Monday, May 12, 2008

Comparing Apples with Oranges

Companies often compare apples with oranges while dealing with competitive issues. Big mistake. Your customers are smarter than you may realize. Do not insult them. Compare apples with apples.

Background: A friend recently told me where to get DSL service for $19/mn which is EXACTLY comparable to the service I am getting from the phone company for over $50/mn. Speed is same, service is same, everything. I've been with the phone company for years and have been relatively happy with it so I entered their chat program to talk to a rep about possibly getting a price match.

Once we got over the identity verifications (which takes longer than a conversation now) she said she could offer a bit faster connection for $40/mn, I have to sign a 1 year contract and pay a $100 fee. OK, so when you break this down, I would be paying the same for a tiny bit more speed (which the modem they gave me 5 years ago will not handle anyway).

So they are trying to compare a $50 orange with the $19 apple instead of a $50 apple with $19 apple.

Why would anyone buy an apple for $50 when they could get that same apple for $19 next door? Is it because they think their apples are better, their store better or because the apple is in a better display? Is it because they have spent 100 years selling apples and know more about apple pricing than you?

Companies have gone out of business making these same assumptions. In fact, the phone company I am referring to had years ago lost over a million customers by merely placing a cap on downloaded bytes. The mailboxes around town were so full of modems being returned to the phone company that I am sure the post-office freaked.

OK, not only are they going to lose me as a long-time loyal paying customer but I will now recommend this same $19 apple to about 100 clients (landlords and tenants). Why? Because the phone company tried to hide the fact they can't sell me their apples for $19 or anything even close to that -- they can only sell me a $50 orange.

Imagine the competition salivating at the phone company's responses to their current customers. If I was them, I would start a campaign and hand out a free apple with each new account, just to stick it to them. Poor large corporation. I think they have created more competing entrepreneurs than any industry.