Friday, December 28, 2007

Strategies to make profit

There are three strategies for a company to make profit:

1. Operate efficiently, reduce cost, offer good value to customers and make a fair margin.
2. Exploit the market situation and customer ignorance to increase profit
3. Design products to "rip off" the customer; pay high commission to people to market the product.

I want to encourage businesses to adopt stragegy 1 (i.e. the ethical approach). It is very sad to see more businesses adopt the other two strategies.
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2 comments:

Anonymous said...

Insurance companies use 2 and 3 strategy. The companies sell rip off products with dubious and ambiqous benefits.They incentivize the agents with high commission to push ,to use any thing or to do any thing to bring in the sales.Whatever means the agents can use so long they close the sales.
The agents exploit the customers' ignorance and fear and trust. They mis-sell, misrepresent,conceal facts, tell half truth, con, cheat and clobber the cleints with a lot info to confuse.

December 28, 2007 11:07 AM
Priyadi said...

you should not expect companies use strategy #1 out of kindness. when market mechanism is working, companies that use #2 and #3 will be automatically penalized by the market. in insurance industry, though, ones that use strategy #2 and #3 get rewarded more than those who use strategy #1. over time, those who use strategy #1 will drool over their competitors who use strategy #2 and #3. they screw their customers more and get better rewards by doing it! some who previously use strategy #1 might convert into doing strategy #2 or #3: "why should we be good but others who really screw their customers get rewarded much more?"

from the comments I gather here, it looks like your own NTUC income is on the way to become one of them. we all need better regulations to preserve the market, to protect the good insurers and to avoid them becoming bad in the future. if this doesn't stop, sooner or later, I can guarantee strategy #2 or #3 will become the norm, we will regard them as strategy #1 in the future, and insurers will try to look for other ways to screw their customers.

December 30, 2007 1:13 PM

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