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Deputy General Manager, APAC
Tags: General
Date: November 21, 2017

Go Cold Turkey on Exclusive Deals This Thanksgiving

Thanksgiving

Even though I've lived in Asia for a large chunk of the past decade, Thanksgiving remains by far my favorite American holiday. It reminds me of the little and big things we're thankful for. The "little" things, like waking up and doing a job I love. The “big” things, like the impending arrival of my second child.

Twenty-five years ago, people waited until the Friday after Thanksgiving to enjoy the Black Friday sale. These days, Black Friday sales begin the week of Thanksgiving, and even shrewd retailers in Asia are cashing in on this American holiday to promote discounts during this period.

Forget Black Friday – Singles Day, held annually on 11/11 in China, is four times bigger than Black Friday and Cyber Monday combined. Sales this past weekend racked up an impressive $25bn.

In his book All Marketers are Liars, Seth Godin asserts that "there is almost no connection between what is actually there and what we believe." In this instance, a Black Friday or Singles Day sale has become a world event that translates into the compulsion to buy something and feel satisfied that you have partaken in a good deal – whether or not you actually want or need to buy something.

Companies play on brand marketing to build irrational desires in us as consumers. This is even more prevalent in the luxury market, where limited edition items open the doorway for entry into a prestigious community. It keeps the competitors out, and it locks consumers into the brand's ecosystem.

That explains why some people are fine with paying almost S$2,000 for the iPhone X.

"Exclusives"—the lie we love

As consumers, we carry these worldviews into the corporate world and wear them with a badge of pride. With this mindset, spending millions for the enterprise to purchase the equivalent of a Lamborghini for network maintenance is essential. The brand is exclusive and carries a guarantee of top quality. After all, we’re spending the company’s money – not our own.

“My peers are doing it.” “We've always done it this way.” “The company needs the best.” “It's a safe option.”

Why pay top dollar if you can’t tell the difference? Believe it or not, researchers from Stanford Graduate School of Business and the California Institute of Technology found that test subjects couldn't distinguish a $5 wine from one that cost $45. This phenomenon also applies to your network equipment.

In the analogue age, we've been trapped into exclusivity with subscriptions and locked contracts. Upgrade your phone and get locked into a two-year contract with your service provider. Sign up for cable television and pay a one-time fee for a cable box, installation, and service fees. Cancel within six months and you get a cancellation charge.

It’s no wonder that the digital age has ushered in freedom from all these “exclusives.” Netflix and Amazon Prime subscribers are on the rise; they benefit from free trials, no commitment, flexible cancellation policies, and easy plan changes — all without hidden fees.

In the USA, T-Mobile has made waves by shifting away from locking in customers with two-year phone plans. It seems to be working: customer surveys show that T-Mobile customers “wouldn’t switch for anything.” In Singapore, Circles.Life is following a similar path. The fourth telco is bucking the norm with its digital model and price plans and is quietly chipping away at market share.

This consumer revolution of freedom from exclusivity has not yet happened in the enterprise world. The opportunity cost to the business is detrimental. Exclusive agreements with exclusive vendors look good on paper but are limiting. You're locked into more expensive options, and switching to another exclusive vendor will cost you dearly. Worse, it becomes a personal crutch. Once you become so reliant on an exclusive vendor, you lose the objectivity and drive to find the optimal choices for your organization or learn about the alternatives.

We did a thought experiment to see what the average enterprise would spend over the course of 10 years. As it turns out, being exclusive actually means you're one of the companies that has contributed to the explosive growth of the big vendors — to the tune of US$64B on IT infrastructure support services.

That's huge amount of money that companies could have spent on digital transformation initiatives.

Fortune magazine did a similar thought experiment. When Apple first released the iPhone, the price was unheard-of for a mobile phone. It was an 8GB phone that ran at 2G speeds, and retailed for US$600 in 2007. Had you taken that US$600 and invested in Apple stock instead of buying the iPhone, that stake would now be worth more than US$5,000, enough to buy five iPhone 8s in 2017.

As decision-makers in the procurement of technology products and services, it's crucial to balance the needs of your organization both today and in the immediate future, and weigh the advantages accordingly. Increasingly, it's making more sense to be strategic on maintenance over new equipment and value scalability and flexibility over the promises of exclusivity that are often riddled with FUD (Fear, Uncertainty and Doubt).

So next time your mobile phone is eligible for an upgrade and you’re tempted into a new contract just to get some dollars shaved off the iPhone X, take a step back. That’s no longer your only option – and it’s definitely not the best deal. The same goes for your IT department.

Questions? Comments?

Talk to our team of expert engineers, product managers, and technicians by emailing us at experts@curvature.com