Tuesday, September 30, 2008

Business Idea: Extreme Reliability

Jeff Nolan writes about our disposable culture, where it's cheaper to buy a new printer than to buy replacement ink:

I am also somewhat curious about what point in time people stopped having things repaired. Is it a deep seated fear that once one part breaks you have crossed a precipice upon which repeated failures are a certainty? Why don’t many power tools have the ability to replace the motor brushes? Is it because people won’t do it therefore why incur the design and mfg cost to build it in, or is it because manufacturers don’t expect you have something long enough to wear out brushes?

Then there is a weird pricing dynamic that manufactures take advantage of, for example, I have an Milwaukee cordless drill that I use instead of the old power cord model that I’ve had since I was a teenager, but the cordless gave up it’s fancy lithium ion battery recently and the cost to replace is half of the cost of the drill itself. Given that one battery has died, it’s certain the other is not far behind but the cost to replace two batteries is almost as much as buying a new kit, therefore what I will do is discard the drill and two batteries (recycle them) and buy a new drill that includes 2 batteries. That’s wasteful and emblematic of what has gone haywire in our consumer culture, we throw away perfectly good things just because of expediency and bundle pricing strategies.

But consumers alone are not to blame on this issue, as I have no doubt that some fresh out of school Wharton MBA grad worked up a pretty compelling pricing model that Milwaukee uses to maximize total unit shipments. In other words, two batteries really can’t be equivalent in cost/price to two batteries and a complete drill, right? Beyond the cost issue, what good is cordless technology bringing the market in this instance if the technology isn’t capable of delivering more than 2-4 years of use?

Here's my take:

When in doubt, always assume that people will do what is easier. Once manufacturing and retailing became efficient enough, we developed a disposable product culture.

For example, I do try to get my stuff repaired. When I needed to replace the drive belt on my vacuum cleaner, I had to search around online and via telephone for an hour before I could locate a supplier. Another time, it took me a number of weeks to locate someone who was willing to repair a microwave. The only guy who was up to the job was an old tinker who had a nearly-invisible storefront on El Camino.

In both those cases, while I might have saved a few bucks versus simply trashing and buying new, the time I burned up probably cost me 5-10X the cost of new appliances.

There is a solution--build a brand that is based on extreme reliability. Offer a lifetime guarantee, and if something goes wrong, either have a courier pick up the offending item and take it to a local repair shop, or have FedEx/UPS pick it up and return the repaired item, along with a "loaner" during the repair period.

Yes, you'll take a bath on anyone who takes you up on the warranty, but expect all of those people to become incredible evangelists for your company. In addition, you'll be able to save a ton on marketing, since word-of-mouth will be the primary driver of sales.

In a less connected world, this idea wouldn't work, but in today's viral society, I think it's a winner.

And if you do start this business, hook me up with some free stuff. Seriously. I don't get paid for blogging, y'know!

3 comments:

Alex said...

Repairing an item takes both initiative and willingness to learn (usually you have to research what has happened, research who can fix it, research repair price vs purchase price, etc).

People high in those traits are usually not poor enough to make the energy expenditure worthwhile.

I'm an exception, I'm a huge FIY/DIY kind of guy despite having an engineers pay with a college student lifestyle. My propensity to fix things is a personality quirk, not a rational set of decisions.

If quirky and poor people are the only ones willing to repair consumer grade items (read: not cars) then I can see the wisdom Milwaukee is employing.

JOSEPH GELB said...

deffinitely ill try your idea

Anonymous said...

Dyson has this business model. For this reason their product is priced so high but it's worth it.