and Place Marketing - The Price
By Sam Vaknin
III. The Price
A product's price reflects the shifting balance
between supply and demand (scarcity) as well as
the value of inputs, the product's quality, and
its image as conveyed and fostered by marketing
and advertising campaigns (positioning). Price
is, therefore, a packet of compressed information
exchanged between prospective buyers and interested
In principle, countries "price" themselves
But, first, we should see how the price mechanism
comes into play in the global marketplace of sovereigns
and their offerings.
The "price" of a country is comprised
of two elements:
(i) The average (internal rate of) return on
investments in its infrastructure, human capital,
goods, and services - adjusted for (ii) The risks
associated with doing business there.
The first component takes into account the costs
of conducting business in the territory - everything
from outlays on inputs to taxation. The second
component considers the country's political risk,
volatility (as measured, for instance, by fluctuations
in the prices of its financial assets and obligations),
quality of governance, transparency or lack thereof,
dysfunctional institutions, stability of policies
and legislation, and other hazards.
A country should strive to maximize it price
and, thus, create an aura of quality and prosperity.
"Selling oneself cheap" communicates
desperation and compromised standards. The way
to attract investors, tourists, and other clients
is to project a kind of "promised land"
but without resorting to exaggerations, confabulations,
or outright lies.
The message should be relayed both directly (though
not obtrusively) and subtly (though not incomprehensibly
or deviously). The country should enumerate and
emphasize its natural and human endowments, capital
stock and infrastructure, favorable tax and regulative
regime, political stability, good governance,
transparency, functioning institutions, and so
on. It should also appear to be substantial, sophisticated,
forward-looking, pleasant, welcoming and so forth.
As an increasing number of people around the
world "buy" the country's self-perception
(where it stands now) and its vision (about its
future) - its price keeps climbing and its value
It is much debated whether countries should engage
in negative marketing and discount pricing. "Negative
marketing" is the disparagement of sovereign
competitors and their products and services which
are comparable to the country's own offerings
or substitute for them. Discount pricing is the
strategy of providing at a discount products and
services identical to those offered by the country's
An example of negative marketing would be to
point to a neighboring country's uneducated and
expensive labor as a reason not to do business
there. An example of discount pricing is to offer
tax holidays and rent-free facilities to a relocating
From my experiences, both practices diminish
the country's perceived value and hence, its price.
In the long run, the damage to its image far outweighs
any dubious economic benefits engendered by these
Still, some countries are geographically disadvantaged.
Recent studies have shown that being landlocked
or having a tropical climate carry a hefty price
tag in terms of reduced economic growth. These
unfavorable circumstances can be described as
"natural discounts" to a country's price.
What can be done to overcome such negative factor
This is the topic of our next article.
Sam Vaknin is the author of Malignant Self
Love - Narcissism Revisited and After the Rain
- How the West Lost the East. He served as a columnist
for Central Europe Review, PopMatters, Bellaonline,
and eBookWeb, a United Press International (UPI)
Senior Business Correspondent, and the editor
of mental health and Central East Europe categories
in The Open Directory and Suite101. Until recently,
he served as the Economic Advisor to the Government
of Macedonia. Visit Sam's Web site at http://samvak.tripod.com