18 July, 2010

Make sure your consumer becomes a consumable

Melbourne Herald Sun, 17 July 2010

Leafing though an Officeworks catalogue I saw a good quality Hewlett-Packard colour printer for just $49. Doesn't seem so long ago that they were hundreds of dollars. Then on another page a range of HP coloured inks was selling at $85. "Ah yes," I thought, "and that's where HP get their money back".

The money's not in the printers, it's in the ongoing sale of inks, month after month. I've joked that next they'll put computer printers in Corn Flakes packets just to get them into our hands. (Yes it would be a very big Corn Flakes packet, but you know what I mean...)

If you're going to buy into a business, always check out the consumables connected to it. This can make the difference between struggle and big profits.

Four years ago when Gillette launched their new five-bladed Fusion shaver I was given a free razor and two blades as part of a promotion at my gym. Before that I'd wondered why on earth anyone would want five blades to shave with, and then just left it on the bathroom shelf for months.

But one day I tried it, it felt funny but seemed to work well, and I kept using it ever since - and buying packets of replacement blades. I now see that Britain's Office of Fair Trading is investigating allegations of price-fixing collusion between P & G (Gillette's parent) and major supermarkets.

One of their submissions says that the blades cost 10 cents to make. In my supermarket they are selling at $19 for four. So I think that by now I've paid for my razor.

For their cost, most popular cars do not have a high mark-up. On highly competitive models it can be ridiculously low. But have you noticed how all the dealerships have such bright, clean, well-managed service departments? Of course you'll take your precious new car to be serviced there. The first couple of years it's under warrantee and then it becomes a habit. And of course you'll insist on genuine spares, even if they do cost double. You've become a consumable.

From the States comes the story of the Toyota Prius. It seems some have had problems with their "high intensity discharge" headlamps. A number of them have needed replacement, which then highlights a little consumables problem: the HID lights can cost up to $2,000, including labour, to replace. And they're not covered by the warrantee. Ouch!

Have you been to a doctor or into a hospital lately? Now there's a market for consumables. Every hypodermic used once and destroyed. Sealed surgical packs opened, one or two items used, then everything dumped. The sterilisers and autoclaves gather cobwebs (metaphorically speaking - no cobwebs allowed in today's hospitals!) as truck-fulls of medical waste rumble out of the back gates.

What if you're selling a product that once purchased, will continue to do its job excellently for years? Well you have to turn it into a consumable. World business has got really good at this.

It was in 1960 that Vance Packard wrote in The Waste Makers about planned obsolescence: "The systematic attempt of business to make us wasteful, debt-ridden, permanently discontented individuals." That's a scheme that has certainly succeeded.

You've barely finished installing Windows Vista when Windows 7 comes along. You're all excited with your iPod and yet iPod 4 has arrived and is making your dearest look old. Your big old TV might still be working fine but it has probably been moved into the garage to make room for the new wide-screen plasma.

And as for your umpteen-thousand dollars worth of camera equipment - well that has all been made obsolete by so many wonderful digital cameras.

Don't think that I'm knocking consumables or planned obsolescence. They are an essential part of this economy we depend on. If Fords were made to last for ever and never need replacing, that would make Geelong obsolete, wouldn't it? (Sorry Geelong - just kidding.)

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