11/27/2010

Are leaked Black Friday ads a positive or negative externality?

The leaking of Black Friday ads have become quite a problem for many business over the past few years. Somehow people are getting a hold of Black Friday ads before they are released and posting them online, but business are unaware of how this happens. Wal-Mart, though, has been taking the initiative to correct this by pursuing legal action against the people who post these ads without their permission. They claim it to be a negative externality because other companies can steal their strategic plan. Companies have taken marketing approaches to fix this issue like Home Depot only releases their ads on the Wednesday before Thanksgiving.
I believe that it can be a negative externality when their ads are leaked, but I also believe that it can be a positive externality for companies. I am a bargain shopper and I am attracted to the "low price" and the "great deal" ads on Black Friday. I also know that I start looking for those ads at least a week in advance. My wife and I knew we wanted a TV and we know which TV that we wanted from Wal-Mart before the ad was sent to us in the mail. I believe that the positive externalities of this issue outweighs the negative. I believe that consumers like having that information early to plan and evaluate their Christmas budget. I don't believe other stores have enough time to copy a competitor's strategy if the part of the ads are leaked a week in advance. The positive benefits and extra sales that companies see on Black Friday due to leaked ads outweigh the costs.

3 comments:

Baden said...

An earlier post by Vladimir on Nov. 23 pointed out that Wal-Mart is matching everyone else’s Black Friday prices as their strategy anyways. Since this is the case then their claim to taking legal action against others who post their ads early because this leads to other businesses stealing their strategy has little to no merit. Wal-Mart plays hardball and knows what it has to do to turn a profit and they have every right to pursue such profit sustaining activities; however, they need to be careful of lawsuits that could turn into a media and human relations nightmare. People are excited and hyped up about the sells. Come on that is a good thing if you are a retailer and they should be seeing all the additional posting of ads as free advertising and in some cases like a nice referral. Anyone in business knows how nice it is to get a referral instead of paying for the advertising and marketing and hoping to generate business. Look at the good side Wal-Mart!

Dave said...

-1 on Rhett for spelling.

Interesting. I hadn't heard of this problem, except from a Black Friday shopper who mentioned that she had scoped out all the ads online before Thanksgiving.

I find it kind of odd. Most retailers face a prisoners' dilemma with pricing. Their strategies for pricing a particular good are to price it high or low. Pricing low is a dominant strategy, but the dominant strategy outcome (it's also a Nash equilibrium) is the worst one. What you really want to do is price high, and not have customers know that your competitors can beat you. Yet all these ads stress the dominant strategy. Hmmm.

Tom said...

It's a win for the consumer when Black Friday Ads are posted. Stores stay in business because consumers buy stuff. Having more ads available entice more people to shop. Stores probably sell more because of all the ads - they need not worry about the leaked ads - it just get more info out, attracting, enticing more people to shop. I use http://www.BlackFridayAds2011.info because they have the ads from the most stores and they post deals before, during and after Black Friday.