Flashback: Cost-Cutting Measures

In anticipation of the shutdown of Apple’s MobileMe service, I am re-posting some of my old blog entries before they become harder to retrieve.

This entry was originally posted on September 4, 2004.

The process by which a business brings a product or service to the marketplace is not a short or an easy one. It begins with someone’s idea, followed by the necessary approvals, then resources are dedicated to the development of the product or service, followed by marketing and then delivery to the general public. Depending on the industry, there may also be federal and/or state regulations that need to be accommodated. Marketing includes advertising, testing the general public for how receptive they might be to the product or service, education of the sales force and the actual process of making the sale.

So, with all of those costs in mind, it doesn’t bother me when a company wishes to turn a profit on a product or service that they provide. If it costs a company $1.00 to produce that product, it may not be unreasonable to charge $1.10, maybe $1.50, or even $2.00 to the end consumer, as long as they’re willing to pay for it.

Right now I have my mind set on two specific industries whose processes and policies make them likely candidates for a large-scale consumer uprising. Keep in mind that both of these industries have encountered steadily increasing costs, are heavily regulated by the government, and enjoy a relatively captive consumer base.

And the end consumer has been paying more, at least in part, due to unnecessary marketing.

The two industries I am talking about are the credit card industry, and the pharmaceutical industry.

Credit cards. Not a day goes by when I do not receive at least two solicitations in my mail to take out new credit cards. Add in the fact that most retail stores today offer deals on financing purchases by taking out a new credit card, and all banks and credit unions offer the ability to take out a credit card, I can’t see how direct-mail solicitations — even with postal service discounts — serve any need other than to drive up the interest rates and/or fees charged on credit cards. In the case of one noteworthy bank that I shall not name in the interest of being polite, I receive solicitations to take out a credit card with them, even though I already have a card by them. (But I will link to them. Tee hee.)

As I write these words, I’m thinking of my son, Harry , who was just born 16 days ago. Although I have not yet received Harry’s social security card, I know that he is in the process of receiving his own social security number, the basis of his financial identity as he gets older. I figure it is only a matter of time before he receives his first solicitation to take out a credit card.

In 1993, a new drug was placed on the market, after obtaining FDA approval. This drug was called Rogaine. The baldness cure was the first to market itself directly to potential consumers, in spite of the fact that it was only available as a prescription when it first came out. Furthermore, this drug took the unconventional step of insulting its potential clients by having ads that literally said nothing about it. The handsome men and women hawking the product said “I started taking Rogaine. You know, with Minoxidil…” No, I don’t necessarily know, and if you expect me to know something about your product without giving me any specifics about what it does, there’s no way I’m going to talk to my doctor about it.

The other extreme in drug advertising is saying what it does, and then it goes on to say that if you or anyone in your family has any history of heart disease, liver disease, diabetes, high cholesterol, ingrown toenails or lazy eye, you should avoid taking this drug.

To be fair, the pharmaceutical industry is heavily regulated by the government, and with reason. All drugs must be proven reasonably safe before they can be brought to market, and the risks should be well documented, since all drugs have some kind of side effect. Therefore, when it comes to mass advertising, they either have to be so vague as to not reveal what the drug is actually intended to do, or they should give warnings about every potential reaction the drug could have with your body and/or other drugs you might be taking.

I have another suggestion with regard to advertising of drugs: don’t allow them except in medical trade publications and direct marketing to the doctors who would prescribe it, the pharmacies who would dispense it, and the nurses who would give it out. Put information on your company’s website and websites like WebMD , but I don’t need to see or hear an ad in newspapers, magazines, TV, and radio, for a drug that I can’t walk into a drugstore and buy on my own, without a prescription.

Direct mail marketing of credit cards, and mass marketing of prescription drugs are two unnecessary costs for otherwise worthwhile products. These costs are only passed on to the consumer. I have no sympathy for either industry, when consumers try to go about finding ways of doing something cheaper and/or more efficiently.

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