Marketing with a "Mafia Offer"
Q: When is your toughest competitor your “very best friend?”
In today’s fast-paced world, most businesses play tag with their competitors. Someone lowers the price, others follow. Someone adds an incremental new feature or service, the others play catch-up. Back and forth, back and forth - the game never ends…
What if there was some other way? What if you could increase the value of your product or service so much that customers can hardly refuse your offer? This type of maneuver is known in TOC circles as a “Mafia Offer” (named after the Godfather, infamous mafia don who was known for the line "just make them an offer that they cannot refuse”).
In today’s fast-paced world, most businesses play tag with their competitors. Someone lowers the price, others follow. Someone adds an incremental new feature or service, the others play catch-up. Back and forth, back and forth - the game never ends…
What if there was some other way? What if you could increase the value of your product or service so much that customers can hardly refuse your offer? This type of maneuver is known in TOC circles as a “Mafia Offer” (named after the Godfather, infamous mafia don who was known for the line "just make them an offer that they cannot refuse”).
What is a "Mafia Offer?"
A Mafia Offer can be sold successfully to 70% or more of all prospective buyers and usually commands premium pricing. Can you imagine closing 70% of all clients who investigate your products or services? It may sound farfetched, but with a Mafia Offer 70% is only just the beginning!
Basic economics tells us that market value is a function of supply and demand. Imagine that the demand for your product suddenly surges. This means that you could sell at a higher price and still make more sales, simply because your item is worth far more to the customer. In other words, any buyer would have to be out of her mind to buy the product from anyone except you. |
Finding a Mafia Offer Using the Theory of Constraints
We create an unrefusable offer by removing unnecessary constraints or impediments to the flow of our customer’s throughput. Voila, your product delivers disproportionate value.
For example, say that the industry standard delivery time for your product is 2 weeks, but your customers often need to have it on short notice. None of your competitors, however, has succeeded in crashing the production cycle time much farther.
You get your team together and challenge a wide variety of assumptions underlying the production process. You discover that reducing the cycle time is possible, but it involves releasing a large number of tiny batches, which in turn increase the setups and lower the efficiency of the plant. You discover a way to reduce the size of the transfer batch (the quantity flowing from one operation to the next) without increasing the process batch size and hence, setups would not impacted!
Studying your competition, you discover that they rely heavily on efficiency measurements and are unlikely to change an industry-standard practices for quite some time. You proceed to adapt your operations and crash the production cycle time to less than 2 days. You have built a decisive competitive advantage!
This decisive advantage can be capitalized in the form of a Mafia Offer. Why? Because fast delivery is so important to your customers, they would be crazy to turn down guaranteed deliver in 3 days, even if it involves a higher price. You might even back up this guarantee financially, and offer the product free if delivered late.
Now that is an offer! Not only will your customers drool to sign up for it, your competition can’t and won’t match it for the foreseeable future. It would involve changes to their fundamental way of doing business and seemingly very high financial risk. Consider a few famous Mafia Offers from business history:
· Hyundai – We will buy back your new car if you get laid off in the next two years (made during a recession year)
· Domino's Pizza – We deliver in 30 minutes less – or you eat FREE.
· Xerox – We offer copies when and where you need them, at an fixed rate per page (instead of selling expensive machines and inconvenient servicing)
So creating the Mafia Offer requires you to examine the constraints on your company’s processes and finding a way to deliver what customers need when they need it. It then requires offering terms and conditions that will make your competitors laugh, then cry.
Q: When is your toughest competitor your “very best friend?”
A: When you can make customers an offer they wouldn’t DREAM of matching!
For example, say that the industry standard delivery time for your product is 2 weeks, but your customers often need to have it on short notice. None of your competitors, however, has succeeded in crashing the production cycle time much farther.
You get your team together and challenge a wide variety of assumptions underlying the production process. You discover that reducing the cycle time is possible, but it involves releasing a large number of tiny batches, which in turn increase the setups and lower the efficiency of the plant. You discover a way to reduce the size of the transfer batch (the quantity flowing from one operation to the next) without increasing the process batch size and hence, setups would not impacted!
Studying your competition, you discover that they rely heavily on efficiency measurements and are unlikely to change an industry-standard practices for quite some time. You proceed to adapt your operations and crash the production cycle time to less than 2 days. You have built a decisive competitive advantage!
This decisive advantage can be capitalized in the form of a Mafia Offer. Why? Because fast delivery is so important to your customers, they would be crazy to turn down guaranteed deliver in 3 days, even if it involves a higher price. You might even back up this guarantee financially, and offer the product free if delivered late.
Now that is an offer! Not only will your customers drool to sign up for it, your competition can’t and won’t match it for the foreseeable future. It would involve changes to their fundamental way of doing business and seemingly very high financial risk. Consider a few famous Mafia Offers from business history:
· Hyundai – We will buy back your new car if you get laid off in the next two years (made during a recession year)
· Domino's Pizza – We deliver in 30 minutes less – or you eat FREE.
· Xerox – We offer copies when and where you need them, at an fixed rate per page (instead of selling expensive machines and inconvenient servicing)
So creating the Mafia Offer requires you to examine the constraints on your company’s processes and finding a way to deliver what customers need when they need it. It then requires offering terms and conditions that will make your competitors laugh, then cry.
Q: When is your toughest competitor your “very best friend?”
A: When you can make customers an offer they wouldn’t DREAM of matching!
Photo attribution: http://www.flickr.com/photos/slightlyeverything/6646322993/sizes/l/