How to cheat customers and make millions

By Shreyash Tewari

About the book

This book provides a step-by-step guide on how you can exploit every entity associated with your company and squeeze out the maximum profits for yourself. Take a lead in your office politics and deliver short term gains using these unethical (but mostly legal) tactics. The examples mentioned in this book are loosely based on real incidents. You can learn from the famous controversies created by some of the best business conmen and schemers of all time, who either have managed to make their companies a monopoly or bankrupted them to make money for themselves.

 

Of course, it is a satire. So, ideally and ethically, you shouldn't follow them. But then, who am I to judge!

 

• Language: English
• Publisher: Shreyash Tewari
• Release date: Oct 15, 2021
• ISBN: 9798201127466

Shreyash Tewari

Shreyash Tewari is a serial entrepreneur heading Rockstar Chef (www.rockstarchef.in) as the co-founder & CEO. Rockstar Chef is a food delivery platform as well as a marketplace that helps restaurants set up their own online ordering system and boost their sales. He has worked extensively in the food industry, both as a restaurateur and cofounder of the corporate food-service business. He has spent more than 7 years working in the startup space. He is an IIT-BHU Varanasi graduate.

Book preview

Introduction

I was going through the news one day and thought, There are so many scandalous stories about startups and big corporations that you can write a book on how to cheat customers! Being a part of the startup world myself, I believe I have the ‘front-row seat’ witnessing the stupidity and/or maliciousness which is rampant in these companies, and the toll it takes on common people. Somehow, I felt so connected to the idea that the structure started to fall in place and take its own shape. The idea of bringing this into existence thrilled me, but soon I realized that there are a lot of constraints in writing something like this.

The biggest risk is that of being censored by the social media and the e-commerce platforms from promoting or selling this book. In today’s times, censorship by social media platforms is equivalent to being wiped out of existence. Ecommerce platforms have become a significant place for buying and selling products and I would not want to lose that either!

I also needed some degree of freedom to give you an effective narrative and storyline by joining two real incidents and creating a new hypothetical one. Of course, I cannot use the real names of the companies that are involved in these incidents. They are excessively complicated and nuanced for me to handle individually. Besides, the risk of being served a defamation lawsuit is also very high, because in real life, people have been served with an actual one for far too little criticism. Moreover, I cannot give you the exact identifiers that can lead to direct identification of those companies. Hence, it is abundantly clear that the risk of naming real companies behind all these incidents is extremely high. So what can I do?

The purpose is to tell the story. I can try to explain a particular scenario and convey the story behind the incident, keeping it as close to the real one as possible. However, I have tried my best to hide the exact financial figures or any other identifying details behind these incidents. For example, if I have mentioned anywhere that some transaction happened for $10 million, the real incident may have a transactional amount as $9.6 million or $10.2 million. So, the real number is hidden, but the amount is roughly the same. My intention is not to malign companies by tarnishing their shady past, but to convey the story of how people can get harmed directly or indirectly by their business practices.

Next, I tried to figure out the series of steps one would take to do these things. I had to make it simple enough that common people understood, without diving too deep into the practical details of the case details. It was not that difficult. All I had to do was to categorize the incident into stages and fill in the gaps.

I have deliberately chosen a satirical narrative. I felt it was the best way to passive aggressively criticize someone and discourage them from indulging in the same malpractices in the future, not that I have much hopes for improvement from the amoralistic and ruthless business world. However, I do hope that with this book, I'm able to educate people to be aware of such practices, and such individuals who can still hurt them in future.

Chapter 1

It all starts with the 'Toothpaste'

In 2015, I started my small cafe. It was a small business where my motive was to understand the basics of the food industry, find a good product, see if I could scale it, and grow from there. Willing to learn more about management, one of the tricks I came across was about a toothpaste company that was able to grow their business massively within no time. The story goes like this:

Toothpaste sales were stagnating. The company was desperate to grow its business. They followed someone's advice of increasing the toothpaste tube's hole from 5mm to 6mm. This increased the toothpaste's consumption leading to an increase in sales by 40%.

Although it wasn’t relevant to my business at the time, this looked like an amazing insight for a newbie like me. What I didn't realize then was that this trick was very dangerous for any company (in a much more mature stage) to implement, as it can lead to the loss of reputation, rapidly decaying company culture, losing market share to the smaller competitors, or the eventual bankruptcy of the entire company. Is it product optimization or is it cheating?

