Q 487. The "Theory of Constraint" body of knowledge proposes a "Mafia Offer" for Marketing folks? What is a Mafia Offer? How is it different from the term USP (Unique Selling Proposition)? 

 

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In order to fully understand the concept of Mafia Offer, it is first very important to first understand Unique Selling Proposition or USP & what are its limitations which makes Mafia Offer the go to strategy these days.

 

USP is a marketing concept which allows a company to differentiate its products or services from the products & services of similar nature of its competitors. USP’s are generally short term statements of differentiation or positioning.

Some of the common examples are:-

• Dominos Pizza : “You get fresh, hot pizza delivered to your doorstep within 30 minutes”.
• FedEx : “When your package absolutely, positively has to be there overnight”.

Thus USP is that distinct & appealing idea that sets a company favourably apart from its competitors. The statements examples shared above summarizes why a consumer should buy a product or a service & it convinces a potential consumer that a particular product or service will add more value than other similar offerings.

 

While USP are good in expressing the value proposition of a product or service to a potential customer but they sound more like a list of attributes or things that are totally subjective. In most of the cases the statements are copied by the competition very quickly & also even though these statements are good but they are not specific like for eg: Increased revenue & decreased costs are good to say but there is no mention by how much & what if a company doesn’t get the results that it brags about. The risk is still on the consumer whether they are ready to take the risk to take your word for it.

 

In order to really differentiate what a company can offer, a good USP is accompanied with a market offer which is unrefusable & is known as Mafia Offer. Mafia Offer is an offer which is so good that your consumers cannot refuse & your competition can't or won’t match. It makes use of the fact that many business have constraints with the outside world as well in conjunction to a business’s internal constraints & the mafia offer capitalizes on this fact by managing this constraint & thus creating demand.

 

A Mafia Offer is the key to exploring a market or sales constraint & it typically requires a company to do something different particularly (in terms of operational changes so as to make a decisive competitive edge)in order to actually deliver something which is delightful to the consumers & not matched by the competition. With mafia offers most companies offer solutions that solve their customer’s core problems. It is basically built on three key aspects:-

• What are the internal capabilities of a company compared to its competitors.
• How competitors are selling their products & services.
• How the customers of a company are affected by its current capabilities & how a company sells.

Some of the common examples of a mafia offer are:-

• Hyundai : "We will buy back your car if you get laid off during the next two years" - this was made during the recession period.
• Xerox : “We offer copies when & where you need them & at a fixed rate per page” - this came when competitors were selling expensive machines & providing inconvenient servicing.

Thus a mafia offer is a sustainable market offer which is built on its advantage & is not merely a tagline as the case with USP.

James Cox and John Schleier in their book "Theory of Constraints Handbook" mentioned about Mafia offer.. Mafia offer is an unbelievably good offer that a company makes to its customers. The attractiveness of the Mafia offer makes it impossible for the customers to decline the offer and difficult for the competitors to match it.

 

A Mafia Offer can be sold successfully to 70% or more of all prospective buyers because of its premium pricing.

With Mafia offer, companies can create an un-refusable offer by removing unnecessary constraints or impediments to the flow of our customer’s throughput.

 

Below are the few famous Mafia Offers from business history:

 

1) Hyundai – We will buy back your new car if you get laid off in the next two years (made during a recession year)
2) Domino's Pizza – We deliver in 30 minutes less – or you eat FREE.
3) Xerox – We offer copies when and where you need them, at an fixed rate per page (instead of selling expensive machines and inconvenient servicing)

 

 

Unique Selling Proposition: Unique Selling Point is what makes your product or service different from the competition.

USP sets your business apart and provides value to customers.

 

There are many reasons to have an Unique Selling Proposition, but it primarily allows customers to differentiate you from other businesses out there. It doesn't take long for potential customers to decide whether they want to do business with you or not.

 

USP is often considered as the cornerstone of a marketing strategy and is used as a differentiator from other products within the same category.

 

While both USP and Mafia offer targets the customer to make the business, Mafia offer is more aggressive approach compared to USP.

Mafia Offer- As cheezy as it sounds, is something an offer that you make to your customers , which is as good that they just cannot refuse amd your competetors cannot match the same either. It is also pertaining to the operational improvements/ incentives which gives the MAFIA offer a competetive advantage. 

 

It is simply an offer you make to your prospective and current customers that they just cannot walk away from and your competetion simply cannot counter in short time period. In today's cut-throat marketing world, the product/services we have to offer has to have better service, quality, delivery time ,response time etc. which in turn should be more of value/significance compared to the premium price they are paying. 

 

 Unique Selling Proposition- This is a marketing concept which refers to any factor(s) or aspect(s) of the product/service which makes it unique to the rest of the competetors/ market while promoting its unique/extra pro's to the customers/ consumers. This becomes more of a Branding strategy for any marketing team to leave a reputable impression in customer's eyes and hence driving the sales to the peak. 

 

It is your statement of definite value , providing answers to the questions below, 

• What is that i am offering that no one else is able/willing to offer?
• What is that my current customers are looking for in contrast to my competetion?
• What makes my product/service unmatchable and special to my customers?  

