Wednesday, 5 December 2007

Spoil Market!

Title says it all, doesn’t it? Surely in one’s working life, one has heard the phrase, “Don’t spoil market, lah”. According to the lexicologists at a satirical Singapore website, this refers to the actions of “someone who does his work so well, he makes his colleagues look bad.” However, that is surely only one way to interpret it, and so let’s bring some intellectual rigour to this diaphanous, oft-used phrase.

Market “spoiling” on 2 fronts
The most obvious way the phrase can be alternatively used is when you buy something and are deemed by others to have overpaid for it. This often happens for services since there can be more ambiguity in how services are priced. (“I went to Ah Yap yesterday for a massage. It was sooooo good I tipped her RM10.” “What? You really spoil market lah!”). We can call this demand-side market spoiling.

The implication seems to be that you are spoiling the market for others who are less willing to pay the price that you paid, and that the supplier of the service may increase price and seek out other high-paying customers like yourself while ignoring low-paying customers like them completely.

Similarly, in the labour market, an employer can also be deemed to spoil the market when he overpays or provides extraneous benefits to pampered employees. (e.g. overheard at HR offices around town: “Did you see those pictures of Digi’s corporate office? It’s like the Google campus! Got waterfalls and free food! Really spoil market!”)

The second type is supply-side market spoiling. Like the example of the overeager worker above, companies can also do the same when they supply their goods and services. No one can ignore the market spoiling power of such brands as Wal-Mart, Air Asia and Dell when they first brought their low-cost wares to market.

“Spoiling” their day
When people say “you spoil market”, it is often passed off as a joke, but also as a scolding. In this sense, it is important to be clear on the reason for your “spoilage”.

Dumping is often the suspected motive behind supply-side market spoiling. Companies that are overstocked or want to aggressively gain market share often muscle in by offering ultra-low prices. This grouse is probably legitimate, but it should be noted that there is a very fine line between this category of firms and those who are actually able to sell their wares at a cheaper price and book a decent profit, such as the low cost leaders mentioned above.

Poor information is often an accusation for demand-side market spoiling – you overpay because you don’t know better. But what if you do? Are the kinds of benefits purportedly lavished on Digi employees a result of corporate vanity or because, at half the headcount of rivals Celcom and Maxis, Digi staff are simply more productive and therefore can be treated better? Would one say other companies with exemplary service records like Shangri-La, Direct Access and Singapore Airlines are “overpaying” their staff?

The ugly side
As a marketer, beholden to your bosses/shareholders, your justifications for “market spoiling” are your own and usually subject to financial inspection – your bottom line will be your conscience. However, I have a personal observation on why the phrase “spoil market” persists to this day in popular usage. It actually reveals 2 ugly sides to our behaviour.

Demand side accusations of “spoil market” are really a reflection of our unwillingness to reward good services rendered. For instance, there is a poor tipping culture here in Malaysia, since most people assume it is covered by the standard service charge of 10%. However, in more developed countries, where services form a larger part of the economy, service charges are usually unstandardised and tipping is wholly discretionary, ranging from 10% to 25% or more depending on how pleased the customer is.

On a larger scale, corporate clients often balk at firms who price their services accurately and deliver on-time and on-budget, thinking they will be guilty of “market-spoiling”. Instead, they prefer to go for less responsible firms who throw attractive lowball prices but who hide behind “unforeseen” future overruns which end up costing the same or more. Sound familiar?

Supply side accusations of “spoil market” are a reflection of our tendency to collude. It is no secret that Malaysian companies in similar industries, even “fierce” competitors, like to gather together for regular meetings to catch up, share news on the market, shop talk. I’m not saying that anything bad goes on at these meetings (picture eyes rolling here), but let’s just say that in many developed countries, such regular interaction between competitors would inevitably lead to a visit from investigators in the domestic trade ministry.

For marketers, this poses a two-pronged challenge: first, should you focus on what your rivals are doing or on what your customers want from you?; and second, especially for those in service industries wanting to climb up the quality ladder, it can be supremely difficult searching out customers who are able to recognise and reward quality when they purchase it, instead of those customers on the endless look-out for the chimera known as the “cheap and good”.

Which way should your firm go? Now, telling you would really be spoiling the market!

(reprinted from The Sun, December 5th 2007. e-paper link here.)

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