Saturday, June 3, 2017

Money Makers: An Inspired Marketing Technique

by Al Jacobs

One of the tougher jobs in business is finding customers. Should you operate a barbershop, getting some local kids to pass out cards around the neighborhood may help. If it’s a restaurant you run, possibly local radio or television will bring diners to your door. Alternate methods include billboards, newspaper and magazine ads, telemarketing, or e-mail solicitation (God forbid you should employ SPAM). Yet another method is direct mail advertising where you stuff an envelope with glitzy brochures, discount coupons, and implausible testimonials. These are standard ways of encouraging patronization – we’ve seen them all in various stages of good and bad taste. Personally my all-time favorite was the 12-second Pepsi spot, with the catchy jingle, used on radio up until 1958 that went: “Pepsi Cola hits the spot; twelve full ounces, that’s a lot; twice as much for a nickel too; Pepsi Cola is the drink for you; nickel, nickel, nickel, nickel . . . trickle, trickle, trickle, trickle.”

I’ll now describe another marketing device being employed with increasing frequency. One such sample arrived by mail yesterday. The standard white business window envelope, carrying a presorted postage permit imprint, showed a company name that evoked a sound institutional image. Inside was a single sheet of 8½” X 11” paper, looking exactly like most invoices you would receive from any number of vendors with whom you do business. All of the information you might require to pay your bill was prominently included: Customer number, Notice date, Description of services, Amount due, $37.50; the name to which the check should be made payable; final date which payment must be remitted; instruction to send check but not cash; and a final statement that  “All listings are final.” The lower third of the sheet contained the portion to be detached and mailed in the return envelope provided. It certainly seemed like the sort of document generated by an established and reputable company.

Ah, yes … established and reputable. However, in my description I neglected to mention a couple of other things on the “invoice.” Tucked into the upper right corner, in tiny font, I found:

“This notice is a solicitation and receipt of payment will confirm your annual listing”

In addition, inserted directly above the remittance stub, in even tinier font, was:

“This offer is provided to millions of Websites throughout the United States to enhance their Website exposure. This is not a bill, invoice or statement of account due. You are under no obligation to make a payment, unless you accept this offer.”

I’m guessing those two disclosures, though obviously designed to be overlooked or misinterpreted by many, were carefully worded and inserted so to avoid constituting the crime of using the mails to defraud. Whether various state laws prohibiting deceptive business practices are violated would have to be analyzed on a state by state basis. But as to the matter of business ethics, no uncertainties exist. The intent to bamboozle is as clear as it is blatant.

As an intellectual exercise, let’s contemplate what factors the designers used in the single most important consideration: Why did they select a price of $37.50? Actually it’s a near-perfect number in that it meets several criteria. Most importantly, it guarantees a substantial return. Stationery, printing, and bulk postage costs come to less than 25 cents per unit, amounting to about $250 per thousand. Even if no more than 3 percent of recipients are duped into paying, the scam artists receive $1,125, representing a 450 percent return on the outlay. If, as is likely, these are mailed out by the hundreds of thousands, the potential profit is immense.

The next consideration on the $37.50 figure is its probable effect when the bill is received – small enough not to trigger suspicion or overcome the natural lethargy and indifference that grips many people. It’s easier to pay it than take the time and trouble to verify it. Finally, it’s an amount less than that established by many large and medium sized firms requiring the Payment Department to confirm with the Order Department before paying. An invoice of this sort can easily slip through without scrutiny.

I’d now like to evaluate what I’ve titled “An Inspired Marketing Technique.” As I view the workings, evaluated from the standpoint of the perpetrators, it’s indeed a shrewd operation. Were it not I personally despise con artists as a group, I could admire the ingenuity that went into this creation. It truly reflects what we, here in the early stage of the 21st century, have come to recognize as corporate mentality. Although the dollar value on each “picking” is small, this particular swindle is worthy of any Volkswagen or Wells Fargo executive. To paraphrase Winston Churchill: “Never have so many been bilked so much by so few.”

In conclusion, what’s the message I want to convey? It’s that this mock invoice is but a straw in the wind. Today it may come from a lone bunko artist, but its potential for profit is immense. This fact will not be lost on what we regard as the legitimate business community. I fully expect that within a short while the device will be used, in varying forms, by many of America’s most prestigious companies. My advice: Be prepared to scrutinize what you receive. You ain’t seen nothin’ yet.

Al Jacobs, a professional investor for nearly a half-century, issues a monthly newsletter in which he
shares his financial knowledge and experience.
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