Tuesday, September 30, 2008

Value For Money

Given the... ehem... "interesting developments" in the stock market yesterday - I was thinking about one of my favorite movies "Trading Places" starring Eddie Murphy, Dan Aykroyd and (a very young) Jamie Lee Curtis. If you've never seen this 1983 classic - it's well worth the rental.

I'm not going to totally bore you with the details - but the basic plot is that Dan Aykroyd (a successful commodities broker) is set up by the two elderly owners of the brokerage house to see what happens if he loses all his money. At the same time - they take "common scum" (Eddie Murphy) and teach him to become a successful broker - all for a $1 bet.

At the end - Dan Aykroyd and Eddie Murphy meet each other and figure out that their lives were turned upside down for a bet and they set out a plan for revenge (full plot details here).

When they're trying to figure out how to best "solve" the situation they come upon a universal truth:

Murphy: [watches Louis clean his shotgun] You know, you can't just go around and shoot people in the kneecaps with a double-barreled shotgun 'cause you pissed at 'em.

Aykroyd: Why not?

Murphy: 'Cause it's called assault with a deadly weapon, you get 20 years for that sh*t.

Aykroyd: Listen, do you have any better ideas?

Murphy: Yeah. You know, it occurs to me that the best way you hurt rich people is by turning them into poor people.

So they decide that the best way to get back at them is to wipe them out... by means of insider trading. Oops. Well, the whole insider trading scandals of the late 80's hadn't become public knowledge yet - so it was actually before it's time.

They basically "went short" on FOCJ (Frozen Concentrated Orange Juice) contracts. They started selling future contracts at market opening price ($40) and that lead to a frantic "buy" reaction by the other traders - which drove the price up to $145.

Then the commissioner came on TV to announce that the orange crop estimates would not be affected by the recent storms.

That lead to panic selling. So, the guys started buying shares (to cover the shares they had already sold) as people were unloading them and ever lower ad lower prices - eventually winding up at $26. So, they basically made the spread between what they sold it at ($40-145) and what they paid for it ($130-$26). And, they got rich.

The thing that struck me - was that the markets behave in a "herd" mentality. They just follow the next guy who follows the next guy, and so on. Consumers do the same thing - they hear "doom and gloom" and they respond. And then it just spirals from there.

It can really affect your business ("Gee - really, Bob - thanks for THAT great insight!"). What I mean is that when times are perceived as "tough" - business people start to panic as well. They start cutting prices and giving away services that they never would in a frenzied race to "get the sale" - no matter what.

This just leads them to be more overworked, and now UNDER PAID as well. This benefits no one. Pricing is another thing that goes to hell in a recession. Everyone has a "sale" or "special" or "one-time-only deals."

Instead, business folks should try harder than ever to reach out to both existing customers and new customers and make sure that their product or service is really filling the needs of their customers. I mean, who does that?

No one has called me up and said - "Hey, I know you may be feeling the pinch - how about if we re-structure your payments into a monthly rather than a quarterly basis to help you plan your cash flow better." OR "Are you guys doing OK now that credit is tighter? Is there any way we can help?"

Think about pricing your products and services like a restaurant. Bundle services and software into a "pick 2" menu of stuff they can buy - and then customize to what they want - much like a before dinner drink and a "complimentary" dessert.

It's easy to make sales in an 'up' economy, and if your organization is one that can reach out to customers when times are hard - and keep up and even enhance your value proposition to them (save them time, save them money, help them to get tangible results) - you'll have a customer for life.

1 comment:

Edward said...

"will it be the lobster or cracked crab?"

Desktop or Web?

"why can't we have both?"



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