 

Key differences, between MAFIA Offer and USP or Unique Selling Proposition are as follows,

 

1. USP's deal with what we are already doing , summerizes it with specifically targetting one or few customers dealing with issues or gaps with the products/services being offered. These cases do not fall under the MAFIA offer category as they do not offer Operational/ technological precedence as it intends to in MAFIA offer.
2. Another area where a Mafia Offer is steps ahead of other concepts as it targets to fix the core issues customers are facing as it is related to doing business with the market/industry. Other concept deals with customers problems or symptoms on more temporary level. 
3. Mafia offer enables us to make operational changes to built/provide that special product/service/quality that has the wow factor that becomes unrefusable to your customers and gives you an operational upperhand, makes your product/service Unique.  Whereas one of the common disadvantage USP's carry is failure to deliver the Uniqueness because it will require customer scrutiny, therefore it fails to live upto the customer expectations.

Dr Goldratt had introduced the term "Mafia Offer" for the first time in his book called "It Not Luck" and then it was defined later as offer that one cannot refuse.A Mafia Offer is actually any offer we make to the market/prospects or customers in order to make them delighted about your products or services and something that your competition cannot match very quickly.

Economics suggests us that market value works on function of supply and demand. For example demand for your product suddenly rises. We can thus sell at a higher price and still make more sales because our item is worth far more and better to the customer. The customer has to now buy from you. Mafia offer is different than USP because USP take something what we already do and aimed at one or few of the customers problems or gaps in current market offerings. Many companies offer solutions that solve their consumers different problems or symptoms. But with Mafia Offer we address customer’s core problem as it relates to doing business with within our industry. It offers to address the core problem which deliver value which the customers cannot refuse and competitors cannot make that improvements because they don’t know or willing to do those improvements. Simply it’s the way to create monopoly or operational advantage in the market.

 

Famous Mafia Offer examples are:

Hyundai Mafia Offer states that “We will buy back your new car if you get laid off in the next two years (made during a recession year)”

Domino's Pizza  has mafia offer that “We deliver in 30 minutes less – or you eat FREE”

Xerox offers mafia offer mentioning “We offer copies when and where you need them, at an fixed rate per page (instead of selling expensive machines and inconvenient servicing)”

A Mafia Offer is the offer that solves market’s core problem/s such that it makes it unmatchable by its competitors in the foreseeable future. Customer desire and drools over such offer and prefer over others as it addresses their core issues, such as desire or requirement for immediate delivery of product or service, return of products without any questions asked, etc, where competition don’t have the capabilities to deliver the same in current market, at least for a very significant time period in coming future.

 These are usually very tough to crack and pose a high risk of failing to achieve the stage where they can make such offer to market. Also, usually requires challenging the constraints prevalent in the industry, and thus needs overhauling the Ongoing operational processes.

 

USPs on the other hand, like CVP (Customer Value Proposition), is aimed at Outing performing its competition by providing certain features of its product, service, or way of delivery better than others. These are mostly achieved by improvement in operations or technology.

 

 Thus, clearly USP is different from Mafia offer on aspects covered below:

1.     Mafia offer is aimed at solving the customers’ core issues, while USP is aimed at only providing current service/product better than others.

2.     Mafia offer, mostly, requires major overhauling of current way of working, while USP is achieved by improvements in current way of working. Mafia offer potentially will create new discoveries and patents in the process of coming up with new combination.

3.     Mafia offer is comparatively more time consuming, capital intensive and risky method.

4.     Mafia offer could potentially create, seemingly, Monopolies for the foreseeable future. While USPs give a competitive edge which could be surpassed by competition relatively easily.

5.     Mafia offer, make industry monopolies like:

        a.     Dominoes in pizza delivery when they introduced 30 minutes or free offer

        b.     Hyundai in cars, when they offered to buy back within 2 years if customer loses the job in certain markets (during Covid period).

        c.     Amazon in product delivery, when they offered no question asked return policy.

        d.    Tesla, when they offered the electric car, with battery efficiency far above the competition, with their innovative battery making processes.

Marketing with a "Mafia Offer"

In today’s fast-paced world, most organizations play tag with their competitors. someone lowers the fee, others observe. someone adds an incremental new feature or carrier, the others play catch-up. from side to side, from side to side - the sport never ends…

What if there has been some different way? What if you can boom the cost of your product or service a lot that customers can infrequently refuse your offer? This kind of maneuver is known in TOC circles as a “Mafia offer”

 

What is a "Mafia Offer?"

A Mafia offer may be offered correctly to 70% or extra of all prospective customers and generally commands premium pricing. are you able to believe remaining 70% of all clients who check out your products or services? it may sound farfetched, however with a Mafia offer 70% is best just the start!

 

The basic economics tells us that marketplace fee is a feature of deliver and call for. believe that the call for on your product abruptly surges. because of this you can sell at a higher price and still make more sales, truly because your object is well worth far extra to the patron. In other words, any buyer would should be out of her mind to shop for the product from all of us except you.

 

How is it different from the term USP (Unique Selling Proposition)?

 

when most of the people are talking approximately a touchstone, a aggressive gain, a price proposition, or a unique selling proposition (USP) these are actually quite different from a Mafia Offer. They essentially take what you already do and country it succinctly and with extra specificity. A Mafia offer commonly requires which you do something specific to sincerely deliver some thing unrefusable for your clients and something that your competition can’t or won’t do due to the fact they are now not willing to do or don’t know the way to make the change.
in this way, Mafia offer is a longer lasting aggressive benefit as instead of only a positioning.

Interesting examples quoted by all respondents. Rohit's answer has been selected as the winner. Congratulations!