could develop and sustain a strong brand. The benefits of a strong brand are the following:

(1) A strong brand helps in promoting the organization's current and future product/service offerings;
(2) It could help the organization attract the best and brightest talents in the market/industry;
(3) It provides a sense of stability and continuity among employees;
(4) It provides leverage when dealing with creditors;
(5) It provides leverage when dealing with suppliers and other business partners;
(6) And, it provides some degree of political influence.

Without lecturing on brand management allow me to focus on just one advantage to having a strong brand and that's how a strong brand helps in promoting the organization's current and future product and/or service offerings.

Whenever we buy a pound of common table salt in a thin plastic bag at the nearest wet market perhaps the only thing we would consider is the price. Now, if we run a restaurant or a food manufacturing firm and the business consumes the same common table salt in large quantities regularly then aside from price we would add other dimensions in evaluating the supplier. We would ask ourselves if the supplier is reliable. Could he consistently meet our regular requirements? Perhaps the ability to deliver the goods for free would also be considered.

The point here is this, if the product is so generic and undifferentiated then we could shift from one supplier to another if low price is the only factor to consider. However, as the need becomes more complex we begin to consider additional factors before we select the supplier and make the purchase.

In the example above, the product is just common table salt. The complexity began when the required volume became large and the demand became regular. Now, what if we evaluate a more complicated product like a car or a desktop computer, what would we consider as relevant factors?

When we evaluate a product we normally consider things beyond the obvious benefits of the product itself. Depending on how well the buyer is aware of his needs he will normally scrutinize the product based on his requirements. Now, assuming that we are standing before a store shelf with several products that meet out requirements with prices that are comparable, how do we decide which one to purchase?

Here is where brand management comes to fore. We refer to the premise that we have raised many posts ago and that's purchase decisions (as well as other major decisions) are driven by human emotions. This time around, allow me to stress that brand management was developed to help organizations capitalize on this.

Brands are strengthened through a solid track record of success and reliability that takes years to develop. In the past, word of mouth and/or actual positive experience with the product or service slowly does the job of raising "brand equity" or the intangible value of the brand. However, in the past few decades a more deliberate approach was taken by companies in order to create a higher level of brand awareness.

Organizations have achieved this along with the concerted efforts of advertising agencies, PR firms, and media practitioners. Normally, brands are associated with images of community service, sensitivity to minorities, commitment to quality, and even dedication to the environment. Associating with popular sports and competitions is also a good way to promote goodwill to the brand.

To my mind, however, the best way to promote a brand is to remind people of how good times were shared with the product through the years. Nothing beats a strong emotional attachment to a brand as far as brand management is concerned. Among Philippine companies we could easily identify the likes of San Miguel Corporation,  ABS-CBN, PLDT, etc. as companies that have achieved strong brand equity using the techniques mentioned above.

A company with a strong brand will enjoy the residual benefit of having a strong mental recall each time a consumer is in need of a product or service to satisfy his needs. In fact, even if the consumer does not need a product yet he could be induced to try something new simply because the product carries the trusted brand that has never failed to deliver satisfaction in the past. That is how important a strong brand is.

I have just shown how trust is essential in decision making in today's modern world and how brands could be associated to good emotions to make these trusted. However, we must remember that although these principles were developed for business these are the very same elements at work in Philippine politics.


Beware of Political Brands

Being the emotional people that we are, Filipinos should know better than to trust political candidates on the basis of their family name.

In other countries, political branding is synonymous to the political party. In the US it is either Republican or Democrat. In the UK it could be a choice between Labor, Conservatives, Sinn Fein, etc. In the Philippines, however, considering the ease at which politicians jump from one political party to another the platform of the party becomes irrelevant.

It all boils down to the personalities behind the campaign, much like in the movie industry where the presence of a superstar could spell success in the box office. Unfortunately, many Filipinos think that good governance runs in the blood line so a scion of a political clan will be just as good as some of his relatives. Therefore, in this country the political family name is to local politics what strong brands are in the corporate world.

In the coming elections, we should think beyond the emotion that we have attached to the "political brand" and look at the track record of the candidate instead, and perhaps we could elect better public servants this way.

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How do we develop trust?

