Mystery Makes Margin
From The Desk Of
Drumlin S Boulder
Do you like making your life complicated?
Neither do I, but that's what was on the table at our regular Monday
morning marketing meeting when Symon, our marketing whizbang, decided we
should break down our Portable Holes into different parts just so we
could bundle our products together. We could then charge a higher price
for individual components, but offer our customers the illusion that
bundling would save them money.
I protested saying our sales materials would have to change and our
sales language would become more complicated, with various options
having to be explained. Even individual components would have to be
described, meaning our customers would have to be re educated on how our
Portable Holes are sold and fit together. Carrie Balance, our
accountant, also started in about having to change our inventory
routines, and Pronto our shipping manager began foaming at the mouth.
Not a good sign.
But Symon, ignoring Pronto's obvious body language, insisted. "Mystery
makes margin" he said, adding "we can increase profits by preying on our
customer's insecurity and lack of knowledge by using complex language.
Management consultants, lawyers, accountants, insurance agents,
investment advisors and other service slingers do it all the time when
they want to charge high prices for stuff we wouldn't otherwise value
Point made, which got me thinking of the worst offenders. Have you
talked to your phone company lately?
I hate it when they call. It always starts with them enquiring about how
satisfied we are with their service, progresses to them wanting to save
us money, then they try and sell us some complicated communications
bundle that makes no sense whatever....except they invariably want to
bundle stuff we'll never use with something we really want. Its always
hard to know what they're selling and even harder to know whether it's
what you actually need.
Of course phone companies are not the only ones who like to bundle stuff
you need with what you don't need. Personally, I think its the route
companies takes when a product flops. I can see the board meeting now.
"Hey lets bundle our top selling widget with that flopget so that at
least we'll get something for it". The head of communication will then
suggest they invent some jabberget language to make sure customers
won't admit their ignorance, and make it hard for anyone who tries to
make apples-to-apples comparisons of different alternatives to make
sense of it.
No I wasn't comfortable with Symon's approach.
You see I think the even though our basic Portable Holes may look like a
portable hole with a detachable control unit, they are technically
complex once we add various extensions that tailor it to specific
situations, so we favour simple presentations that explain our product
in simple terms and benefits, and we avoid the small print. Our
customers can see where their money goes and clearly see what they are
buying, and they know why they are buying it. Our key selling goals are
to make a buyer's shortlist because of our "all in one hole" solution
and our reputation, then to send in knowledgeable people who can explain
things in simple terms. We gather information from potential clients
through questions, conversation, and idea-sharing. This way we can build
a portable hole to suit their precise needs and budgets.
It's the way we win. By listening, working together, and making exactly
what our customers want, they pay us more because we give them something
that meets their needs better. "People pay for value," I said, "And they
know we aren't perfect, but we do a good job and stand behind our holes.
Playing the parts game means we'll have to compete on price", I added,
and Carrie interjected with "and that'll play havoc with our margins"
Symon made a last ditch effort to convince us. "Nothing is too difficult
to explain" he said, "its only that people can be bad at explaining."
"You know, Stephen Hawking has explained black holes." "Why can't we.."
he started to add, but he was cut off by Slide Rule, our Chief Engineer.
"Yeah, but he recently paid off a bet with a colleague because after
many years of insisting that a black hole destroys everything that falls
into it, he's now saying he was wrong. It seems that black holes may
after all allow information within them to escape"
Nothing escapes Slide Rule. He knows everything about holes; portable,
black, deep, gopher... he even read that kid's book. So as our chief
designer, his opinion was vital.
So we listened intently as he went on. "When we buy any tool, we want to
concentrate on what we can do with it, not how complex its parts are. We
want delivery of solutions, not a complicated analysis of options that
get in the way of understanding how the solution is delivered. It's
wrong to think complexity of a process or system is in itself value. In
fact, the opposite is true. To describe or design something in simple
terms is an act of genius."
"Think about it", he added. "Do you want a hockey stick because you can
really whip the puck with it, or because it is made of carbon fibres
that bend to specific tolerances?" "Exactly", countered Symon... "hockey
sticks used to be just wood and tape, then they got curves, and now you
can buy just shafts from various materials, in various tolerances, and
blades can be bought separately." "Sporting goods manufacturers have
done exactly what I want to do, and they're skating away with the
The discussion went back and forth a bit longer but in the end, we
decided Slide Rule was right and simple was best for a complex product.
So we voted almost unanimously to one to forget bundling.
Privately, I considered giving Slide Rule a raise for cutting through
all the clutter, and making us see the problem clearly. But I'm not sure
I can afford to give it to him. After we collectively dismissed Symon's
idea and closed the meeting, Pronto came up to me to ask if we would
sponsor his son's novice triple A hockey team for $10,000, almost double
our level of last year. The increased cost was justified, he said,
because of escalating equipment costs.