The (Price) Race To Nowhere

Only one place to go

Twenty years ago, in the throes of the Christmas season, I knew what my big gift idea for the year was going to be. I wanted to get the woman who eventually became my wife a high-end leather jacket.

This wasn't the kind of purchase that you'd do over the Internet, especially not in those low bandwidth days. Fortunately, I knew people in New York City who trafficked in high fashion circles, and knew the right places to go. They also knew *how* to shop in such a setting, and prepared me accordingly. So instead of relying on a credit card, on the instructions of my experienced friend, I pulled my cash out of a bank machine, then spent the better part of an afternoon going from shop to shop in Lower Manhattan.

After four or five stops, we finally found what we were looking for, at a price that, to my non-New York eyes, seemed high but fair. It was, after all, a really nice coat. My very sharp friend agreed with the choice, and then approached the shop keeper.

What followed was something out of a play. My friend offered half of the price. The shop keeper looked at her as if she had insulted his ancestors, but she didn't flinch or seem in any way taken aback. He repeated the sticker price, at which point she noted the seasonality, how the coat was more of a fall piece and wasn't likely to move in January, and her original offer. He came down 10%. She went up 10%. He complained about his costs, and talked up the piece. She shrugged and made as if to leave. We got halfway out of the shop before he came down another 10%. She replied with 10% more, final offer. With a frankly uncomfortable amount of venom, he agreed to split the difference for a final 5% less, or 25% off the sticker price, but only if we paid in cash. Which we did, in a transaction that somehow didn't involve sales tax.

The whole experience took about five minutes, saved me a significant chunk of change, and gave me quite an education. From what I learned later about fashion, the shopkeeper probably still made significant profit from the transaction. (The fact that he was willing to risk his margins to avoid paying sales tax also shows that even at 25% off, he might not have paid full price for his goods, either.) But to me, and to anyone who might have witnessed the conversation in what wasn't an empty store, we were all quickly trained to the idea that paying the full price was just a mistake.

Now, let's pivot to the current state of affairs in e-commerce.

There are a myriad number of ways to avoid paying full price online. Comparison shopping among vendors can happen with just a couple of clicks. If you've got the time and inclination, abandoning a cart and seeing what might come your way in a retargeting offer can drive significant coin. Checking coupon sites for codes, or just typing in common keywords before checkout, can pay off handsomely. Using a rewards credit card, buying in bulk, taking advantage of seasonal discounts, bundling purchases to avoid paying for shipping... it's all there for you, and you don't even have to handle cash or haggle.

The challenge this brings to marketing and advertising professionals is considerable. How do you protect your margins while still driving enough revenue to matter? Can you protect your brick and mortar stores while still having a competitive online presence? And when connectivity gets even more ubiquitous, and wifi more widespread, are we all on a race to the bottom?

The answer, as far as I can see it, can only come from protecting the brand through extraordinary value and customer service. My favorite grocery store has exceptional prices across the board and a down-market esthetic that makes me think they'll always cut corners; I don't check their prices or fliers, because life is too short. Instead, I just load up on stuff when I'm there. The company that makes my poker cards just has a better product, so I wait for them to go on sale, or just pay full price if I have to, because there's no substitute. When my wife and I researched our most recent car purchase, we tried over a half dozen models, but wound up fixating on one model in particular... which led to a purchase with less leverage, since the only thing we could do was pit different dealerships against each other.

But if your brand doesn't have exceptional service or value, and there's no way to invent it with your work?

Well, then, you're in the race with way too many other entrants. With the fading hope that new prospects won't find out about all of the ways they can cut your margins...

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Feel free to comment, as well as like or share this column, connect with me on LinkedIn, or email me at davidlmountain at gmail dot com, or hit the RFP boxes at top right. RFPs are always free, and we hope to hear from you soon.

The Internet Of Insertion

This Goes Inside A Cow; Ouch

On my Twitter feed (you aren't signed up for my Twitter feed? It's @davidlmountain, please, feel free) over the holiday, I noted how one of the things to be thankful for is that, in this lifetime, you aren't a dairy cow. (Yes, I'm presuming and yes, marketing and advertising is on the way. Patience.)

Another thing to be thankful for: that you aren't a dairy cow 130 miles northwest of London, where, if Bloomberg.com is to be believed,cows get Internet of Things transmitters placed inside the first of their four stomachs, so that they can be remote monitored for illness, going into heat, and so forth.

The weighted sensor is said to be about the size of a hot dog, and will last about four years, which is about as long as a dairy cow is productive. Given the expense of such animals, and the amount of product that a farmer can expect to receive from a healthy animal, as opposed to an ill one, it's a clear win for the farmers, and the animals don't have a say in the matter. But it also lends itself to a clear if this, then what thought exercise.

