Q3. Without giving away too many trade secrets ... can you give an example of a Mafia Offer, explain how it was developed, and why it qualifies as a Mafia offer?
A3: Sure, but this will be the Cliff Notes versions since Mafia Offers are typically developed over 3 days in our boot camps.
Mafia Offers are developed by analyzing 3 things. 1st what are (or could be) your internal capabilities compared to your competition. 2nd How does your industry, you and your competitors sell what you sell. And 3rd Understanding how your clients are impacted by your current capabilities (which are usually the same as your competitors) and how you sell.
Mafia Offers are specific to a company. So while an example would not apply to anyone reading, it is a good way to illustrate what a Mafia Offer is.
I have a client that sells custom printed labels. These labels are found everywhere on just about every product and are considered by many to be a commodity. Their quoted lead-times were 2 to 3 weeks and their due date performance was about 90%. We started with the operations and were able to get lead-times down to 2 days and due date performance to 99%+. Sales remained stable. This was significant since their competition was at about a 2 week lead-time and in the low 90% due date performance.
Next, we looked at how the printing industry sold labels. They used a price quantity curve. The more labels you order the less you pay per label. If you only want one label, the price is very high.
Then, we looked at how their specific customers purchased and used the labels because an offer is only a Mafia Offer if it is un-refusable to your specific customers. In this case, their customers were regional size food and beverage manufacturers. One customer was a coffee roaster who roasted many different varieties of coffee and sold them in several sizes so they need about 100 different labels.
Now when they looked at the price quantity curve they decided to order what was equivalent to 6 months of labels. To decide how to spread the quantity across the 100 labels they had to forecast what they would sell. But because their forecasts were always wrong, they ended up with too many of some labels while stocking out of the labels for the fast moving coffee. We know that this was happening because they would call frantic to get more of what they just stocked out of.
We also found that their marketing departments felt limited because they could only make changes every 6 months, after they worked through the inventory.
So we make the following offer:
Mister customer, don’t give me orders. Your orders are based on your best guess of what you might need. Instead tell us everyday what you used. We will guarantee on the one hand that you will not need to hold more than 2 weeks of inventory so you have more marketing flexibility and less risk for obsolescence and at the same time we will also guarantee that you will never run out. If we ever stock you out, we will pay you $500 per day per SKU.
That’s a Mafia Offer – best of all worlds for your customer and you will not pay a penalty because it only takes you 2 days to replenish. The competition can not offer the same thing because they can not consistently deliver in less than 2 weeks and they could not risk paying the penalty.
My questions for your readers are:
How much capacity could you uncover or do you currently have?
And what’s your Mafia Offer that will allow you to sell it – increasing sale and profits?
