Maximising Profit through Customer Perception
A friend gave us a $59.99 gift card for a handy service I enjoy using – they send items via slow mail (one to three days) and I send them back. At any given time I can have two items. At the end of two months this would move into the standard plan costing $19.99 per month with an option to select the three item plan for $29.99. Item supply can be sped up by ticking a ‘prenotification’ return box to signal its in the return mail – another item is supplied on the promise. No late fees.
It’s a good business model and they have access to my card so any fines and fees are automatically deducted. On their end it offers reasonable security and the most they’re up to lose from somebody is an item or two.
But in the last two weeks before that cusp of change between gift card recipient and ‘fully enlisted consumer’ there seemed to be a slight change in the supply line. Call me a cynic but the MBA (Master of Business Administration) program tunes you into profit maximisation strategies so my ‘paydar’ went up.
Here is a simple way to covertly influence that business model to improve the plan conversion selection. In the first six weeks you would honour the pre-notification and send items that arrive as close to the next-day as often as possible. This gives the perception of constant supply. Note that the objective is conversion to the $29.99 plan rather than the standard $19.99 plan. This process has the added benefit you can more easily identify ‘power users’ from those who would only use the item on weekends (or irregularly).
Power users will tend to use the item on arrival and prenotify to receive a constant stream.
In the final two weeks before converting automatically onto the $19.99 plan you would slow supply by providing a larger percentage of items in three days (rather than one day). This affects the perception of the power user who obviously likes the service but may ‘feel unsatisfied’ by the quantity of goods supplied. Bingo. And instead of honouring the pre-notify functionality on the website you quietly send the new items as you receive the returns. This creates ‘controlled dissatisfaction’ at a crucial conversion point specifically for the power user who is more likely to commit to the higher $29.99 plan.
It’s not that hard to manipulate customer perception in these business models and it’s exactly the sort of thing managers build in when profit maximisation is the driving force behind the business.
A better idea is to see your business as ‘filling a social need not met by government’. The up side of filling that need well is that people give you money. Don’t always make it about the profit margin… make it about a driving need to improve customer satisfaction.
