The Power of Breaking Consumer Compromise

I believe “breaking consumer compromises” is one of the most powerful concepts in business today.   Introduced by George Stalk, Jr., David K. Pecaut, and Benjamin Burnett in a Harvard Business Review article in late 1996, it states that the best way to create breakaway business growth is to identify all the ways in which a business has made compromises with the consumer and then break them all so that that consumer gets exactly what he needs and wants.

CarMax and The Used Car Industry
A powerful example they use is CarMax and the used car industry.  An industry outsider (Circuit City) carefully analyzed the very large and profitable used car industry to identify all the consumer compromises – limited variety at any one place, no maintenance records, limited knowledge about the car’s history, high pressure sales tactics, perceived lack of honesty, etc.  By breaking all of these compromises, Circuit City gained a substantial market share very quickly with its CarMax business.

The Greeting Card Industry
Another example is the greeting card industry.  Most of the major greeting card companies raised their card prices much faster than the rate of inflation over several years until the average price of an individual card exceeded $2.  This invited deep discount card shops into the industry.  Factory Card Outlet (selling all cards for under $1) and others have gone from a zero share of market to over 20% of the market in less than 10 years. (These stores have introduced other compromises, however, which will limit their long-term share to about 25% of the market – unless they can keep on reinventing their successful business formula.)

Another greeting card industry example is share shift from card shops to the mass channels.  As more and more women entered the workhorse (the vast majority of working age women today), the convenient hours of grocery stores, chain drug stores, and Wal-Mart broke the compromise consumers faced in card shops (with their traditional 10 am to 5 pm hours, which they have extended more recently).

Reinventing Your Business
The trick is to constantly reinvent your business even if you think you have something to lose by doing so.  That is why it is often the most difficult for an industry insider to transform their industry by breaking compromises.  Consider Kodak.  It must have been difficult for Kodak to enter the digital imaging world with a passion when most of their current business is based on chemical photography.  And, it was very difficult for Hallmark, in the late 90’s, to introduce a very large selection of 99 cent cards (Out of the Blue, children’s seasonal, and Hallmark Warm Wishes greeting cards) with the very-real concern of possible trade down. But, to their credit, Hallmark did it, and broke the consumer compromise.

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