W A R N I N G !

W A R N I N G !

This page is full of non-facts and bullsh!t, (just like the internet and especially forums and other blogs), please do not believe entirely without exercising your intellect. Any resemblance to real things in reality is purely coincidental. You are free to interpret/misinterpret the content however you like, most likely for entertainment, but in no case is the text written on this blog the absolute truth. The blog owner and Blogger are not responsible for any misunderstanding of ASCII characters as facts. *cough* As I was saying, you are free to interpret however you like. *cough*

Saturday, September 19, 2009

Calculation of hype

Hype is the deviation between a product's expected worth or performance and its actual worth or performance, expressed in terms of percentage.

It's NOT the number of people supporting the product. We can have lots of people buying supporting a product with negative hype i.e. the product is better than what they think it is, or one idiot preaching that a product is so good so good - the amount of hype is 300%.

Just remember - after factoring in packaging, marketing, distribution, other business whatnots, the worth of a product is very efficiently decided by the market. More efficiently than analysts, more efficiently than government, and most importantly, more efficiently than you.

A law always applies - whatever idea that you think of has already been thought of by others, and they usually know it in more detail, and if they never implemented the idea, they know the problems with it. The only exception to this law is if you are some professional paid to research in that for months, which most of you likely aren't. Or unless the product maker is an idiot. But if that's the case, the invisible hand will do its works.

BTW if by any chance any of you reading are working in R&D, I'm honoured to have you as my audience.

Let me illustrate it better with a case study - suppose a product is priced at $500. Either some or many people are saying it's good it's good it beats $2000 products - which would mean it's a $500 product with a worth of e.g. $1000 as a conservative estimate.

So logically it would be selling like hotcakes.

If something is selling like hotcakes, then manufacturor will up the price. People who need that kind of product within that price range will still buy it if they think it is worth $1000, which goes in line with the economic concept that consumer will buy something as long as consumer surplus >0 (although really, much of basic economics is common sense).

If the manufacturor downs the price, it would be because they are not selling enough at original price, and that they will get more sales at a lower price. To get more sales by lowering price, in economics this would mean an elastic demand, which means people has a greater unwillingness to pay at the higher price. Which means more people think that the product is not worth the original price.

Summary - manufacturor downs price -> because they will get more sales -> because people think that it is not worth the original price

Since the huge crowd of price-determining people here is the market, market forces adjusts the price of product to what it should be worth.

And this value is lower than the hyped value.

Therefore, no matter how much hype a product has, one must always look at its retail price. Of course, marketing and hype can affect pricing, but you can reduce the effect by comparing prices of different ranges but similar products. For example, no matter how hyped a Zero DAC is, it will certainly never beat a Citypulse. The answer is given clear by the works of market forces.

So I stress, always consider the relative prices when guessing a product's performance.

Now, there is actually an irony here - the reason people follow hype is because they are insecure and hence want to go with what is accepted by others. But this others is actually a small group different from the rest of the world.

Hence hype.

Recall that hype does not require a certain number of partipants, any number will work as long as there is a considerable deviation in expected and actual value. Which agrees with the above proposition that hype happens in groups that are small relative to the market.

What about groups that are big relative to the market, or even as big as the market itself?

It would be marketing. And marketing is both an art and science. And it takes effort to skew people's view by so much. iPod is the best example of marketing.

And the difference between hype and marketing is that, I can always sell my iPod off at a high price second-hand, because marketing has actual value. Hype does not, so good luck selling your hyped-up product before its value halves next year.

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