Friday, January 28, 2005

Competing on Price

RE: [spiers] Competing on Price

I would have to look through some very old notes, but I once took a sales
course where the instructor handed out a list of 11 things to give away
before giving a discount (i.e., 13-month warranty vs. 12, 2 operator manuals
vs. 1, additional students in the training class for free, anything with
high perceived value but low cost). I have never given a price discount
since then.


-----Original Message-----
From: wileyccc@aol.com [mailto:wileyccc@aol.com]
Sent: Friday, January 28, 2005 11:51 AM
To: spiers@yahoogroups.com
Subject: [spiers] Competing on Price


Folks,

Last summer I went with family to the Shakespeare Festival in Ashland,
Oregon and so I am now on many more mailiing lists. Today I received an
offer for a "free" seat cushion if I book a room now for this summer. It is
a good example of a bad idea.

Since most of the plays are outside, and the benches weather-resistant hard,
a seat cushion is nice to have. But if I want one, I'll buy one. When I
book a room, I want a room, not a room-and-a-seat-cushion.

Of course, the seat cushion is not free, it is in the price of the room.
Also, booking the room now encumbers the credit card, which for some can be
a problem. Hotels now have cancellation policies, and are a revenue
generator for the hotels on the forgetful. (I read somewhere that 20% of
gift certificates are not redeemed, meaning the gift certificates gain 25%
for the vendor for nothing at all. A neighbor of mine who developed the
Starbucks coffee card confirmed the numbers.)

If in fact the pillow is free, that is to say the hotel is willing to take
say some $10 less on the gross revenue of each reservation to cover the cost
of the pillow, then the hotel is competing on price? Of course. How come?
Because at the higher price, people prefer other hotels? Why? The answer,
whatever it is, cannot be good. Either way, the hotel has guaranteed that I
will not register with them.

Further, what has the hotel inflicted on itself? Who does take the hotel up
on its offer? Different clientele. People who want free things, people who
think one free pillow is good, and some towels too is even better?

Ogilvy says "key every ad" by putting a coupon for something 'free' in the
ad. In this case what is free is say a brochure that tells why you are
special, or something normally given away anyway. Like the auto dealer who
will give you a free test drive.

Problem with that advice for we start-ups is we cannot afford to advertise,
or more to the point, advertise what? We pick the product area we work in,
then our custoemrs are constantly redesigning our products... we have no
idea what we will be selling specifically next year, so we can hardly
"promote it." Happily, as mentioned in the book, we do "ad allowances"
where we gain great benefit by piggy-backing our items in ads retailers are
running anyway.

Competing on price is something we tend toward naturally, and the results
are disastrous. If sales are not what we think they should be, redesign.
Far better for the hotel to have sent me a feedback form and if I fill it
out and return it the promise of my room choice at reservation time
(something hotels can do for free but usually won't.) I'd tell them I want
my coffee creole in the morning, my wife wants soy milk in hers, and if they
comply, they'd own me as a customer.

Compete on design.

John


The good of free trade article

Folks,

An an article with an point I would second...

OP-ED CONTRIBUTOR

The Market Shall Set You Free
By ROBERT WRIGHT

Published: January 28, 2005


Princeton, N.J.

LAST week President Bush again laid out a faith-based view of the world and
again took heat for it. Human history, the president said in his inaugural
address, "has a visible direction, set by liberty and the author of liberty."
Accordingly, America will pursue "the ultimate goal of ending tyranny in our
world" - and Mr. Bush has "complete confidence" of success. Critics on the left
and right warned against grounding foreign policy in such naïve optimism (a
world without tyrants?) and such unbounded faith.

But the problem with the speech is actually the opposite. Mr. Bush has too
little hope, and too little faith. He underestimates the impetus behind freedom
and so doesn't see how powerfully it imparts a "visible direction" to history.
This lack of faith helps explain some of his biggest foreign policy failures and
suggests that there are more to come.

Oddly, the underlying problem is that this Republican president doesn't
appreciate free markets. Mr. Bush doesn't see how capitalism helps drive history
toward freedom via an algorithm that for all we know is divinely designed and is
in any event awesomely elegant. Namely: Capitalism's pre-eminence as a wealth
generator means that every tyrant has to either embrace free markets or fall
slowly into economic oblivion; but for markets to work, citizens need access to
information technology and the freedom to use it - and that means having
political power.

