13 SECRETS ARE GOOD FOR BUSINESS

Adam Smith says that, ‘When the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market are generally careful to conceal this change.’ In other words, secrets are good for business because they keep prices artificially high.

DEFINING IDEA…

Intellectual Property has the shelf life of a banana.

~ BILL GATES, MICROSOFT BILLIONAIRE

He goes on to say that if it ‘was commonly known their great profit would tempt so many new rivals to employ their stock in the same way, the effectual demand being fully supplied the market price would soon be reduced’. If you find yourself in a business that is highly profitable either because there are few competitors or because you have some trade secret that gives you an advantage, it’s simply shrewd business to keep that knowledge to yourself. Otherwise you risk stiffer competition or imitation and your advantage will be lost. That is why it’s so important to protect your intellectual property and patent your inventions. Keeping competitive advantages close to your chest is sensible but for most businesses, realistically they can’t be kept forever.

Unless, of course, you are Coca-Cola®! They have successfully preserved the secret formula invented by Dr John Pemberton in 1886. Although how much is true and how much is marketing spin is a little hard to quantify. Coca-Cola have tinkered with the recipe and even tried to improve it dramatically with the introduction of ‘New Coke’ in 1985. This caused a severe customer backlash and the company hasn’t touched the recipe since. Coca-Cola stands as a profitable reminder of the financial potential of secrets.

Post-it notes were not so lucky. Although the original still enjoys the kudos of being the first to market, the secret to their success is either out or has simply been replicated by thousands of imitators: evidence of Smith’s statement that, ‘Secrets of this kind, however, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept.’ However, he acknowledges that, ‘Secrets in manufacturers are capable of being longer kept than secrets in trade.’

The reason is probably financial. It costs more to initiate a competitive challenge to an existing manufacturer because of the start-up or modification costs associated with manufacturing. This cost usually allows existing manufacturing to maintain an advantage for longer.

Smith goes on to suggest that, ‘A monopoly granted either to an individual or to a trading company has the same effect as a secret’… As a result, ‘The price of monopoly is upon every occasion the highest which can be squeezed out of the buyers.’ So, secrets may be good for business, but they are rarely good for the customer!

HERE’S AN IDEA FOR YOU…

If your marketing appears to be getting a little tired and isn’t pulling in the same response as it used to, try adding the word ‘secret’ to your copy! Is there a way to re-package your product or service around the idea of scarcity to make it exclusive and available to only a select few? If so, test this against your existing marketing approach to see which draws the most response.