There’s a term called asymmetric warfare that is commonly used for terrorism. One party in this war (the Government) has to secure all vulnerable points to win, while the other (the Terrorist) has to penetrate just one to win. Naturally, in most cases, the terrorist wins. It is just so much easier.
Of late, I’ve been wondering if we should worry about another similar, though not same, problem. How do you fight competition that wants to blow itself up? You come to the meeting armed with logic, profit and loss, analytics; while this other guy just parts his jacket to show you a string of bombs strapped to his belly. This kind of competition is not rational, or maybe is, but not in your conventional sense. You seek victory while he seeks martyrdom. You seek P&L while he seeks valuation. He’s happy showing a 200% rise in traffic even if he can’t sustain it beyond the year because he hopes to sell some stake within the year (aside, I know the offline guys are giggling here, guess how much traffic we can build at our stores if we sell at a loss :D). Worst, our suicide-bomber will spend till the consumers are so drunk on a cocktail of discounts, cash-on-delivery, coupons, no-questions-unlimited-returns and a variety of unknown ingredients that any rational person can’t persuade them to listen to anything sensible.
What is worse is that your hope of sanity prevailing is faint. When this particular guy runs out of money, the next free-drinks guy walks in, and till there’s even one joker left in the pack, the suicide bombing continues. Even if someone does it sporadically, you’re done.
Like the Uncle who walks into your house and spoils your kids on ice-cream, now the businesses are left dealing with irrational expectations of spoilt kids. eCommerce consumers would ideally like everything free, next they’d like to be paid to use eCommerce I guess. Soon we’ll have to send chauffeurs to their homes, with iPads encased in soft blue velvet for the users to tap - all for products with negative contributions.
If Soft-Drink Giants can agree (unofficially, of course) on pricing for 200ml of soda, why can’t we eCommerce guys have some sanity?
welcome to the real world ! - "The Matrix"
ReplyDeleteand oopsy !
soft drink thingy is not going to happen (until you buy out all of your competition ... not happening in your industry as i know) .
competing with your uncle in spoiling kids is not a solution for your industry . I would say either giving them the taste of pizza or spreading horror stories of tooth decay should do the trick ; ) .
-SV
Depends on what you're selling - if it's low risk commodity, compete on price, if it's higher value sustainable service, convince your customers that they're getting value even if you're not the cheapest. Cartels stink.
ReplyDeleteThanks for this. Guess the Soda example's skewing the point. The bigger concern was not the absence of price-collusion, but irrational myopic competition.
ReplyDeleteAirline tickets (post the low-cost-wars) also did rationalize as sense prevailed. The danger, however, is evident in all the airlines that bled to death during the price-war.
Hoping for that day, and hoping the good men are still standing by then...