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    « Case Study: Ultimate Escape from Commoditization | Main | Nickel and Diming »

    November 17, 2006

    Golaith Isn't Embracing Digital Services

    Below is a comment from a subscriber to my post on conditioning customers that prefers to remain anonymous.

     
    A large competitor of ours preaches charging for digital services, but continues to give these digital services away for free. They recently expanded their market footprint by absorbing another large company. I had high hopes that when branch #2 was absorbed they would start charging some sort of minimal fee for posting projects, but they have not. They merely charge for scanning and any additional indexing beyond 3 fields. This is extremely frustrating.

     
    You write, "The first step is to have faith that the market will converge on the best practice. Those who don't charge will see their profits erode to the point they can not sustain their business. They are 'burning their furniture to heat their home'." That may be so, but what is bothersome is that a large company has an awful lot of furniture to burn - far more than I do.

    A large company may have the ability to “bleed the market” or defer charging for digital services longer, but they will ultimately suffer the same profit erosion that a smaller company will. The market will move towards a cost plus model and you must cover your costs or loose money. The point I was trying to make in the previous post is anyone can take a leadership position in charging for digital services. It doesn’t have to be the largest company. The objective is to start conditioning your customers to accept the charges by adding a line item and starting small. What if you charged $10 for posting projects? What if it was $1? At some point the customer is going to see that as a negligible expense, but they will start to become “conditioned” to expect some charge. You may be surprised to see the large competitor follows suite. They were waiting for someone brave enough to take the initiative and they will follow suite. Maybe they will charge $15 to your $10? This gives you an opportunity to raise your prices also.

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