After the discussion above the question that is begging to be asked is how do we develop trust to help us in our endeavors?

The key concept behind the techniques on how to develop trust will revolve around "association".  As the target individual meets us for the first time we need to associate ourselves with things that will draw that feeling of trust.

Indeed, the first impression lasts, as the saying goes, but what do we associate with in order to create that lasting impression that speaks to audiences that we are trust worthy? Here are some techniques on how to develop trust:

(a) Act the part
(b) Sell the brand
(c) Plain Folks
(d) Bank on the reputation of the person who referred you
(e) Develop a solid track record over time


(a) Act the part

The way we look and present ourselves is critical. On top of the normal personal hygiene we have to look like someone trust worthy. What this "trust worthy look" should be may depend on the over all approach and we will discuss this further in the subsequent techniques on developing trust.

The important part here is to look like someone the target audience can relate to..someone the target could associate with his personal concept of what a trust worthy person should look like. This may sound stereotypical but this is how the human mind works and visual cues (the image we project) could either raise or drop mental barriers. The last thing you want to do is associate with a negative image inadvertently.


(b) Sell the brand

If we were engaged in selling goods/services we could easily focus on the brand. If the brand is well known then half of the work involved in selling is already done.

But what if the company or the brand is new or not known in the market. Here sales people would normally work on raising the level of awareness on the brand. He could  identify popular products that are under the brand. He could identify successful products/projects of the company/brand in other parts of the world. Others would even explain how the company evolved and highlight its successful ventures.

Here the salesman is banking on associating the product/brand/company with success. Nothing sells like success and the inherent desire of people (the prestige driven type) to take part in that success. Indeed, "the winner takes it all".


(c) Plain Folks

Allow me to reintroduce a style originally used for oration, "plain folks". This is a style that illustrates to the target audience that the speaker is just like them. This is a powerful message because people generally think that they do not get goods and services in the desired manner because the brand/company/seller does not understand them. With plain folks the communicator tells the audience subliminally that "yes, I used to be like you, and yes, I understand you". This way, association is greatly developed on a personal level because the target audience realizes that he and the speaker are alike.

Salesmen use this a lot and topics such as which place they were from, where they studied, which parts of the world they have been to, which social group they belong to, which company they worked for, or even something as superficial as where were they / what were they doing when a major event occurred, could actually do the job of connecting through plain folks.

I remember how many sales agents from newly established multinational outfits in the country used plain folks to attract people. They even stressed how the founders of the company used to be ordinary people themselves until (through some stroke of genius or hard work) they were able to become successful. This way the target audience could visualize themselves as no different from the founders and learn to associate with the brand.

More importantly, we should all be aware that this is the most commonly used technique used by politicians on the campaign trail. When we hear lines like I used to be poor; I used to sleep on the streets; my family didn't have enough money for food as I grew up; and so on, we should remember that these are merely emotional appeals. Even if there is truth in the statement of the speaker we should be aware that using plain folks is just a diversion. It merely takes the target audience's attention away from the more important issues.

Personally, I would be skeptical about listening to a person who puts too much emphasis on plain folks. To my mind, these people simply lack the substance to be elected in a public office.

 
(d) Bank on the reputation of the person who referred you

This is actually similar to "selling the brand" because a salesperson relies on the reputation of another entity.

Under the circumstances, the salesperson depends on the pre-established positive relationship between the person who referred him and the target individual. As in "selling the brand" if this works out then half the job of selling is already done. 

This is the reason behind brand endorsements by celebrities. This is also the reason why some inexperienced candidates get elected simply because they were endorsed by a popular senior politician.

This is very potent because a personal level of trust (even in the case of celebrities and fans) is immediately established unlike in "selling the brand" where the trust is between a consumer and an inanimate business entity. So potent that some people abuse this by "name dropping". Of course, in "name dropping" a scheming person could simply drop the name of an influential person and get things done his way.


(e) Develop a solid track record over time

The most potent but also the most time consuming (and potentially the most difficult) approach is to establish a solid track record over the years.

This entails consistency in the delivery of goods/services to the consumer and establishing a long-term relationship that could take years to develop. However, this is also the most reliable way to establish trust. In fact, achieving trust this way would almost automatically lead to brand loyalty.

