Interesting question and much better put than on some recent threads. I can see your point. Logically any increase in demand for a product or service will result in an increase in demand, or price equilibrium will force the price up. Unless there is an increase in supply of that good or service. Very hard to say how price sensitive the WG service is but I would put punting prices in the inelastic section along the lines of tobacco, alcohol and fuel. Hence price can go up without affecting demand as much as some products where alternative services are available in a free market.
I would say for WG the entry barriers are very low, it’s not hard to set yourself up as a WG, set up costs are very low, no qualifications are needed and no legal requirements.
So we come to problem one, punting does not exist in a free market, no protection for consumers under the sale of goods act, no set standard of service, no mis-selling rules, no legal recourse at all for a poor service. Also we have the problem of a near monopoly in advertising which creates abuse and a corrupted system (AW need I say more).
As these problems have no chance of being fixed in the near future then we have other punters and blind luck to rely on.
Assuming that an increase of positive reviews directly increases demand for a WG and hence an increase in price due to the above factors, and at this point I would like to say other factors should be taken into account.
If I see negative review from a respected UKP member then I would not see the WG. If I see a positive review that’s only step one, I would still take many other factors into account for example location, price, services on offer, size, race, hair colour and many, many, many other things. So a positive review helps a punter to help another punter to know a WG is not a negative but doesn’t guarantee a substantial increase in demand. We all have different requirements its about matching those requirement to a WG and hopefully to a WG who provides a good service.
For the moment let us assume that all factors are equal and see if I can run the math. I will keep it simple, and can of course be up scaled and I will have to make many assumptions due to the lack of data available.
Let’s have a bit of fun and look at the fictional country of Puntdonia. There are three WGs in this country.
Good (Gives good service, top WG) 100% value for money
Ok (Hmm ok average service) 50% VFM
Bad (Awful/liar/Crap service) 0% VFM
Lets assume they are triplets (and yes I’m waiting for the jokes) and look exactly the same, offer the same type of likes, same price each £100
Punter One (John) spends £100 once a month £1200pa.
Puntdonia has no UKP and no reliable reviews poor John just has AW, SAAFE and prossynet to help him choose.
So John has been lucky in his first year and with his blind bookings seen Good 6 times, Ok 3 times and Bad 3 times.
Thus £100 x 6 = £600 (100%VFM) £50 x 3 = £300 (50%VFM) £0 x 3 = £0 (0%VFM)
So out of the £1200 John spent £750 was VFM or 62.5% VFM
SO YEAR ONE 62.5% VFM
Puntdonia now has UKP and well done gentlemen you are putting on good and bad reviews. So this year John has more reliable information and makes a more informed choice. However the downside is because of the reviews Good is more busy and put her prices up, Ok is no more busy price the same price and bad as she is quieter put her price down.
Good £100 to £125
Ok £100 to £100
Bad £100 to £75
This year John thanks to UKP reviews still punts once a month but makes better choices. So this year he sees Good 8 times Ok still 3 and bad only once.
Thus £125 x 8 = £1000 (100%VFM) £50 x 3 = £150 (50%VFM) £0 x 1 = £0 (0%VFM).
Now he has increased his overall spent per annum to £1375 but at this point we are still talking about VFM.
So out of the £1375 John spent £1150 was VFM or 83.6% VFM
SO YEAR TWO 83.6% VFM
Puntdonia now has UKP well established and hundreds of reviews come in a day, When John books he can now almost guarantee a good level of service. Again due to getting even busier Good is now £150 but Ok has now gone down in price to £75 and Bad is £50 (she is thinking about giving up and now can only guarantee punters who only read Prossynet)
Good £125 to £150
Ok £100 to £75
Bad £100 to £50
This year John thanks to UKP reviews still punts once a month but makes even better choices. So this year he sees Good 10 times Ok still 2 and bad not all all.
Thus £150 x 10 = £1500 (100%VFM) £37.5 x 2 = £75 (50%VFM) £0 x 0 = £0 (0%VFM).
Now he has increased his overall spent per annum to £1650 but again at this point we are still talking about VFM.
So out of the £1650 John spent £1575 was VFM or 95.4% VFM
SO YEAR THREE 95.4% VFM
As you can see John is punting the same amount of time but has increased his VFM from 62.5% to 95.4% over three years. Due to reviews helping him make better choices and yes Good has increased her prices from £100 to £150 due to her having so many more bookings thanks to good UKP reviews.
Now this is only a bit of fun but I hoped to somewhat illustrate the point I wanted to make that the more honest reviews we have on UKP the better VFM all punters get even if it does result in higher prices for the good WG’s.
I’m sure there are many flaws in my example which I look forward to discussing with you all. I will try to address a few problems I can see now.
As bad WG stops working due to a lack of work and Ok goes part time for the same reason VFM will cap at at 100%. Overall however following my model Good price will keep going up and John’s will have to spend more money each year to have the same amount of bookings.
Yes however in Puntdonia we now have a standard level of service and a fair and equal market place, so price equilibrium now works and prices will stabilise and not increase forever there will be a upper level at which new service providers will enter the market and stabilise prices but now the overall market will have a much higher base level of service.
Does this work if I have a regular and I don’t have a free choice as much as some? True if your regular is more and more busy her prices may go up and you do not benefit as much others may. However you still have a choice to see other WG’s and I have heard example of good regulars, keeping her regular punters on a fixed price anyway.
I suppose the point I make is reviews benefit us all in the long term and can change the overall standard of service. One thing I have learnt myself recently is how reviews can be subjective. Perhaps a topic for a future thread would be should we have some sort of standardised review system, simple but effective as at the moment we all write reviews very differently. Which in turn can cause confusion