The Trap

Two friends are speaking about their businesses. One is distraught because he cannot seem to make money selling watermelons. The other attempts to help:

"So, what do you pay for watermelons in the country?"

"A dollar", said the distraught one.

"And, what do you sell them for in the city?", asked the helpful friend.

"A dollar", was the reply.

"I've got the solution to your problem!" said the friend. "You need a bigger truck!"


And so it goes with our business sometimes. We seek bigger and bigger programs, more and more clients, and somewhere in all this we fall into The Trap. We forget the reason we're in business--to make profit.

My good friend Greg Canose, a rep in New York says it best--"this may come as a shock to some of you, but I'm in this for the money". Sage words-and guidance we need to consider as we adapt to the New Reality of our businesses.

Selling gift cards to our end user clients "because they demand them" may sound like a good idea but sooner or later you'll need a bigger truck because the margins are crappy. Suppliers that generate large volumes on low-priced items with bad margins will find their futures mortgaged and their ability to move their clients upmarket limited.

Garnering "psychic income" by cutting your margins to the bone so you can put Fortune 500 Company X on your client list doesn't make anybody any better off (except possibly Company X, and they could probably afford to pay more anyway). And as I heard last week at the IMA Executive Summit, giving away information and expertise that we should charge for creates an image of the market that our knowledge isn't worth anything.

One of my mentors is George Kling, the icon of consulting in our market. He always said that we needed to put a high price on our time because if you give that away you will always have trouble charging for anything else. But it's not enough to charge "something"--we need to make sure the price we charge supports the longer-term viability of our companies and the market in general.

There's a quote about "value is remembered long after price is forgotten", and I believe our market may be challenged to deliver on that. There are so many places to buy "stuff" that we are lowering ourselves to the level of "stuff peddlers" and are chasing lower margin business just to keep the lights turned on.

This is a dangerous path that will marginalize suppliers (because senior management might just think it's easier to send all business to Amazon or "Big Box" retailers) as well as resellers (creating an image that incentive programs are only "stuff" that is commoditized to the point where margins are benchmarked against Internet retailers).

There's a symbiotic relationship between suppliers and resellers that needs to be based on more than the cost of the goods. Resellers need to bring suppliers into the process to make the program more than just a gift or reward. Otherwise we all fall into The Trap together and suffer similar fates....


Pete