This explains how the demand remained high for some higher-priced quality products despite countless low-priced competitors. The manufacturer/supplier could simply justify the high price with the consistent quality of its products/services. In fact, many consumers try cheaper alternatives only to go back to the old trusted brand ever more loyal due to the failures of the cheaper alternatives.

The association made here is this, you pay more but you get the satisfaction and not the headaches. After all, what price would we pay to avoid headaches due to product/service failure?

Arguably, this is the reason why people do not venture with untested alternatives despite the obvious benefits. Ironically, perhaps this is also the reason why some people tolerate corrupt candidates and not try other untested candidates. The corrupt candidate may cost the society much but his consistency and predictability is perhaps perceived by people as a good trade off rather than try an untested candidate.

To my mind, if it is broken then fix it.

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(2) No Need

There is a saying among salesmen that you know you are good at the trade if you could sell a refrigerator to an Eskimo man.

The paradox highlighted here is why would an Eskimo need a refrigerator when he is surrounded by ice almost all year round? We could simply imagine the level of selling skills a salesman must have to pull off this feat. This saying also points out the difficulty or perhaps virtual impossibility of selling an item that is not needed.

As we move on and discuss the reasons why people do not buy we now tackle one major stumbling block faced by salesmen, the lack of demand. Or simply put, when customers do not see the need for the product being peddled.

Except for compulsive buyers, people normally give thought to their purchases especially if the transaction entails a large sum of money. If we factor in the economic difficulties of our time then it makes sense to spend not only on items that we need but also to prioritize the purchase of items that are deemed as necessities and forgo those that are less vital.

But what if you are selling something that is seemingly of less importance, or worse, useless and unwanted by your target market?

And yet, seasoned salesmen know that if they push the right buttons they could still manage to sell their wares. The crucial needs that must be served are not the ones on the surface. Salesmen know that there are two types of need, the "stated need" and the "unstated need".

The stated need refers to the overt need as expressed by the customer such as the case when he goes to a counter and asks for an item. However, the unstated need is the real motive that drives the behavior; it is not expressed and people are seldom aware of it. This is sometimes referred to as the "human desire" that transcends satisfying simple need. In fact, unstated needs correspond to the emotions that drive purchase decisions like love, prestige, fear of loss, greed, and guilt as discussed in previous posts.  Allow me to illustrate this:

Ex. 1   Love            

Stated need
I want to buy a tube of toothpaste       

Unstated need
I want to have confidence to face the girl of my dreams               


Ex. 2   Love

Stated need
I want to buy a car

Unstated need
I want to impress my friends and especially the girl of my dreams


Ex. 3   Prestige

Stated need
I want to get a platinum credit card

Unstated need
I want to be treated very special and I want access to special privileges


Ex. 4  Guilt

Stated need
I want to buy a gift for my in-laws

Unstated need
I don't want my wife to think I'm being bitter by not extending the gesture


Ex. 5 Fear of Loss

Stated need
I want to get health insurance

Unstated need
I don't want to have big medical bills should I get sick unexpectedly


However, we must keep in mind that the target customer is never consciously aware of his unstated need. Therefore, it is up to the salesman to recognize it, bring it to the surface, and show how his product can satisfy it.

Surprisingly, it is also possible for salesman to suggest an idea, confuse the priorities, and eventually convince the target customer to buy the product based on the suggested need. Short of branding some salesmen as hypnotists, I have met some who were very good at making suggestions that they have virtually spoon fed the target customers with their rationale who were eventually induced to purchase.

Understanding and anticipating the need for a product or service (and the satisfaction thereof) could make or break a trader. Among economists and businessmen the general public's need for a product is called "demand".

Attempts to appeal to the unstated need is systematically used by advertising campaigns especially when the product/service caters to the mass market. The use of  mass media (radio, television, print) to attract buyers is simply the preferred method used by advertisers to develop and drive the demand for products and we only need to watch the television for a few minutes before we get inundated by such advertising material.
 

The Law of Supply and Demand

If we think about it, whenever there is talk of price increase we often hear traders explain how the "law of supply and demand" has influenced the price increase. However, do we truly understand this powerful economic model? Allow me to explain this in simple terms for everyone. The key elements of this economic model are price, demand quantity, and supply quantity. Next, we have to understand the dynamics that takes place as these factors influence each other. For a clearer illustration, let us put this principle in the context of a commodity, tomatoes.

