THE SUNK COST EFFECT
The Concorde Fallacy" is a case of "sunk costs". This prodigious and unique aircraft meant large investments by the Anglo-French alliance, and it was decided to move forward despite the constant cost overruns because they did not want to lose work already done and the heavy investment already consumed.
Until now, this effect has been related to the following questions:
Have you continued with a project long after you should have abandoned it?
Have you persevered with a relationship even after the point of no return?
Have you dragged yourself to an event in miserable weather just because you already bought the ticket with your hard-earned cash?
These are all examples of the “sunk cost effect,” which occurs when someone chooses to do or continue something just because they have invested (unrecoverable) resources in it in the past or even because they love the idea, and abandoning it may cause a lot of pain.
In modern marketing, this effect may have a deeper meaning.
Before, measuring the sunk cost was related to achieving less and less profit in a business; even losing money defending a project that maybe was a “star” initially with significant quota in a market that was still growing exponentially; but now, although the market is still growing, the competition grows more fierce daily and the supply channel is instead yielding less profit with less sales volume.
The cause is simple to explain: The meaning of the term "profit" needs to be changed. It is not only money-related anymore. The lack of cooperation between supply chain steps is making them forget the satisfaction of the end users and also forgetting that the real profit is 100% attached to the search for sustainability.
So, when companies in renewable energy, like solar, finally understand that end-user satisfaction will be the best way to promote the increment of sales volume towards the main goal which is to reach a sustainable world, then they will be able to avoid this sunk costs effect that is making solar business come off as "dog" products, that do not grow because almost every hour a new competitor appears and companies then get less quota in the market.
Our organization is fighting ferociously to set an Integrated Supply Chain through our innovative marketing and manufacturing Integration Coefficient IC model process, which can get factories closer to the end users emulating Collaborative Economy business tendencies, minimizing costs, and making the supply chain more efficient for the promotion of both On-grid, and hybrid solar kits; OEM battery projects, and Real Specs solar LED lamps, among others solutions.
Interested in enhancing your business? We’re ready to help you integrate sustainable solutions into your strategies. Get in touch now!
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