Selling Intangibles: Possible Lessons for Economic Development

Economic development is very much about selling intangibles. Maybe this article can provide some insights in how we can do our job better.

Consumers around the world last year spent $3.5 billion for cell phone ring tones. More than $1 trillion was spent for insurance, including accident, health and property.

There is tremendous revenue in things that you can't see.

One of the primary reasons is that the pricing for invisible products is more difficult to evaluate. For example, a manufacturer can determine how much it costs to make a DVD player, based on the cost of the components and the labor to make it. Based on profit margins, it is relatively straightforward to determine the cost of the product to the distributor, who in turn can properly price it for the consumer. Competitors can easily calculate those same costs and competition continually drives those prices down by decreasing production costs and profit margins.

However, aside from the Net, selling what cannot be seen can be a great business. Though there might be more, we see the selling of the "invisibles" in five categories.

- Peace of mind. These include service contracts and extended warranties. After you buy that expensive sound system at Best Buy, do you really want to take a chance on it breaking two years down the road?

Under this category falls the brand itself. Companies buy from IBM, Dell, etc., because they perceive that the company will stand behind the products. That is the value of the brand and the market position of a company. This intangible of brand causes sales of those companies' products. Insurance also falls under this category, as people feel better that they are "covered." The same holds true for security monitoring services.

- The second category is futures. Cell phone services are a great example, as people pay for a future amount of time per month. Advertisers buy future advertising time on television and people purchase future time-shares for properties.

- Then there are rights. Cable and satellite television fees allow consumers the rights to see certain programming. For extra charges, people can have more rights to see more things.

- There are ideas. Examples of the selling of ideas are portrayed in consulting or paid advice, as the pricing of intellectual property is market driven.

- Finally, there are dreams. The dream of winning the lottery or investing in the results of a future event, such as gambling that the next roulette number will be yours.

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