Let us assume that there are 100 kilos of tomatoes priced at P20 per kilo and the demand for the produce is at 100 kilos as well. This implies that the market demand (the combined need of various individuals/households) for tomatoes is equal to the supply available and buyers are willing to pay P20 per kilo and nothing more. From this point on, let us keep in mind that any change among the three factors could upset the balance (equilibrium) and affect the other factors.

The common explanation that goes with the law of supply and demand is that prices will go up if the demand is high but prices will go down if the demand is low. Moreover, prices go up if supply levels are low and prices go down if supply levels are high.

Allow me to explain this further using the case of the tomatoes. Should the demand for tomatoes rise to 120 kilos and the supply remains constant at 100 kilos then the shrewd trader will maximize his profit by selling at a higher price, say P25 per kilo. People will pay the extra amount because there is a supply shortfall of 20 kilos and they have no choice.

Perhaps some people will decide not to buy anymore but there will still be enough buyers who could afford the price increase and buy the produce until all the 100 kilos is depleted. However, if the trader raises the price too much, say to P30 per kilo, then the number of buyers who could afford the commodity will decrease further therefore some tomato will be left unsold. To sell the remaining tomatoes the trader might decide to reduce the prices to a more acceptable level or suffer supply spoilage.
 
Similarly, if the available supply decreases to 80 kilos and the demand remains constant at 100 kilos then there could still be price increase because there is still a supply shortfall of 20 kilos.

Conversely, if the the demand is constant at 100 kilos but supply increases to 120 kilos then there will be a price decrease in order to induce buyers to buy more than what they normally consume or else the trader may suffer food spoilage due to over supply.

Similarly, if the demand decreases to 80 kilos and supply is constant at 100 kilos then there will still be price drops, a case of over supply.

Therefore, we can say that from the point of view of supply a shortfall will lead to price increases but a surplus will lead to price decreases. However,  from the point of view of demand a shortfall will lead to price decreases but excess demand will lead to price increases.


Imperfect Market Information

The harsh reality concerning the Law of Supply and Demand lies in the availability and quality of the market information available to the trader and consumer alike.

Unfortunately, there is no way for a trader to objectively know the demand situation for the  trading day or even the days to come. It is simply impossible to conduct surveys on consumer preferences on a daily basis. Instead, businessmen rely on historical data to forecast the demand, but this is in no way precise.

One age old practice lies in observing and anticipating the seasonality of demand based on preset social/calendar events like school opening, summer vacation, and holidays. In fact, many will tell us that the demand for products and services follow a reoccurring pattern where demand starts to rise around July coinciding with school opening and then peaks in December during the Christmas season only to gradually decline from January throughout the doldrum summer months.

On the supply side, traders closely monitor suppliers and news on the supply situation allows him to decide whether to increase or decrease the prices accordingly. This is critical to fresh produce traders especially since adverse weather conditions could affect the harvest or the cargo from reaching the main distribution centers/market places thereby reducing the supply available for retail.

Meanwhile, some traders also consider the seasonality factor. We all know that some fruits are abundant in summer while some are abundant during the autumn months. And yet there are those that are available all year round.


Hoarding and Price Manipulation

Now, what if the supply-side information is not accurate? One form of imperfect information is when supply information is distorted to suit the interest of unscrupulous people. Imagined or rumors of a poor harvest could trigger price increase despite large supply quantities available in warehouses. If a trader hoards the supply until everyone else is out of stock and then waits for the prices to skyrocket before unloading the goods then for sure we know that the trader is up to no good.

If a group of suppliers agree among themselves to set the price then we have here another source of imperfect information, the cartel. The cartel can manipulate the prices and consumers have no choice but to accept it. This is because for cartels to work, the combined supply capacity of its members has to be quite significant in order to keep non-cartel members from providing an alternative supply source.

Of course, the worse form of price manipulation comes from none other than the monopolist. A monopolistic player in the industry can come up with feeble excuses to raise the prices and no one can lift a finger about it unless the country has an anti-trust law like in the US.

