Why New Cars Lose Much Value When Driven Off Lot

“The day that a car is driven off the lot is the worst day in its life, for it instantly loses as much as a quarter of its value. This might seem absurd, but we know it to be true. A new car that was bought for $20,000 cannot be resold for more than perhaps $15,000. Why? Because the only person who might logically want to resell a brand-new car is someone who found the car to be a lemon. So even if the car isn’t a lemon, a potential buyer assumes that it is. He assumes that the seller has some information about the car that he, the buyer, does not have–and the sell is punished for this assumed information.”(p. 67)

The Long Tail Complements the 80/20 Rule

“The 80/20 Rule is chronically misunderstood, for three reasons. First, it’s almost never exactly 80/20…

“The 80 and the 20 are percentages of different things and thus don’t need to equal 100…

“People use it to describe different phenomena. The classic definition is about products and revenues, but the Rule can just as equally be applied to products and profits.

“…I’ve described the Long Tail as the death of the 80/20 Rule, even though it’s actually nothing of the sort. The real 80/20 Rule is just the acknowledgement that a Pareto distribution is at work, and some things will sell a lot better than others, which is as true in Long Tail markets as it is in traditional markets.

“What the Long Tail offers, however, is the encouragement to not be dominated by the Rule.” (p. 131)

Why Textbooks Cost So Much Money

“It’s worth taking a moment here to understand the used-book market. For most of the past few decades it has actually been comprised of two very different markets. About two-thirds of it was the thriving and efficient textbook business that centered around college campuses…

“Used textbooks are a model of an efficient market–every year millions of students buy and then resell expensive volumes they need only for a single semester. The set of books with resale value is determined by the published curriculum of core classes; the price is set by what competition there is between campus bookstores; and the supply is replenished twice a year.

“Textbook publishers don’t mind this very much because it means they can actually charge more for new copies, since the buyers know they have a predictable resale value. Indeed, the economic model at work here is more like a rent than a purchase. Typically, stores buy books for 50 percent of the cover price and then resell them for 75 percent. Depending on whether the student is buying new or used, that ‘rental fee’ is between half and quarter of the list price of the book. This arrangement works so well that the used-textbook market in the United States is now a $1.7 billion enterprise, accounting for 16 percent of all college store sales.” (p. 86)

Successful Marketing Is Achieved Through Focusing on the Customer’s Wants

“Your Marketing Strategy starts, ends, lives, and dies with your customer.

“So in the development of your Marketing Strategy, it is absolutely imperative that you forget about your dreams, forget about your visions, forget about your interests, forget about what you want–forget about everything but your customer!

“When it comes to marketing, what you want is unimportant.

“It’s what the customer wants that matters.

“And what your customer wants is probably significantly different from what you think he wants.” (p. 218)

Turning Your Business Pla into a Game

“…People do not simply want to work for exciting people. They want to work for people who have created a clearly defined structure for acting in the world. A structure through which they can test themselves and be tested. Such a structure is called a game.

“And there is nothing more exciting than a well-conceived game.

“That is what the very best businesses represent to the people who create them: a game to be played in which the rules symbolize the idea you, the owner, have about the world.” (p. 202)