10.03.08, The Psychology of Scale

The small shopkeeper and a giant like Tesco, with up to 30% of the market, can use the same marketing techniques the intermediary sizes of grocers will probably find too expensive to initiate. One technique is to offer savings in some form or other if products, which are not selling well, are bought in sufficient quantities by the customers. I’m not referring to the 2 for 3 bargains, but something on a lower scale, a points system. With a vast number of products, in a large supermarket, it is impossible to visually modify the prices, selectively, as this would overburden the computerised cash-out. In a small shop the man can put up notices wherever he wishes telling of reductions, because he is doing the totting. Tescos, make points-offers on certain items if more than a certain value is spent on that type of item. The monetary differential is probably miniscule but the psychological effect is tremendous, and because they have a shop in practically every town and city in the country, and their computer systems are common throughout, it is a simple matter to download the information, so that at the cash-out, points are given on selected items by the cashier without her having any reference to a list.

Scale in financial terms. A young person said to me ‘you can’t expect to get much for £50.’ We were discussing giving presents. I only earned £50 a year in my first job, in the Navy I received ten shillings per fortnight, (50p), as most of my pay was dedicated to my mother so she would have a war pension if I were killed. Post war, at university. I had a total grant to keep a wife and two children, buy books, go on educational excursions, of £300 a year. My first job as a graduate in 1950 paid £250 a year. So it is unsurprising that pensioners like myself, and people on low incomes, still think in tens and hundreds. The professional classes, earning upwards of 40,000 a year, think in hundreds and thousands. Even the lower paid, in purchasing a house, are forced to think in tens of, or hundreds of thousands. The really wealthy, and those in the entertainment industry think in hundreds of thousands, and millions, and as a million is a thousand times a thousand my mind boggles even at that. The government, and the civil service, think in billions, or a million times a thousand, which really worries me, because I haven’t a clue what a billion really is and so I’m forced to wonder whether they do either. For a time I did deal in extremely large sums, in millions in fact, and one can have a mindset sitting behind a desk that is entirely different to the one sitting at the breakfast table trying to balance the home budget. As you will have seen in the last few posts, government spending, seems illogical to me, and I wonder if they also work in unrelated, and separate compartments, as I did, having two perspectives, but in their case in astronomically unimaginable figures.

I question the attitude, of those at the top of the civil service pyramid, our masters, as it is applied to these vast sums of money, in billions. The Cabinet talks and therefore could, I presume, think in billions. The heads of the various departments don’t see the detail, they are only concerned with the overall picture, in billions. The people who submit the budgets to department-heads seek to obtain as much capital for their own use as they can, still in billions. They in turn are supplied information being gathered for them from some gatherers right across the country, in the various sections of their department. These gatherers are given information by gatherers lower in the pyramid, which they have collected from the people responsible for determining how the work is to be done, where the work is to be done, when it will start, how long it will take, and more importantly how much it will cost. Some of this work is maintenance, generally short lived and only in hundreds of thousands of pounds, the new work can take years, and therefore has to be split up into sections, and costs anything from a few thousands to a few million. So really it is only at the very bottom of the pyramid that people evaluate costs in the smaller sums that they
understand? They are the doers, and the checkers. Once the information starts moving upwards in the pyramid, it becomes ever larger and hence, if we are honest, totally outside the imagination of those handing it. The bigger the amount is, the broader the brush is that it is used to paint the picture, and broad brushes are inevitably hard to control.

Categorized as General

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