Zach Matthews
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Word is that the organizer of the event fished it with one of his wealthiest clients, won the tournament, won the Calcutta, and generally fell into the ‘reasons-why-the-host-doesn’t-compete’ territory in just about every way possible.
I’d either go to the Big Hole C4 Lodge in Twin Bridges, Montana (fish the Beaverhead, the Big Hole, the Ruby, the Jefferson, and the Madison–all in a week): http://www.bigholec4lodge.com/
OR
I’d go to the Crescent H Ranch in Jackson, Wyoming, and fish the Snake and their private water: http://www.crescenthranch.com/history.php
[media]http://www.youtube.com/watch?v=xvmZ9SPcTzU[/media]
I still have a limited number of brown cotton caps and darker brown waxed cotton caps; I also have a couple of the gray t-shirts left.
Mark –
It’s a technical discussion; I wouldn’t honestly understand it at all if I hadn’t been involved in the insurance world so intimately. When I say in the letter that the rodmakers have been prevented by the market from setting a proper reserve, in plain English that means that they haven’t set enough back from the beginning to cover their future repair costs. They could either (a) take more of the initial money they make from the rod sale and set it back for repair costs, while leaving the price alone, thus impacting their profits, or (b) raise the prices so that they can take enough to offset their future liabilities.
By undervaluing the costs of repair, then charging a somewhat higher deductible when they do get a broken rod that needs repair, they are offsetting the averaging problem I discussed at the end of the letter. Since they don’t take their full costs of repair up front, when they initially raise the price of the rod to cover their future expenses, they are only getting *some* of the money necessary to fix that broken rod from all the non-rodbreakers out there. Then when the broken rod comes in, they get the rest of the money they need from the rodbreaker in the form of the higher deductible or “service fee.” This has the effect of making the actual rodbreaker responsible for a bigger piece of the pie when it comes to costs to repair his rod. However, the rodbreaker still gets some benefit from all the money that non-rodbreakers paid in to the rod company by buying warranties that they don’t use.
Mathematically: if the “warranty” cost of the rod is $75, everyone pays an extra $75 when they buy the rod. If the actual costs of repair are $100, that leaves a $25 gap. The manufacturer could either raise the price of the rod to, say $80 and then average that out over all their sales to make up the $25 gap on the repairs that do come in. Or, they could leave the price alone, and just charge the actual rodbreaker the fee necessary to make up their gap. The burden borne by the whole market is thus reduced somewhat, and shifted to the pocket of the actual rodbreaker. The most extreme possible example would be if the companies offered no warranty and simply charged full costs of repair; then the rodbreaker would personally bear the whole burden for getting his rod fixed. As it is now, it’s a hybrid system with everyone bearing most of the burden and the actual rodbreaker then picking up 100% of a little remaining cost.
It’s not easy, dude; this isn’t stuff most rod companies talk about with their customers, but I bet the businessmen on the board will find all this pretty familiar.
Zach
Hey Mark –
I want to address you specifically because you’re a shop sales guy. Not to pick on you; you just raise some common objections that I anticipated.
You mention that the warranty is a selling point in moving the rod. The point of my letter was to illustrate other ways to get the rod covered against breakage, aside from the rodmakers themselves. The end result to the consumer, whether he breaks a rod and files a warranty claim or he breaks a rod and files an insurance claim, is the same: he gets his rod fixed.
From your perspective as a shop guy, the sales advantage would be that with insurance, the customer also gets protection against loss or theft. Assuming the insurance is offered as a package deal at the counter (maybe that would happen, maybe not, but it’s one scenario), then the presentation would be this:
“Hey customer, on the one hand, you can pay $675 for this rod and get a manufacturer’s warranty that will cover you against breakage alone. On the other hand you can pay $675 for this rod and get an insurance policy that will cover you against breakage, loss, and theft.”
Which does he buy, A or B?
There are legitimate reasons why it might not work out that way. The #1 roadblock is the over-the-counter sales scenario. Selling an insurance policy over the counter (or selling a 3rd party warranty company’s policy) doesn’t really let the customer tweak the system to his advantage. The advantage comes when the customer goes to his local insurance agent and buys rod coverage attached to his existing home or auto policies. That’s when the insurance agent is willing to oblige the customer and cut him a better deal. The over-the-counter insurer may not have the same incentive.
The smartest possible move for a buyer would be to buy a warranty-less rod for a discount, then insure it with a personal articles policy through his own insurance company. Then he gets coverage against loss, breakage, and theft, with no deductible, for less money than he would have paid the rodmaker for the warranty.
Zach
Tim –
I haven’t gotten any hard numbers from anyone, but $75 was intentionally conservative based on what I have been told.