Pricing Wisdom: Extortion Is Such an Ugly Word
Monday, May 29, 2017
I've always believed that two traits have held me back in life: a penchant for honesty and an ever present desire for a clean conscience.
That said, I'm not one of those people who doesn't understand how the world works. I've written about techniques for scamming honest folks out of their hard earned savings and various types of confidence tricks. I've even written about a new scheme to prey on the desperate that's taking the business world by storm.
Today I'm going to explore how a nonprofit's perplexing focus on "following the law" is causing it to miss out on income that firms with a more nuanced understanding of value and pricing could easily capture.
Back in April, it was reported that The Kentucky Coal Museum had decided to install a number of solar panels on its roof. The management team hoped to save an estimated $8,000 per year - cutting its energy expenditures by nearly a third.
I haven't run the numbers, and I have no idea as to how much of an upfront investment the solar panels required. For all I know, countless spreadsheets could prove the mathematical correctness of the choice to install solar panels.
Nevertheless, I maintain that the museum's board demonstrated poor judgment by allowing this travesty to occur. The fact that The Coal Museum was ostensibly paying too much for its energy shouldn't have been a problem. In fact, I would argue that every dollar needlessly spent was not a concern at all. Rather than proving to be a liability, it serves as an asset to the organization. Each excess dollar spent on coal energy represented political power and enormous leverage that could have been brought to bear for the museum's benefit.
Before the story broke, it was little more than a dirty secret that the museum's dependence on coal was proving suboptimal.
A simple request, obfuscated just enough so that prosecutors wouldn't start using words like coercion, bribery or RICO statute could have proved quite the lucrative endeavor.
Here's a rough draft of a letter that could have worked wonders:
Dear Coal Industry, I represent Kentucky's greatest coal museum, a public and well-known face of your industry. Unfortunately, we've run into some financial problems and need to reduce our spending for energy. As far as we can tell, the only solution is the installation of solar panels. It was a tough decision, and will no doubt cause a tremendous scandal, painting your industry in a terrible light. I know it will attract the attention of journalists the world over who are just looking to put down the coal industry, and I'm truly sorry. This is too bad, as it would only cost $4,000 a month to pay for our existing energy systems. Do you have any suggestions as to how this will be handled one this story hits the news? P.S. We were thinking about maybe seeing if the solar industry could help subsidize a move to using solar panels to help defray our ongoing costs.
It's not like it would have been difficult to find a point of contact in the coal industry. A simple search turned up quite a bit of information on companies and trade associations that would have been happy to spend a few thousand tax-deductible dollars each month to keep the museum powered by coal and the ironic tale away from the story-hungry press.
The solar panels may very well be a win for the environment, but it serves as little more than a black eye for the coal industry. When a coal museum (in the heart of Kentucky no less) takes action to break its own coal addiction, business owners, politicians and bystanders all over the world may begin to shift their perceptions as well. Many will begin to question whether they should consider solar, whether tax-breaks for the industry make sense, and whether coal company stock should be sold as quickly as humanly possible.
I should note that I'm not a lawyer and nothing herein should be considered legal advice. If you attempt something similar, I will not visit you in prison. That said, I am an expert in pricing, and if you need some advice in that field, don't hesitate to contact me for a pricing strategy consultation.