[renzphotography]

And then there are statistics!

In great disgust, one American politician quipped that there are lies, there are bigger lies, and then there are statistics.

To my mind, nothing is more deliberate and insulting than to use math or science to justify lies. It is simply a blatant exploitation of people's lack of knowledge (ignorance) in a certain field of study. While there are professionals who can be consulted for alternative opinions on certain scientific and mathematical questions the one peculiar problem inherent to statistics lies in the way it is implemented.

I am trained in statistics and I thought big ticket survey outfits were very scientific and methodical in implementing statistical studies. However, I was rudely awakened when upon close scrutiny through an interview with experts from one of these outfits years ago I realized that the entire rule book for conducting proper statistical surveys was simply thrown out of the window.

The major flaws lie in defining the scope and the actual data gathering. It is important to properly define the scopes and limitations of any statistical survey just as in any scientific and mathematical endeavor. Since statistics is the math that describes a population based on random surveys on samples then it makes sense to take samples/respondents within the appropriate scope of the study.

Let us put this in proper context. Suppose we conduct a survey that aims to describe a group called "Five-block-village" (the population of which is separated by five blocks) then it makes sense to take samples/respondents from all five blocks.

If all samples are taken from just one block, say Alpha block, then the results must be called the survey results on Alpha block and not on "Five-block-village". This is because the results were drawn exclusively from just one block.

In fact, if the "Five-block-village" has a population of 1000 and if the target respondent size is 100 then it makes sense to get 20 respondents from each block.

Now, if there is a total of 100 people in block Alpha, 50 in Bravo, 400 in Charlie, 200 in Delta, and 250 in Echo, then the best way to distribute the number of target respondents is to follow the proportion of the distribution of the population. Therefore, it makes sense to take 10 respondents from block Alpha, 5 from Bravo, 40 from Charlie, 20 from Delta and 25 from Echo.

In television rating surveys, pollster firms install an expensive device on televisions that monitors the television stations viewed on which time slot. I know for a fact that these devices are installed in upscale and middle class households but very reluctantly (if ever) on poor households for safety reasons. So, how do these polling firms survey and describe the behavior of poor viewers? You guessed it, they use their magic wands!

Another problem here is that most of the machines are installed in Metro Manila households. So, do we conclude that Metro Manilans have the same viewing preferences as those in other parts of the country?

Now, what if I tell you that the same survey firms are behind the presidential candidate ratings. And what if I tell you that the same sampling flaws are conducted when describing the nation's presidential preferences--that is, when the respondents are mostly from the upper segments of Metro Manila society.

However, not all surveys are flawed. The one survey that I admire for accuracy and depth is the one prepared by the National Statistics Office on the population every five to ten years. It is a painstaking process where statisticians walk from house to house to gather data. It takes one whole year to prepare and the project is so costly that it is conducted several years in between.

So, whenever we see another presidential survey report perhaps we should pause and think twice. If the survey company can update the results almost daily then there has got to be something wrong.

[maxsims]

In great disgust, one American politician quipped that there are lies, there are bigger lies, and then there are statistics.

The "American politician" was, in fact, Winston Churchill, and his quip referred to "lies, damned lies, and statistics".

Ahhh, Renz, have you contemplated setting up your own website instead of parasitically using Joe's?

[Joe Carillo]

Let me referee these two conflicting claims on the quotable quote on statistics as a dismal enterprise.

Here’s what’s on record in the directory of Mark Twain’s maxims, quotations, and various opinions:

“Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: "There are three kinds of lies: lies, damned lies and statistics.”—Mark Twain’s Own Autobiography: The Chapters from the North American Review

I then would venture to say that although the grim, dismissive idea about statistics wasn’t originally said by Mark Twain (1835-1910), he did popularize it in the United States way before Britain’s Winston Churchill (1874-1965) was old enough to be qualified for high public office.

Read a deeper historical background of "Lies, Damned Lies and Statistics"

[maxsims]

You are quite right - 'twas Disraeli.

[renzphotography]

Look who is talking.

[maxsims]

My dear Renz,

I merely argue (sometimes heatedly) with Joe; I do not give his other readers second-hand lessons in Psychology 101.