Profit by confusion and an economy based on intangible goods

December 16, 2010 — 1 Comment

When you start driving any sort of volume with a company they are generally agreeable to discounting your price a bit. As an example last month I asked for a price review from our credit card processor whom complied and shaved a few 10ths off our transaction fees since we are driving higher and higher volume each month.

Today I reached out to another service provider of ours to ask for a review of our account to see if we can get better pricing. Sadly this companies sales guy countered with a pitch on how a new “technique” could boost our margins. I replied I was not interested in any “techniques” and just wanted to know if we qualified for better wholesale pricing. Again he dodges the question and says this technique is “guaranteed” to make us more money than a discount in pricing would.

I relented and agreed to at least hear the guy out so he could at least tell his boss he “tried” before relenting and giving me what I asked for. Load the gun, spin the barrel… and kill me please. His “strategy” was essentially forcing our customer to opt-out on a upgrade. He would gladly give me preferred pricing on this upgrade.. and boasted about 40-50% uptake on this opt-out.. in other words 40-50% of the people declined the annoying upsell, but the rest were too gullible to know better = higher margins for me.

WHAT THE FUCK!? Who the hell would run a business like this? Confusing your customers and forcing them to opt-out of your high margin product is a recipe for higher margins for you.. but also a whole bunch of�annoyed customers. Ask GoDaddy how that strategy is working for their brand equity. Sure they are printing money.. but come on. Have you no soul, no integrity, no sense of common decency? PROFIT BY CONFUSION is a long term lose for your brand and your customers in favor of short term financial gain.

I’ll give the service provider and the sales guy a break and not call them out. But I will send this note to their COO as food for thought.

Disclaimer: Yes we have a few addons at page.ly. However they are very minimal, and very secondary. They are also directly inline with our core product. Premium themes go hand in hand with premium WordPress hosting, but we don’t push it in your face buy it.

This brings me to my second point. We are moving into an economy based on intangible goods. Like the term Vapor-ware from the boxed software days many companies cannot point a tangible asset they sell. Banks sell this thing called credit, SSL providers sell an emotion called “trust”, marketing people sell whatever it is their customer is buying.. currently “likes” and “followers”.

When a business cant point to a tangible good like say a dishwasher or a car they seem to be more likely to fall into this profit by confusion model. Cable companies sell you service contracts and free installation: Sorry Cox it’s your job to put a guy in the truck and send him to my house to connect the cable as by law I am not allowed to tamper with your wires outside my house. If the box breaks you gave me.. why should I pay for you to replace it?

It’s a fine line out there. Page.ly sells security and automation of technical tasks dealing with server configuration and software installation. And we do so with a sense of responsibility that it is our civic duty not to bend our customers over and sell them useless stuff because they do not know any better. This is industry is some of the worst offenders as we deal in the black arts of technology that 98% of those over 30 are still scared of. You tell them they need to buy ID protect so that big bad spammers don’t get them they will. You tell them they need to buy credit monitoring services because people are going through their mail, they will.

If you cant point to a physical good that you sell, your customer has to buy based on faith you are not misleading them. STOP MISLEADING them people. Happy customers that can genuinely trust you are worth far more than those you duped. Sooner or later the gullible will figure it out and the backlash wont be pretty.

Thanks Lee, for the conversation today about “trust” from SSL providers. Thanks Ward for the thoughts on Profit by confusion.

Strebel

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I write here on this blog. Kinda cool huh.

One response to Profit by confusion and an economy based on intangible goods

  1. I’d never let you live this down if you went this route. I HATE shit like that.

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