Tuesday, July 24, 2007

Be Like Tom

I’m sure you all know the story of Tam Sawyer and how he convinced others to paint the fence for him. However, I’ll bet it’s been awhile since you heard in Mark Twain’s words. We’ll pick up the story where Tom just about has Ben convinced to beg for the opportunity to paint the fence, when Ben pleads:

”Oh, come now - lemme try. Only just a little - I’d let you, if you was me, Tom.”

“Ben, I’d like to, honest injun; but Aunt Polly - well, Jim wanted to do it, but she wouldn’t let him; Sid wanted to do it, and she wouldn’t let Sid. Now, don’t you see how I’m fixed? If you was to tackle this fence and anything was to happen to it --”

“Oh, shucks, I’ll be just as careful. Now lemme try. Say - I’ll give you the core of my apple.”

“Well, here - No, Ben, no you don’t. I’m afeared --”

“I’ll give you all of it!”

Tom gave up the brush with reluctance in his face, but alacrity in his heart. And while the late steamer Big Missouri worked and sweated in the sun, the retired artist sat on a barrel in the shade close by, dangled his legs munched his apple, and planned the slaughter of more innocents. There was no lack of material; boys happened along every little while; they came to jeer, but remained to whitewash. By the time Ben was fagged out, Tom had traded the next chance to Billy Fisher for a kite in good repair; and when he played out, Johnny Miller bought in for a dead rat and a string to sing it with - and so on, hour after hour.

And when the middle of the afternoon came, from being a poor poverty-stricken boy in the morning, Tom was literally rolling wealth. He had, besides the things before mentioned, twelve marbles, part of a jew’s-harp, a piece of blue bottle-glass to look through, a spoon cannon, a key that wouldn’t unlock anything, a fragment of chalk, a glass stopper of a decanter, a tin soldier, a couple of tadpoles, a kitten with only one eye, a brass door-knob, a dog-collar-but no dog - the handle of a knife, four pieces of orange-peel, and a dilapidated window-sash.

He had had a nice, good, idle time all the while - plenty of company - and the fence had three coats of whitewash on it! If he hadn’t run out of whitewash, he would have bankrupted every boy in the village.

Just like painting fences, not everything in the business world is particularly pleasant. Take selling, for example. Anyone who has spent much time doing cold-calling for sales will tell you that at times it can be a tough way to make a living.

Wouldn’t it be great if you could devise a system like Tom Sawyer, where people would actually pay you for the opportunity to endure a something undesirable, like sitting through a sales pitch? Believe it or not, it is possible.

Today we are going to talk about the idea of altering the location of value in a transaction. Normally, we think of the value we offer as being tied directly to the product or service we are offering. For example, if we are selling automobiles, then we see the primary value as being in the value of the automobile—its performance relative to the price. Or if we are selling a credit card service, we might see the value in how well the card works and how low the interest rate is (or how many airline miles you get with it).

In other words, the customer does not receive the value until after the transaction—once they take ownership of the goods or service. However, what if we turned this on its head and said we want to create value elsewhere—like prior to ownership—and actually get people to gladly pay for the privilege of hearing a sales pitch (even if they end up buying no goods or services).

This is not that far fetched. Allow me to give a few examples.

Every community seems to have its share of “shows,” be it the Auto Show, the Boat Show, the Lawn & Garden Show, or whatever. Some place like a convention center is rented out to a number of vendors in that particular theme, and they ask people to come in and hear sales pitches. And people flock to the convention center by the thousands and pay good money to be given sales pitches. For example, opening day admission to the Miami Boat Show was $28. The Los Angeles Auto Show cost $10.

Not only do people pay for the privilege of hearing sales pitches, they often drive hundreds of miles for the opportunity. In addition, not only does the show get people to pay for the right to hear sales pitches, they usually get local TV stations to give them a ton of free publicity. It’s starting to sound a lot like Tom Sawyer.

And then there is the State Fair, where you pay money so that you can see exhibits where there are sales pitches and where you get the opportunity to pay outrageously high sums of money for greasy food, something you would not otherwise do if not at the fair. If there was ever something which smelled of Tom Sawyer, it would be the State Fair.

Or how about American Express credit cards? While others credit card companies are falling all over themselves to give you credit card deals, like free interest on transfers, airline miles, and cashback rewards, American Express goes the opposite route. They expect you to pay money for the privilege of getting a card. An American Express Platinum Card has a $450 annual fee, whether you use the card or not. And you are stuck paying off the bill in its entirety every month. Getting people to pay for the right to spend even more money when others let you do it for free (and even give you more time to pay it off) sounds like an idea Tom Sawyer would hatch up.

Finally, what about those warehouse clubs, like Costco or Sam’s Club? Depending on the type of membership you get, it can cost $50 to $100 a year to get one at Costco. Think about it—paying money so that the store will allow you to come in and spend money. Millions do. It’s sort of like having to pay money to get a discount coupon (or perhaps pay to whitewash a fence?).

What do all these examples have in common? They have shifted forward the value point in the equation. You don’t have to buy the auto to get the value of the auto. You get the value from the Auto show. The value at a State Fair comes from being a part of a spectacle, rather than the value coming from the food or what the exhibits are pushing. You don’t have to use a credit card to get the value of the card. You get the value from being a member. You don’t get the value from the goods you buy in the store, but the value is in being able to shop a particular store.

Once you realize that you can shift the value to a different location, lots of different opportunities open up—opportunities to get people to pay for things often thought of as being free.

To do so, you have to change people’s perception about what they are experiencing. At a Boat Show, the expectation is no longer to hear a lot of sales pitches (something one usually tries to avoid)—it is to enjoy visiting a world of dream boats and pretty girls—a place to fantasize. Now that has value!

What are some ways to change people’s perception and add value upstream?

1) Provide people with excitement or entertainment. Surround a sales pitch with enough excitement and entertainment and you have a Boat Show or a State Fair.

2) Stroke the ego by making membership at least as important as what the membership offers. That’s what American Express does. As they like to say, “Membership has its privileges.” The more exclusive the club, the more people want to clamor to get in.

3) Provide friendship or a place to hang out with your friends. The value comes through relationships and being with people you enjoy socializing with. The men of Mayberry didn’t hang out at Floyd’s barber shop just for the hair cutting. The value was more in being at the venue than in the service provided there. Even if a better hair cutting value came about, it would take a lot to give up the other value found in the friendship and camaraderie. To abandon Floyd’s would be like abandoning your friends.

We’ve just scratched the surface. Think about ways to apply this to your business.

Value needn’t only be found in the product of service people buy from you. Value can also be added to the way you sell it, the improved image you imbue to people who purchase from you, the entertainment you offer, or the associations you provide. By surrounding your product or service with all of this, you may even get people to pay you money even if they don’t end up buying your good or service. Wouldn’t that make Tom Sawyer envious?

If you are in the business of selling “stuff”, you run the risk of commoditization. Even if you win, you lose because the profitability is sucked out of commodities. However, if you are selling experiences, friendships and ego boosts (and oh, by the way, there might be a product or service purchased in there somewhere), then you can avoid the commodity trap.

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