Can you make a product too well?
Can you give your customers too much value for their money?
Apparently you can – you can make a product so well it’s bad for business.
When lightbulbs were first mass produced, they lasted up to 2,500 hours.
This was good for initial sales, but obviously bad for repeat sales.
In 1922, for instance, Osram sold 63 million lightbulbs in Germany.
But the lightbulbs lasted so well that next year they only sold 28 million.
Building a better product was plainly bad for business.
Something had to be done.
They contacted the other manufacturers and found they had the same problem.
Everyone’s sales were down because their bulbs lasted too long.
Making a better product was killing their business.
So in 1924, the Phoebus Cartel was formed.
It comprised: Osram from Germany, Philips from Holland, General Electric from Britain, Compagnie de Lampes from France, Tokyo Electric from Japan, and Tungsram from Hungary.
The document that was signed by all parties was headed: "Convention for the Development and Progress of the International Incandescent Electric Lamp Industry."
Together they decided to increase demand by shortening the life of their lightbulbs.
So in 1925, they reduced the maximum life from 2,500 to 1,000 hours.
In order to make sure everyone complied, samples were regularly tested at a centralised laboratory in Switzerland.
Manufacturers whose bulbs lasted longer than 1,000 hours were fined.
And manufacturers who sold more than their allotted quota were also fined.
This led to problems.
Tokyo Electric, for instance, had seen sales rise fivefold since reducing the life of their bulbs.
They didn’t know whether to pay the fines or reduce production.
But cartel members were rigorous about shortening bulb life to create repeat purchase.
In a letter to an executive at International General Electric, Anton Philips, head of Philips, wrote the following: "After the very strenuous efforts we made to emerge from a period of long life lamps, it is of the greatest importance that we do not sink back into the same mire by supplying lamps that will have a very prolonged life."
In other words: "We worked hard to stop bulbs lasting longer, we must keep it up."
It was only the Second World War that brought an end to the cartel.
Companies couldn’t control international pricing and quality agreements while their countries were fighting each other.
But it does show you that making a better product can be bad for business.
Making an inferior product can actually be better business.
And, in case we feel superior, that’s exactly the way advertising works.
Years ago, we used to make fun of the bad agencies for the poor quality of their work.
We said their motto was: "A good ad is a sold ad."
That was all they cared about, whether the client bought it.
It would never occur to them to ask if consumers liked the ad, or if it worked.
"A good ad is a sold ad."
But now, that’s pretty much all you hear in any agency: "The client likes it."
As if that’s the sole job of advertising.
We don’t care if it’s an inferior product, just as long as the client buys it.
Just the same way lightbulb quality was defined by its ability to make money.
We’re not about making a better product, we’re about making money.
Dave Trott is the author of Creative Mischief, Predatory Thinking and One Plus One Equals Three.