Many for-profit manufacturers and service providers
concentrate only on influencing their own prices and costs.
In the process they ignore or are insensitive to what
customers and end users pay to use these offerings. While
this narrow viewpoint may be profitable, much more profit
is missed because demand is dampened due to soaring costs
incurred by customer and end users.
For example, my banker called to suggest that I open a new
personal checking account. These accounts are free. I
didn't really need this checking account, but my interest
was piqued when he told us I would receive a free
BlackBerry portable digital assistant (PDA). I didn't need
a BlackBerry PDA, but figured that I could sell it on eBay
and make a profit to put into my new checking account.
After signing up for a checking account, I learned that I
would only receive a BlackBerry PDA if I subscribed to a
service costing $720 for a year. Suddenly, I had a checking
account and a "free" certificate for a PDA I didn't want to
spend $720 to use. The bank had wasted its time and money
on me, and I had a checking account I didn't need.
Presumably enough other people signed up who used the
accounts to make the promotion successful. The bank may
have thought that it had won.
But here's what it had missed. If the bank had instead
offered a $200 off value on the PDA and six months of free
service, I probably would have tried the BlackBerry PDA. If
I had liked the product and service, I would probably have
continued to use the PDA and thought favorably of the bank
when I did. Or if the bank had offered me $100 off the
PDA's price and no required service, I could have pursued
my original plan and sold this product on eBay for a
profit. That would have made me appreciate my bank more,
as well.
When you can instead reduce the cost of using offerings,
for-profit organizations and their customers both gain. A
big waste of my time is in going to a bank to make
transactions. Although my bank has an excellent online
service, I'm limited in how many times a month I can
transfer balances online from one of my accounts into
another one. As a result, I don't tend to keep much money
in that restricted account.
If the bank instead gave me postage-free envelopes to make
such account transfers, I would keep a lot more money in
the account because I wouldn't have to make lots of extra
trips to the bank for the transfers. The bank could
slightly reduce the interest rate it pays on such accounts,
and I would still be attracted to the convenience because I
would be saving lots of valuable time I could be using for
other purposes than going to and from the bank.
Where can you slash your customer's costs?
Copyright 2007 Donald W. Mitchell, All Rights Reserved
----------------------------------------------------
Donald Mitchell is chairman of Mitchell and Company, a
strategy and financial consulting firm in Weston, MA. He is
coauthor of six books including The 2,000 Percent Squared
Solution, The 2,000 Percent Solution, and The Ultimate
Competitive Advantage. You can find free tips for
accomplishing 20 times more by registering at:
====> http://www.2000percentsolution.com .
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