Truth: The Most Valuable Thing We Have

March, 1989

Blair Labatt

Guest editorial, Foodservice Report

Mark Twain said, “Truth is the most valuable thing we have.  Let us economize it.”

Apparently the latest notion of sophistication in pricing is something called “unbundling.”  The idea of unbundling is to itemize pricing so that you can charge separately for value-added services rather than providing them for free.  In practice, however, unbundling often turns into a kind of price trap, where the apparent bargain price is not the actual price.

The automobile rental industry has been vigorously pushing its daily Collision Damage Waiver Insurance as a kind of value-added service.  But Collision Damage Waivers are an overpriced add-on intended to compensate for bargain rental rates.  Sure enough, when American Express started automatically providing the insurance to its cardholders, all the rental companies suddenly raised their basic rental rates.

In our industry, too, unbundling is really just the latest verse of our version of the old Rolling Stones hit, “Gimme Shelter.”  The problem all starts with somebody.  Somebody can audit you; Somebody represents a large share of your business.  But Somebody does not want to pay you the margins you know you need.  You know this is unfair, but what can you do?  Evidently, you think of more and more elaborate ways to shelter.  You play a kind of shell game, using private labels to hide an occasional load of low quality product.   You tell the manufacturer to raise the price and kick more back.  And before long, your whole customer strategy is built on deception.

Unbundling is just more of the same.  It is like having a $400 suit, offering to sell it to someone for $200, and then trying to come out even by charging $200 for the buttons.

Isn’t this futile?  Isn’t it obvious to everyone that some of the margins people pretend to distribute groceries for are arithmetically too absurd to fool anyone?  We need to ask ourselves how this has happened to us.

Why don’t we just go and tell Somebody the truth?  It could be that we are natural born liars, like our competitors; or it could be that we just don’t know how to communicate to our customers the real value of what we do, the real margin needs we have.  Perhaps if we knew how to, we would be brave enough to actually go and do it.

The challenge is for us to break the pattern of deceptions and find a way to tell our customers the truth.  We must learn to help our customers to place a quantitative value on the basic service a distributor provides.  That means explaining our expense structure.  It means challenging talk of “fixed costs” and the fallacy if incremental thinking.  It means providing and documenting basic service excellence.  If we really communicate with our customers, we ought to know and grow our customer’s business; and we ought to be eager for our customer to know ours.