I'm not buying the alligator

At the gym yesterday, I was watching one of those soundless flat screens while working a merciless and boring exercise machine. Coincidentally, something similar cropped up on one of the news show, but it looked like fun.

It was a bicycle. Except, instead of the traditional pedals and seated position, you stood and worked an elliptical drive, much like the stationary machines in the gym.

When I got home, I looked up the site on the web and the hype was appealing. I had some interest until I got to the price, twenty-two hundred bucks. My eyes sliced back to the photograph. It looked pretty simple and appeared to be comprised of fairly standard components. Over two grand for that? I do understand that you price according to demand, not cost, but… Maybe they had a lot of tooling and it wasn’t as standardized as I thought.

I drilled down through the site and came to the deal breaker. Under the FAQ section, they reassured potential buyers about ease of repairs, stating that the bike was mostly comprised of “commercially available components” and that there were few custom parts.

No, no, no, no. You don’t pull back the curtain and show them the wizard. When Ford introduced the Mustang, their ads didn’t say, “By the way, this is easy to get fixed because we built it from your grandfather’s Falcon parts bin.” Let the magic sell it.

In the same vein, I attribute the decline of the Cadillac brand to the debut of the Cimarron. This was the intersection of two strategies. The first was GM trimming cost by developing a single platform on which to base models for its various brands. The second was for Cadillac to tap into a younger market with a less expensive car and make them Cadillac people for life. The latter worked to the extent it attracted new customers.

But, the other one destroyed the Cadillac mystique, in my opinion. The Cimarron was so similar to its sister versions that it trumpeted it was little more than a gussied up Chevy Cavalier. And, by extrapolation, all Cadillacs are Chevys. Who wants to pay those prices for a Chevy? I’m not advocating concealing relevant facts. But you don’t have to put them out in the store window.

If you don’t drop your pants in public, sometimes a competitor will pull them down. At one time, Escort radar detectors (the original, not the one that rose from the ashes of the sold brand name) were the dominant choice. Even with a premium price, they could barely produce enough to satisfy demand. Their unique selling proposition was that they invested so much in advancing their technology that the product had no peer.

All well and good until the partners had a parting of the ways. One wanted to take the company public and cash in. The other wanted to play it close to the vest. So, the partner desiring the IPO bought out the other and off he went to Wall Street.

That made Escort a public company. Public companies have to disclose their audited financial statements. So, what does that have to do with market share?

A clever competitor latched onto those numbers and used them to show the market that the extra dollars they paid for the Escort product weren’t going into technology. They were finding their way into the pockets of the owners. You were paying more for enhancing profits than R&D.

Escort went down in flames. There were other critical management errors that led to this, but you’d never convince me that this wasn’t the beginning of the end.

If you really want your bubble popped, take a trip to the Pacific Rim. There you will see a relatively few companies putting together televisions, audio systems, etc. with common components for almost all the brands. That is, you will see inexpensive and premium brands and models on the same assembly lines with the primary difference being a case or logo. The companies buy a lot of their components (standardized) from the same suppliers.

There’s a marketing axiom that dictates you sell the sizzle, not the steak. It’s not to deceive but to provide the market what it is they demand. Woody Allen wrote a satirical version of the story of Job. Job laments to the lord that he has made all these shirts and they haven’t sold. He’s employed the finest materials and best craftsmanship and yet, the warehouses remain full.

And the lord sayeth, “Put an alligator on the chest.” Huh? Trust me on this one. Just put an alligator on the chest. And the shirts sold out. The alligator logoed Izod shirts were a very hot, overpriced (my opinion) item of the time.

I’m not saying this elliptical bike strategy is wrong. Being the first in the market and charging a premium is a strategy I’ve employed successfully. The trick is to skim the cream before all the competition comes in and drive prices down. See digital watches and calculators.

But, I won’t be putting a deposit down on the bike. I’m not buying the alligator.