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EVP, Marketing at Specialty Print Communications

Against the Grain

By Dustin LeFebvre

About Dustin

A third-generation printer, Dustin LeFebvre delivers his vision for Specialty Print Communications as EVP, Marketing through strategy, planning and new product development. With a rich background ranging from sales and marketing to operations, quality control and procurement, Dustin takes a wide-angle approach to SPC

 

Doubling Down on Price Is a Losing Strategy

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If you’re like me, when the name Don Johnson comes up, you jump straight to the dapper Det. Sonny Crockett of the hit TV show, Miami Vice. In the current edition of The Atlantic, Mark Bowden tells the story of another Don Johnson.

The article—titled “The Man Who Broke Atlantic City”—explains how an expert gambler won a total of $15 million from playing Blackjack at three Atlantic City casinos in a short period of time. For anyone who’s left a casino with a thinner wallet, it’s a David vs. Goliath story that warms the heart and provides equal parts of hope and justice.

Upon further review and after a deeper dive into the story, however, I became less excited and more concerned. Johnson is a very smart guy and extremely good with numbers. He knew that the odds of Blackjack were against him. He also knew that total revenue taken in the 11 Atlantic City casinos had fallen from $5.2 billion in 2006 to $3.3 billion last year. Competition had spread with the rise of gambling in other states, and Atlantic City was desperate to attract high rollers.

Is this starting to sound familiar?

Johnson began negotiating improved odds with the casino, including 20 percent off any of his losses over $500,000, playing with a hand-shuffled, six-deck shoe, the right to split and double-down on up to four hands at once, and a “soft 17.”

In the casinos’ desperation to get him in the door, they essentially gave him 50/50 odds and then insured him against 20 percent of the downside risk. With this deal in place, Johnson went on a rampage and won $5.8 million from the Tropicana, $5 million from the Borgata, and $4 million from Caesars.

Yep, once he secured the deal with one, he had the other casinos match it. They fell right into place.

I know an empty press schedule is scary, but like the casinos, we printers need to keep track of the numbers and verify them for ourselves before we, like the casino managers, walk off the cliff like lemmings. Margins are a slippery slope, and once you cede them, they’re almost impossible to recover. Most of us can remember the “one-time” favor we did for a client, and most of us would like to forget the number of years we’ve been honoring that favor.

It’s not a secret that companies will use low pricing to sneak their foot in the door of a new client. The price door is rarely a good entryway; printers who enter through it find that it’s a revolving door, and they often end up getting pushed out the same door when another player comes in with lower costs.

Price provides a tactical advantage, at best. It sets a bad precedent, and the only way to push margins back to sustainable levels is largely deceitful.

Johnson took advantage of a market segment that had fallen on hard times and made millions off of it’s members. My initial romantic notion of his conquerer story turned when I connected it to the plight of many of us printers.

We need to stand our ground on price, command fair compensation for our value, and ensure that we don’t find ourselves in the same position as the Atlantic City casinos. Johnson’s success shows us that the “odds are always with the house,” except when they aren’t. Some of BPO (business process outsourcing) business models share similarities with Don Johnson’s play.
 

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