My dog, and maybe yours as well, has a microchip in his leg. It's about the size of a grain of rice, and he got it when he was a puppy. It causes him no pain, and he's in no way aware of it. It's there on the off chance that he ever gets lost and found by a professional with the right technology. My children, and maybe yours as well, have phones that can easily give the location in the event of crisis. My car, and maybe yours as well, has a transmitter on the windshield to allow for toll collection at speed, and the newer model that my wife drives has much more than that. All of that can be used to track our movements. Oh, and the vast majority of our purchases comes through digital technology, which is to say, easily trackable movements. My credit card, and maybe yours as well, rewards me to use it, and carrying a great deal of cash isn't just unseemly, it's dangerous.

Much of this is so commonplace now as to be barely worth mentioning, and yet they all add up to an ever-thickening web of connectivity, which only seems noteworthy when it's, well, new. Or invasive.

Now, we'll add another moment of technology, which is the introduction of a supercapacitor that can be charged by human body heat. This may seem like a development that doesn't have immediate consumer utility, but that would be wrong. Just imagine, for instance, a mobile phone that you just need to hold to recharge. Useful, right? So much so that it may be ubiquitous within a decade.

Where does all of this go next? Well, for my money, we're going to see real movement in wearable health monitoring technology, especially once the battery charge is more or less an afterthought from body heat. It's one thing to know how many steps you've taken, or your standing heart rate. It's quite another to know when someone with a chronic condition is at risk for any number of factors, or for someone who is post-surgery to be able to recuperate, safely, at home. No one wants to lose a loved one for any reason, let alone something that technology could easily prevent. Becoming a bio-mechanical hybrid also seems, well, off-putting. But probably less than being at risk. (Also, it leads to revolutionary possibilities in targeting, ad effectiveness, and so on. See, this all comes back to how we pay the bills.)

The question comes to this: where will the push/pull of utility versus discomfort, privacy versus health, security versus expense, fall?

Because, well, I love my dog. That's why I had him chipped.

And I don't love my kids any less...

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The Future Of Delivery?

Fly-By Dinner

When I was a child, the Metric system wasn't just a logical unit of measurement. It was absolutely assumed to be the way the U.S. was going to go. There were any number of classes where teachers seemed incredulous that they still had to even give short shrift to English measurements. And yet, decades later, they are still, well, everywhere. Miles, gallons, feet, yards, Fahrenheit... all still out there for you. And no one, seemingly, is ready to predict when they will go away.

Fast forward to adolescence. My first start-up looked to take advantage of a newly dominant communications medium, one that had massive installation in business locations and world-wide use. We even changed the name of the company to match this exciting tech, in the hopes that it would make us more attractive for future partners. And that's how a small group of investors lost a larger amount of money on U.S. Fax.

The point is that all tech, no matter how sexy or inevitable it might seem when it's on the rise, has a very hard threshold to break to achieve dominance and true market changes. For every social media channel that seems like an unstoppable juggernaut, many have gone by the wayside. Even if something seems logical and inevitable, if the benefits to the average user are not enough to make the bargain work, the market (or at least, in the case of the metric system in America, the U.S. market) will reject it.

Which brings me to an event that happened in a suburb of Auckland, New Zealand this last week. A pizza chain (no need to say which, honestly) completed a delivery by drone. Food was winched up and flown to the customer's house, lowered and released, with the drone then returning to port. One assumes the transaction was covered online, so there's no need for the drone to collect funds.

The advantages are obvious. Drones would use a fraction of the fuel of the technology (humans driving cars) that they would displace. Instead of propelling a ton or more of car, the drone is pushing about 50 pounds or so. The positive environmental impact is intense, not just for the gasoline, but also the wear and tear on roads, and the presumably lower fatalities, since a drone accident is much less likely to result in human injury then, well, an automobile accident. Multiply these savings enough times, independent of the costs of labor, and there's clear market movement. Given the lack of delay from traffic, deliveries may be faster, and consumers may choose to patronize this option more, since you never have to deal with a tip, or possible awkwardness with the driver.

And yet, I can also see strong reasons why drones may not succeed, outside of a niche option in isolated markets. In the footage that I saw, the food was delivered in a box, instead of the usual thermal sleeve. Even if the box doesn't take very long to get to you, there are temperature issues from being high in the air and exposed, and rain or wind could also be a major issue. Add in the difficulties involved with high density living areas, and the starting friction with having to buy a bunch of drones and figure out how to use them, and it's safe to say that delivery drivers might keep their jobs for a very long time. Maybe even to the point of automated cars, and maybe even permanently, because it's not as if you can argue with the drone if the order is wrong.

There's also this: it's easy to imagine how drone tech would be outlawed, or made so expensive as to be impossible to use. All it would take is mayhem from terrorists that use the tech, and a public reaction that more or less makes the technology publicly untenable. Or highly regulated, or with excessive insurance costs.

Hard thing, predicting the future.

Harder still, keeping people employed during it.

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Feel free to comment, as well as like or share this column, connect with me on LinkedIn, or email me at davidlmountain at gmail dot com, or hit the RFP boxes at top right. RFPs are always free, and we hope to hear from you soon.