THE GIST of Editorial for UPSC Exams : 16 August 2019 (Discount addiction detox (live mint))

Discount addiction detox (live mint)

Mains Paper 4: Ethics
Prelims level: Not much
Mains level: Emotional intelligence and consumer behavior

Context

• Wiping out market-creation losses typically involves reducing customer subsidies bit by bit and getting service partners to taken on some or all of the burden
• If you’re looking to order food home or book a table at a restaurant, you may soon find that your favourite eat-out place is missing from the app you swipe open on your phone.

Effects of discount addiction detox

• According to a news report, about 300 restaurant brands in Gurgaon are delisting themselves from aggregators and table-reservation services such as Zomato and EazyDiner, over deep discounting.
• They’ve cited adverse revenue implications as the main reason, and have come together to detox consumers from their discount addiction.
• And this is not just about Gurgaon; Eateries in Delhi, Pune, Mumbai, Kolkata and Bengaluru are likely follow suit.

Key implications of this business strategy

• The business strategy of many online services is to first offer price cuts to lure people, and then gradually raise prices to turn profitable once they have a large customer base habituated to the convenience on offer.
• The assumption is that large sums of money ploughed in to gain a bit of the world’s most prized real estate place for an app on your mobile phone can be more than made back at some point in the future.
• The success of this strategy, however, depends on whether online businesses and their partners can endure the expenses along the way.

Conclusion

• Every such user-subsidising business must face a moment of reckoning, for sure, and answer tough questions on its so-called “path to profit".
• Wiping out market-creation losses typically involves reducing customer subsidies bit by bit and getting service partners to taken on some or all of the burden. It’s not easy.
• In the food-ordering business, some restaurants have turned restive, arguing that they would be better off on their own. How food apps respond would be interesting.

  Online Coaching for UPSC PRE Exam

  General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1) Consider the following statements about Active Pharmaceutical Ingredient (API):
1. The Drugs Technical Advisory Board (DTAB) has recommended recently to the Health Ministry to make it mandatory for companies to include codes to track-and-trace APIs to ensure authenticity of drugs manufactured in India.
2. It is the part of any drug that produces its effects.

Which of the statements given above is/are correct?
a) 1 only
b) 2 only
c) 1 and 2 only
d) All the above

Correct Answer: C
Mains Questions:
Q.1) Define the Discount addiction detox model. What are the key implications act this kind of business strategy market?