This link between economic and political liberty has been extolled by
conservative thinkers for centuries, but the microelectronic age has
strengthened it. Even China's deftly capitalist-yet-authoritarian government -
which embraces technology while blocking Web sites and censoring chat groups -
is doomed to fail in the long run. China is increasingly porous to news and
ideas, and its high-tech political ferment goes beyond online debates. Last year
a government official treated a blue-collar worker high-handedly in a sidewalk
encounter and set off a riot - after news of the incident spread by cell phones
and text messaging.

You won't hear much about such progress from neoconservatives, who prefer to
stress how desperately the global fight for freedom needs American power behind
it (and who last week raved about an inaugural speech that vowed to furnish this
power). And, to be sure, neoconservatives can rightly point to lots of
oppression and brutality in China and elsewhere - as can liberal human-rights
activists. But anyone who talks as if Chinese freedom hasn't grown since China
went capitalist is evincing a hazy historical memory and, however obliquely, is
abetting war. Right-wing hawks thrive on depicting tyranny as a force of nature,
when in fact nature is working toward its demise.

The president said last week that military force isn't the principal lever he
would use to punish tyrants. But that mainly leaves economic levers, like
sanctions and exclusion from the World Trade Organization. Given that
involvement in the larger capitalist world is time-release poison for tyranny,
impeding this involvement is an odd way to aid history's march toward freedom.
Four decades of economic isolation have transformed Fidel Castro from a young,
fiery dictator into an old, fiery dictator.

Economic exclusion is especially perverse in cases where inclusion could work as
a carrot. Suppose, for example, that a malignant authoritarian regime was
developing nuclear weapons and you might stop it by offering membership in the
W.T.O. It's a twofer - you draw tyrants into a web of commerce that will
ultimately spell their doom, and they pay for the privilege by disarming. What
president could resist that?

Correct! President Bush is sitting on the sidelines scowling as the European
Union tries to strike that very bargain with Iran.

It's possible that skepticism about the European initiative is justified - that
Iran, in the end, would rather have the bomb than a seat in the W.T.O. But
there's one way for the Bush administration to find out: Outline a highly
intrusive arms inspection regime and say that the United States will support
W.T.O. membership if the inspectors find no weapons program (or if Iran fesses
up) and are allowed to set up long-term monitoring.


There are various explanations for Mr. Bush's position. Maybe some in the
administration fear losing a rationale for invading Iran. Maybe the
administration is ideologically opposed to arms control agreements (a strange
position, post-9/11). But part of the problem seems to be that Mr. Bush doesn't
grasp the liberating power of capitalism, the lethal effect of luring
authoritarian regimes into the modern world of free markets and free minds.

That would help explain the amazing four-year paralysis of America's North Korea
policy. Reluctant to invade, yet allergic to "rewarding" tyrants with economic
incentives and international engagement, the president sat by while North
Korea's leader, Kim Jong Il, apparently built up a nuclear arsenal. Now, with
Iran no more than a few years from having the bomb, we're watching this movie
again. And it may be a double feature: the inertia we saw in North Korea
followed by the war we've seen in Iraq. With Iraq and Iran in flames (live, on
Al Jazeera!) and Mr. Kim coolly stockpiling nukes, President Bush will have hit
the axis-of-evil trifecta.

Pundits have mined Mr. Bush's inaugural address for literary antecedents -
Kennedy here, Lincoln there, a trace of Truman. But some of it was pure Bill
Clinton. Like Mr. Bush, Mr. Clinton said that history was on freedom's side and
stressed that freedom abroad serves America's interests. But he also saw - and
explicitly articulated - something absent from Mr. Bush's inaugural vision: the
tight link between economic and political liberty in the information age, the
essentially redeeming effect of globalization. That's one reason Mr. Clinton
defied intraparty opposition to keep commerce with China and other nations
strong.

In the wake of John Kerry's defeat, Democrats have been searching for a new
foreign policy vision. But Mr. Clinton laid down as solid a template for
post-9/11 policy as you could expect from a pre-9/11 president.

First, fight the spread of weapons of mass destruction, which means, among other
things, making arms inspections innovatively intrusive, as in the landmark
Chemical Weapons Convention that President Clinton signed (and that Dick Cheney,
Donald Rumsfeld, et. al., opposed). Second, pursue terrorist networks overtly
and covertly (something Mr. Clinton did more aggressively than the pre-9/11 Bush
administration). Third, make America liked and respected abroad (as opposed to,
say, loathed and reviled). Fourth, seek lasting peace in the Middle East
(something Mr. Bush keeps putting off until after the next war).

