Last year, when you and I went to the One World Observatory, we saw that famous tourist location—the penny crushing machine. We watched a tourist put her penny in the machine and then added in a dollar. The machine then crushed the penny into a medallion that she could take home as a souvenir. Your quite reasonable reaction was, “Why would you pay a dollar to have your own Penny crushed?”
The way you were looking at it was:
- Initial valuation: $1.01.
- You start with a penny and a dollar.
- Then you put a dollar in a machine that crushes the penny.
- You get back the crushed penny.
- Final valuation: $0.01.
- Result: You feel like you’ve wasted a dollar.
But I think the crushed penny is a pretty good value. To undertand why, let’s understand the job that the crushed penny is doing. When most people think about products, they think about the product itself, i.e., I’ve taken a penny and gotten a crushed penny. But people don’t buy most products just to own them, they hire products to perform a job. The famous Harvard marketing professor Theodore Levitt used to tell his students, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”(1)I also really like this version from UserOnboard which is that a product is something that gives you superpowers.
Clayton Christensen, of Harvard Business School, and Scott Cook, CEO of Intuit, introduce the concept in their article Marketing Malpractice: The Cause and the Cure. I’ve paraphrased some key parts below.
A hypothetical fast-food restaurant is looking to improve sales of its milkshakes. Researchers observed that in the afternoon parents often bought milkshakes, in addition to complete meals, for their children. What job were the parents trying to do? They were exhausted from repeatedly having to say “no” to their kids. They hired milkshakes as an innocuous way to placate their children and feel like loving parents. This was expected and a well known job that milkshakes perform.
However, one researcher was surprised to find that 40% of all milkshakes were purchased in the early morning by customers driving alone in their cars. He found that most bought it to do the job of making their drive to work more interesting and keep them satiated until noon.
So the milkshake is doing two completely different jobs. With children, the milkshake is a competitor to a toy or candy. However, as an early morning snack, customers may buy a bagel, banana, or donut instead. The key point here is that the milkshake can be hired to do completely different jobs, meaning that it has a very different value depending on the context.
Getting back to my crushed penny. I want it to do the job of a souvenir, providing a physical memento of the trip that the kids can buy and keep. The alternatives are a t-shirt, a stuffed animal, or a postcard. It would be hard to find a souvenir for my boys for cheaper than that.
So I’ve talked to my kids and we agree that the crushed penny is a good souvenir. But how can we make it more valuable than another typical item they might get at the souvenir shop. That’s where the elongated coin album comes in.
At the One World Observatory, you asked me why anyone would buy a case for these crushed pennies. “It’s even more useless than the crushed penny!” you insisted. But the album has a wonderful purpose. It lets my boys keep their crushed pennies in a safe place and makes sure they don’t lose them. It turns a crushed penny into a treasured collectible and makes the kids into official crushed penny collectors. Then, when they are deciding between whether they want the crushed penny or an expensive souvenir, we can have a discussion on what we’re likely to keep around longer and value more. The crushed penny and album should do well in that fight.
I agree with you that crushing a penny for $1 is not a worthwhile exercise. But creating a token souvenir at every tourist attraction we attend for $1 in lieu of something we’d just lose is a great deal! Buying an album is a drop in the bucket and makes each penny that much more valuable to the kids.