A closer look

So you might be thinking that the company did nothing wrong. After all, many companies make changes in the products later to fix bugs and make improvements. However, you see, this act of increasing the hole’s diameter of toothpaste packaging is not a product improvement. It is an upgrade that forces customers to consume more.

The story is surrounded by many myths since the company never publicly admitted to doing this. I have not come across the real case study about this management lesson, so somehow, I’m unsure how much of the story is true. Nevertheless, before we discuss whether this was cheating or not, let us see if we can answer some basic questions.

When did the researchers figure out how much toothpaste was good for customers?

Did the researchers at the company conduct any study that existing levels of spread are not enough for customers?

Has the customer’s value increased over the period when the size change was implemented?

You have to understand that whichever set of answers the real company can provide, there are 2 possible explanations. First, the toothpaste manufacturer made a mistake in selecting a 5mm hole and jeopardized millions of their customer’s dental health. This may contain legal repercussions, and I am sure this company would not have done anything illegal in any form. The second explanation can be that the company willingly decided to increase the diameter to 6mm just to see if they can increase sales. And it worked!

The second seems like a more plausible explanation for the series of events, in my opinion, because there is usually no sinister motive behind any of the management’s monetization measures or optimization measures. The simplest explanation often is to push more quantities of the products so that the company makes more money. The problem is that these measures are the very definition of cheating.

Definition of Cheating

A simple search result shows the definition of cheating as

Act dishonestly or unfairly in order to gain an advantage.

In our context, this means if the companies dishonestly or unfairly try to reduce the value they provide us via their products or services, that can be considered cheating. Think of it as if you were getting higher value in terms of utilizing the product’s full life, but somehow the life of the product or the value you received from the product is reduced. I’m referring to this act of value reduction as cheating.

Other Instances

Let us see how other businesses replicate this. Imagine the competitor of this company has a nearly flawless product in the bathing soap segment. If their competitors were to implement this strategy to boost sales, they can increase the soap’s solubility a bit more. Let us see if we are in that position, how we can do that.

If you are the soap’s designer (not sure if this designation exists in real life), you are now given the task of redesigning the soap so that the solubility increases but the soap should retain its original structure. So you figured that if you reduce the solubility throughout the soap, it would just dissolve so fast that people will start noticing the edges falling, large chunks of soap breaking off while having a bath, and after a few sessions, only lumps of the original soap would remain. This would be a horrible quality downgrade of your product. So what else can you do?

The problem started with the edges of the soap falling off its main body. If the edges somehow retain their shape and strength, and only the central portion of the soap dissolves faster, people would not feel much of a difference, and would just order a new pack of five. So the solution can be where the sides remain strong (because of greater thickness or less solubility). Thus, the entire soap looks the same but customers will order more of it in the same period.

Real scenarios

Now since I just made up the above scenario, does it mean that I’m wrong and companies don’t do that? I would hope you think again. In this book, I will give multiple examples and ways in which companies can exploit their customers much more efficiently than this hypothetical example and you will have no difficulty searching for similar real-world controversial cases. Let’s look at how these tactics can get replicated in other markets.

Marketplace Companies

Suppose you are operating an e-commerce marketplace. Since your platform can save credit card information, you can also figure out which of your customers have premium credit cards. You can raise prices for those customers in general. If your customer tracking mechanism is strong, you can identify them on multiple devices and maintain that markup everywhere. Similarly, an online flight-booking marketplace can increase the prices of certain flights for certain customers who are frequently checking the flight prices of that particular route. A simple food delivery provider can apparently increase the distance of the restaurant in their app to increase the delivery charges they can later apply.

Pharmaceutical Companies

Imagine you are the world’s sole manufacturer of a life-saving cancer drug. Since that drug is patented, you are protected in all jurisdictions and your competitors will not ruin your business. But, you felt that the margins this quarter are getting lower than expected. What can you do now?

Just raise the prices of that life-saving cancer drug by 55 times. Not 55%, by 5500%. People who have cancer will have to buy your medicine, as they have no choice. Insurance will deplete faster, and they will end up paying higher premiums later. Since it is patented, you can price whatever you want without the repercussions of competitors. No one can say anything to you. If you own a US based company, you may have to attend senate hearings in the future on why you have increased product prices so much, and your lawyers will help you frame a good response. Since increasing prices is not a crime, they cannot prosecute you, nor can they ban you.

