Tuesday, October 27, 2015

If You Could Make A Dollar From Everyone In America....

If you could make a dollar from everyone in America, you'd have 1/3 of a billion dollars.

Many large companies and successful businessmen didn't become successful by reaping huge profits from individual transactions.   Rather, they managed to upsell a customer here and there and add a dollar or two per transaction, to their bottom line.  If you can do this, and sell to a lot of people, you can make a lot of money.

Most folks take the alternative route.   The local car dealer, being in a small town, wants to make the maximum profit from each sale.   So he charges obscene prices and tries to snare unwary and unsophisticated buyers, and then slam them with inflated trade gags, financing tricks, and hidden fees and charges.   He sells few cars, and his dealership is rarely profitable.

The big-city volume dealer, on the other hand, has a lot full of cars, and wants them all to go away as quickly as possible.   If he can shave his prices and sell cars, he makes more money selling more cars than he would by trying to maximize profit on each sale.

Not surprisingly, the small-town dealer still has 2014 vehicles for sale on the lot - when the 2016 models are already coming out.  Unless he can get "his price" on a vehicle, he won't sell it.   And he goes bankrupt as a result. 

Not only that, in the time it takes for him to snooker one poor fool into signing these onerous deals, he could have sold three or four cars at a reasonable price to other people.   Those other people drove 20 miles to the "big city" dealer and got a better price.   He turns away business with his practices - and his reputation.

Smaller profits, in volume, can make you rich.  Filthy rich.

If you can get ten million or a hundred million people to pay $1 extra to see your new blockbuster movie, well, that's 10 to 100 million in your pocket.   Small transactions, added up over time, turn into big profits.

Cigarettes are a prime example.   Time was, a pack of cigarettes was pretty cheap - maybe a buck or less.   Not very profitable, but back then, nearly everyone smoked and as a result, well, you could make a lot of money, when everyone in the country bought your product on a daily basis.  Having an addictive product certainly helped as well.

The Subscription Model works on this same theory.   Cell phone companies don't make money selling cell phones - they make money on the service that you pay "only a few bucks for" month after month after month.   Over time - and over a large population - this adds up to an awful lot of dough.

Consumers fail to notice this leakage in their wallets.  A dollar here, and a dollar there - it doesn't add up to much, does it?   Well, it does, over time.   And it adds up to huge profits for the business scarfing up these dollars.

On the flip side of the coin is the consumer.   If you could save a dollar on every financial transaction you made every day, you could end up saving a boatload of money over time.

Impossible to do?   Maybe.  Maybe not.  

When you fuel up the car with gas, can you save a dollar?   Maybe by buying a car that burns regular instead of premium.   Maybe driving more carefully and getting better gas mileage.   Maybe by buying a car that gets better gas mileage as well.

Note that I didn't say, "getting a 1% cashback rebate on your credit card rewards" or "shopping for gas that is a few pennies a gallon cheaper" as both end up saving a lot less money than the solutions set out above.

When you have lunch every day, can you save a dollar?   Well, if you bring your lunch to work, you can save a few dollars as it costs about 1/2 to 1/4 to make a meal at home than to buy one.

Note that I didn't say to use coupons or order the special at the restaurant, as these techniques really don't save as much.

And so on and so forth.   The marketers and businesses want you to spend more, of course.  And often, we do, without thinking.   Or we think, "Oh, it's just a dollar, right?"