And finally, help the world mature into a comprehensive community of nations -
bound by economic interdependence and a commitment to liberty, and cooperating
in the global struggle against terrorism and in law enforcement generally.

But in pursuing that last goal, respect and harness the forces in your favor.
Give history some guidance, but resist the flattering delusion that you're its
pilot. Don't take military and economic weapons off the table, but appreciate
how sparingly you can use them when the architect of history is on your side.
Have a little faith.

Robert Wright, a fellow at Princeton University's Center for Human Values and at
the New America Foundation, is the author of "Nonzero: The Logic of Human
Destiny."


Competing on Price

Folks,

Last summer I went with family to the Shakespeare Festival in Ashland, Oregon
and so I am now on many more mailiing lists. Today I received an offer for a
"free" seat cushion if I book a room now for this summer. It is a good example
of a bad idea.

Since most of the plays are outside, and the benches weather-resistant hard, a
seat cushion is nice to have. But if I want one, I'll buy one. When I book a
room, I want a room, not a room-and-a-seat-cushion.

Of course, the seat cushion is not free, it is in the price of the room. Also,
booking the room now encumbers the credit card, which for some can be a problem.
Hotels now have cancellation policies, and are a revenue generator for the
hotels on the forgetful. (I read somewhere that 20% of gift certificates are
not redeemed, meaning the gift certificates gain 25% for the vendor for nothing
at all. A neighbor of mine who developed the Starbucks coffee card confirmed the
numbers.)

If in fact the pillow is free, that is to say the hotel is willing to take say
some $10 less on the gross revenue of each reservation to cover the cost of the
pillow, then the hotel is competing on price? Of course. How come? Because at
the higher price, people prefer other hotels? Why? The answer, whatever it is,
cannot be good. Either way, the hotel has guaranteed that I will not register
with them.

Further, what has the hotel inflicted on itself? Who does take the hotel up on
its offer? Different clientele. People who want free things, people who think
one free pillow is good, and some towels too is even better?

Ogilvy says "key every ad" by putting a coupon for something 'free' in the ad.
In this case what is free is say a brochure that tells why you are special, or
something normally given away anyway. Like the auto dealer who will give you a
free test drive.

Problem with that advice for we start-ups is we cannot afford to advertise, or
more to the point, advertise what? We pick the product area we work in, then
our custoemrs are constantly redesigning our products... we have no idea what
we will be selling specifically next year, so we can hardly "promote it."
Happily, as mentioned in the book, we do "ad allowances" where we gain great
benefit by piggy-backing our items in ads retailers are running anyway.

Competing on price is something we tend toward naturally, and the results are
disastrous. If sales are not what we think they should be, redesign. Far
better for the hotel to have sent me a feedback form and if I fill it out and
return it the promise of my room choice at reservation time (something hotels
can do for free but usually won't.) I'd tell them I want my coffee creole in
the morning, my wife wants soy milk in hers, and if they comply, they'd own me
as a customer.

Compete on design.

John


Sunday, January 23, 2005

More on part 2

I'll share something with you that has supercharged all my endeavors
throughout my life in the many different industries I have beckoned in. I
call it the 4x4 Learning System: take 4 books on any subject you want to
learn or path-of-travel/interest (herein: PATH) I usually pick 2 new & 2 old
books (sometimes the older the better, but not always - HINT: overstocked
used book stores); read the first four chapters of each book. JUST THE
FIRST FOUR CHAPTERS! After you read the first 4 chapters you will have 80%
of the BASE-Knowledge of anyone on, in or about that PATH, you will be able
to speak to them with minimal efforts. Of course if you're on some kind of
R&D journey which you should always be on, then you only need to speak one
sentence to their paragraph; this way you'll get more information that is
un-written, I'm sure you'll agree and have experienced how additionally
valuable that can be. Invariably, you might connect with one of the authors
of the 4 books you attained, and read the whole book or more/most of the
book.

Voila`: you have just been retrained.

PS. Forget retrain... EVOLVE: it's natural for the human species

JOHN: I know you're quite the author and have quite the following. If you
find my pedantically eruditeness I would appreciate the accrediting; I'm
looking for my 15 minutes.

How's this title: Re-Todded 4x4 Learning System

Warmly and Sincerely Yours,
Todd