American marketing 101

A friend of my daughter’s has two W-2’s and some student loan interest. She went to H&R Block to get her tax return done, and they wanted $150. She shopped around a bit more and found that the tax preparation business is pretty much like the cell phone business or health insurance … there’s very little competition, and a whole lot of gouging going on.

We have a couple of cell phones … one of them is functional. When they were both working, I got lured into a Verizon store by their Internet promotion of their Druid device. As I read it, the phone would cost $150, and the monthly service fee would be $70. That’s what we were paying for two phones, and I thought it would be worth it to have one phone with Internet access. So I went there – maybe I misunderstood, but the price of the phone was $250, and monthly service $100. That monthly service fee just happens to be exactly, to the penny, what Apple/AT&T wants for an IPhone.

As long as I was there anyway, we dropped one of our phones, saving us $30 a month. That was the best deal Verizon offered that day.

There are basically three cell phone carriers now – Verizon, T-Mobile, and AT&T. Their price structures are virtually identical. We are crazy to pay full price for a phone, as we pay the same monthly service fee whether we are under contract or not, and there is no incentive to switch from one carrier to another. They all want two year contracts.

Their phones cannot be used with any competitor’s signal. There has been very little innovation in recent years, and they do not allow applications on most devices. Every little extra service – music, email – costs extra. Accessories are made in Switzerland by the same people who make Rolex’s -that’s all I can figure. Why else would a $1.95 wall charger cost $35? And nothing works with anything else – each phone has it’s own unique little plug-in hole, and they keep changing them.

But that’s basically the marketing game in a nutshell – they must teach it at Harvard and community colleges alike – segment the market into low and high end, never undercut a competitor’s price, annuitize, and never cut a customer a break – Apple works as hard at monopolizing their customers as it does at innovating. The only way they try to distinguish themselves from competition is by advertising. Each has its own pitch for the same product.

It’s really boring, this American consumer capitalism. If it really worked like they say it does, we would be able to buy a phone at Target, and we would be able to switch from one carrier to another and add apps and make them earn our business. This is not competition.

Anyway, I did my daughter’s friend’s return – it took about 15 minutes. She offered me $50, but I did it for $15 – the cost of an e-file. I try not to be in the tax preparation business, but cannot avoid it. If I were in it for serious, I’d be doing those W-2 returns for $50, and clearing $35. It’s tempting.

But it brought to mind one other thought – those W-2 returns are so easy that a child could do them – why do these kids not learn something about it in school?

PS: I keep hoping that this strange un-American company, Google, will break some china here soon, both in cell phones and Internet service. Is the Google phone a new concept, or are they just trying to enter the market without disrupting the price structure?