The Repercussions

Although repercussions are many, the biggest one, I believe, is that the customers become aware of your tactics. Once they lose trust in you and make up their mind, you lose the chance to communicate with them. This eventually gives rise to new companies building new and improved products or services, which is a costly war for you. But, does it bother you? Nope! As long as you are out of this company when this happens, and you go out with a huge bonus and stock option rewards, it is cool.

Take the example of the toothpaste company. If this company’s customers realize that the paste coming out is too much, they will reduce the quantity of the spread after a few tries. Later they may also figure out that they used to do it all wrong, and they can further reduce the spread and save more paste. So, after the initial burst of sales, the revenue will eventually decline and become even lower than what it should have been if you didn’t implement this strategy. There is no way to make sure that the profit they made was sustainable in the long term. Should you care about it? Meh!

Let us take another example. Imagine that you are providing an app that helps your customers in trading stocks. Your customers are not the rich and powerful people; they are common people, the ones who everyone on Wall Street calls stupid money. Your app has a great user interface and people love using it because you charge no commissions. One day many of your customers ended up making a lot of money by holding one ‘particular’ stock in their portfolio and your real investors were losing billions of dollars. Since people were buying and not selling the stock, and this stock was scarce in the market, the prices kept on increasing and the institutional investors, some of whom invested in your company, kept losing more and more money. Therefore, you decided to stop your customers from buying more stock but kept the option of selling open to them instead. This act makes a lot of people lose a lot of money and your investors can cap their losses and not let them skyrocket. You ended up saving your investor’s ass and screwing your customers. Will customers forget? I don’t think so. Do you care? Nope. They will stay away from your company’s stock when it goes for IPO and you will end up losing a lot of market share in the end, to your competitors who are trusted more by their customers. Your company will never live up to its full potential, but that is a long way to go. You will liquidate most of your holdings even before your company hits the IPO anyway. So, you didn’t lose, you just ended up milking a lot of money from the company.

Characters in the book

Let me give a little bit of the background. If you are not from a startup or entrepreneurship background, you may find many terms I use in the book as huh. But you can relax. I will explain everything as simply as I can. Once you understand the story, you may feel that this is not possible, and how people and companies can do that! It is a genuine feeling, and I understand it. I have taken some liberty in explaining many incidents here and kept the narrative close to reality. I urge you to do your research. Always try to search online for relevant articles that help you dig deeper into a particular incident.

My objective here is not to be a whistleblower and report anonymously what happened where. I’m trying to find humour in it by imagining what could have happened if the incidents largely remained the same as per the news reporting. I also urge you not to take things very seriously and have a light and funny attitude towards the ‘unfortunate’ reality we are currently living in.

The ‘Protagonist’

I’m addressing this book to a protagonist who is ‘genuinely’ seeking sarcastic advice. They are primarily people who hold a position of power. You may imagine that our protagonist is a super-smart charismatic person who is hungry for success. They are highly motivated and can do anything to beat the competition or to succeed. They would prefer cheating over hard work, belong to a privileged class, and feel entitled to all the riches with no empathy towards others, be it vendors, employees, friends, or co-workers, etc. So, our protagonist is a superstar, super charming, funny, competitive guy who loves sports and is also good at it, but is a horrible team player.

You will also come across a few minor players throughout this book. These people are expendables, the spineless sycophants of their boss. They do not have a conscience and act blindly to whatever the protagonist tells them. Think of these people as the yes men you see in your office every day. I am confident that you know at least one such person in your office.

Where will you find them?

They rise up the ranks very easily. Therefore, I feel you can find them at every major company’s top management. They either are the leaders or are well absorbed in the leadership positions of the biggest multinational firms. These can also be at the lead position in upcoming heavily funded and ethically compromised startups. There are very few examples of people who started their company genuinely, and along the way, when they became millionaires, they lost their morals and kept on doing things that were exactly against what they started building in the first place.

What do they want?

Winning at all costs. Since they are extremely competitive, success is their primary goal. Even if they end up winning and becoming successful,