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How To Compete on Price Without Competing on Price


Posted on 17 May 2011

spivs.jpgTwenty five or so years ago, in the Hacksaw years, there was a move afoot (there had also been a Michael Foot, but that is another story) to relax the then decidedly restrictive and yet unworkable Sunday Trading Laws. Hacksaw and her buddies attempted to introduce a Shops Bill in 1986 to relax the rules, but the move was seen off by an unlikely coalition between the God Squad, acting in best Ian Paisley style, and by the Unions, marking the only time – a precedent we might want to note - that a Hacksaw Bill was ever defeated. Thus the restrictions, including the quaint absurdity of allowing the sale of a pornographic magazine but not a Bible or a birthday card on a Sunday, continued for another eight years, until the liberalising 1994 Sunday Trading Act came into force.

The early Hacksaw years were nonetheless a time of unbridled market adoration – yuppies had just been born, and the Stock Exchange Big Bang was around the corner – and so the spivs and suits, who had no intention of letting tiresome laws fetter their marketing zeal, set about devising ways of getting round the restrictions. Dr No’s favourite, for its audacity, was the carrot wheeze: carrots, but not beds, could be sold, so the spivs sold carrots, at a hundred quid a pop, and threw in a bed for free.

Naked ingenuity in the face of market restrictions is the natural response of spivs and suits, and so it was that the other day Dr No found himself wondering how the S & S brigade might apply that ingenuity once Mr Cameron and his buddies have Big Banged the NHS, and opened it up to any willing spiv, and yet left it with a ball-breaking restriction: price, a vital lever in the market machine, preset and fixed to a national tariff.

Now, Dr No is to marketing as lead is to balloons, but even he, in the calm of the bath, quickly came up with a few Apprentice-style no doubt idiotic but on the face of it good for a laugh wheezes. He suspects, but has no idea whether this is true, that these wheezes come under the general heading of ‘adding value’. But then, there are many ways to ‘add value’. The more respectable hospitals will no doubt buy in a better class of linen for their beds, and put fresh flowers on the mantelpiece, but what might the spivs do, to ‘add value’ alongside their nylon sheets and pink plastic flowers? How about…

1. BOGOF (buy one get one free) and related offers. These, in fact, are the natural descendents and variants of the carrot wheeze. One could offer two hips for the price of one, or more realistically eleven for the price of ten. Or how about an anaesthetic with a free operation thrown in? The trick here is the free item, whatever it is, isn’t actually itself being sold – so the price fixing doesn’t apply.

2. Loyalty schemes, club cards and bonus point wheezes. Buyers – commissioners – are free to sign up to these schemes, and get issued with swipe cards that collect points every time they make a purchase, always at the all proper and correct full fixed purchase price – so no rules have been broken. But down the line, those nominal points become real cash rewards, and can be used in part-payment, again at the proper and correct full fixed price, to purchase services; and thus the buyer ends up paying less.

3. Place operations procedures investigations etc on eBay as BIN (Buy It Now) items. BIN items, unlike eBay auctions, are fixed price offers, and so the price can be set at the all proper and correct tariff price – and so no rules are broken. Then either wait for the buyer to receive free eBay coupons, which can be used as cash in part-payment, or, better still, set up an offshore company to email coupons to prospective buyers. The item still sells for the full price - so no rules have been broken; but the buyer pays less, the full price less the coupon value.

If Dr No can come up with three such ideas after a simple sojourn in the bath, then Heaven only knows what the army of willing spivs and suits waiting in the wings will dream up once the Tories complete their reforms. The spivs and the suits, a thousand fold cleverer than Dr No at such games, will devise any number of wheezes that cunningly comply with the letter of the law, and yet allow them to compete on price, a competition that has but one chilling conclusion: the race to the bottom.

2 comments:

This is more depressing than a trip to my GP.

Hi,

Nice Birthday Blog.
Amazing Information you shared with us.
Thank You.


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