A Lesson from Tire Bounties

By John Malmo

http://stream.publicbroadcasting.net/production/mp3/wkno/local-wkno-963874.mp3

A Lesson from Tire Bounties, by John Malmo

Memphis, TN – The city of Memphis has allocated $100,000 for old tire collection. It'll be the third year for a program that was highly successful last year.

Citizens lined up with truckloads of old tires, and the money was gone in no time. Each old tire had a bounty of one dollar. When I first read about it, I was overcome by the city's wisdom. If the city tried to collect all the old tires internally, it probably would cost five or ten bucks per tire.

And it reminded me of a program twenty years ago with which China solved its rat problem by paying a bounty of five cents for each rat tail. What puzzled me, though, was why local government started at a dollar per tire. On reflection, they'd have collected twice as many tires at a half-dollar per tire.

The point is never to introduce a new product (a new program, in this case) with the price too low (in this case, the bounty too high). In the case of the old tires, they should have started with a half-dollar bounty. It could always be raised to a dollar if the program wasn't working.

Likewise, lowering your price in business is pretty easy. Raising it is tough. Remember that when you set the original price.

John Malmo is a marketing consultant who concentrates on helping business owners grow their businesses with effective marketing. To reach Mr. Malmo, hear and read more of his commentaries, or ask him a direct question, go to askmalmo.com.