Economic View on Spaghetti Sauce

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Ted Talks by Malcolm Gladwell on Spaghetti Sauce in term of Economic perspective

Gladwell talks about Howard Moskowitz, who was the food industry guru and most famous for re-inventing spaghetti sauce. The key point in this story is basically the destruction of the Platonic Ideal. Prego has hired him to find the perfect spaghetti sauce so as to compete with Ragu. Moskowitz created dozens of prototype sauces testing each variety with different American people. Moskowitz concluded that there is no single perfect spaghetti sauce, but there are three basic types that people responded to: plain, spicy and extra chunky. At first, there was no chunky type in the supermarket, so when Prego launched it, it was very successful. He changed the way food industry thinks about making people happy. The fact is that people don’t know what they want. Another critical point he mentioned is called horizontal segmentation, no product hierarchy just only different kinds of product that suit different kinds of people. Also, he democratized the way we think about taste.

Of course, there are too many types of Spaghetti sauce sold in the US market because most of the producers try to launch the new differentiated products in order to satisfy various types of consumers without realizing their real needs which is easier to do with the modern technology. Moreover, many companies follow after learning Howard’s successful ways of testing varieties of spaghetti sauce. As a result, this leads to the paradox of choice.

In this case, the consumers get benefit with higher utility or more preferences, as a taste for variety model, since there are many choices of products chosen to consume. More choices mean more freedom; more freedom means more welfare. Therefore, more choice means more welfare. What Pregu did linked to Strategic behavior through brand preemption which incumbent introduces brands prior to an entrant and makes it difficult for the profitable entry. Thus, Prego raises it...
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