Marketplace Features

Underground Economy
November 16, 2001
Illicit Market Share
RealAudio
If what you did for a living was unlawful - how would you go about drumming up business?
“Love for sale
Advertising young love for sale
Love that's fresh and still unspoiled Love that's only slightly soiled
Love for sale…”
In the fifth part of Marketplace's weeklong series on the inner workings of the “Underground Economy,” Marketplace's Stephen Henn takes a look at Marketing in Illegal Markets.
Talk to almost any drug dealer and they will tell you drugs sell themselves. While there is some truth to that, it's also true most drug dealers face stiff competition.
Curtis: “I've got to tell you right now in drug markets there is a big interest in market share.”
Rick Curtis is a professor of anthropology at the John Jay College of Criminal Justice.
Curtis: “It is definitely a buyers market -- with different companies competing for their customers. We have even heard stories about one drug dealer calling the cops on another dealer to get a piece of their business.”
Curtis says that's rare. It's much more common for dealers to pursue some of the very same marketing strategies more frequently used in selling soap. Larry Cohen's a marketing consultant with some big mainstream clients. But he says legit or illegal, the same rules apply.
Cohen: “I actually like to think of it as three ‘p's’ and a ‘d.’”
Translation: product, price, promotion and distribution.
Cohen: “The most important is product -- having a product that meets customers needs and desires.”
Just like in legit business, drug dealers compete to bring the best quality product to their customers, enhance their reputation and build market share.

In the ‘80s, New York heroin dealers created specific name brands like ‘Redstar’ and ‘Executive.’ Today, many dealers offer discounts in return for referrals. And like in the legit economy, customer service is still key.

In New York, competing drug dealers run call-in centers, offering quick at-home delivery. Others offer volume discounts -- kind of frequent flyer bonus miles for the stoner set.

Jody: “I guess they did it just because they wanted to be kind to customers.”
Jody -- who asked that her real name not be used -- worked for a company that delivered pot to wealthy clients all over Manhattan.
Jody: “It used to be that they would keep a rolling tab in their database of what everybody bought, so once you hit five or something, it didn't matter if you bought them all at once -- you would get a free one. But then they decided that wasn't paying off, and you had to buy six at one time and you would get one free.”
While Jody's pot-selling employers used many typical marketing tools, it was obvious to everyone actually advertising would lead directly to jail.

However, there is one illicit industry that does advertise and gets away with it with a wink and nod -- escorts, prostitutes and adult massage parlors market with a vengeance.

Lizzy: “I don't like to refer to it as ‘prostitution,’ but basically that is what it comes down to.”
While Lizzy, a high-priced Washington D.C. call girl, still makes most of her money in the world’s ‘oldest profession,’ she's also a self-taught marketing expert -- with a burgeoning new sideline.”
Lizzy: “I do escort consulting and agency consulting for people who want to get into the business.”
Her main message -- advertise aggressively. Buy big ads in back pages of alternative weekly papers. Operate your own Web site and link to as many adult service Internet guides as possible.

Lizzy's own homepage automatically tracks the number of hits she gets from other sites. Her clients can pay in advance online using credit cards. She estimates she spends $3,300 a year on marketing. Lizzy even deducts that cost on her tax returns.

Lizzy: “I pay my taxes as an entertainer. I could be a tap-dancing clown. Most people don't ask unless I start trying to write off lingerie, or something like that.”
With thousands of escorts all over the country spending thousands of Dollars, illicit adult advertising is big business. Jane Levine publishes alternative papers in Washington D.C. and Chicago.
Levine: “There's a lot of talk about how you get addicted to that money. It is not at all insignificant -- there's papers that have 10 or 20 pages of adult ads.”
Levine's papers each pull in more than $300,000 a year in what she affectionately calls her "dirty ads."

But while she happily takes the bucks, her papers put the brakes on the size, the layout, and language in the adult ads. Papers in New York and L.A., with a no-holds barred attitude about adult ads, easily earn millions.

Levine: “I'm pretty sure we could bring in more business. I think if we opened the floodgates, the floodgates would stay open.”
Despite the enormous amounts of money spent on this kind of advertising, the Federal Trade Commission doesn't exactly police the industry, and truth in advertising is tough to come by.

Lizzy warns that it never pays to burn a client. Especially now that some clients are using the Web to create rating services, and becoming their own ad hoc consumer advocates. There are many rating services and review services for escorts. The biggest one is bigdoggie.net., which has reviews.

One review waved off potential clients -- "WARNING - this lady will charm your socks off and then pull a rip off - stay away!"

Lizzy: “They will list your name, your Web site name, your e-mail address, and no one will touch you.”
Henn: “Is there a difference between this and selling soap or children's cereal?”
Lizzy: “Absolutely not, there is no difference at all. You create a good Product, you market it, good customer service and relations, and you will have repeat clients. It's that simple.”
Henn: “You can’t write adult service jingles though?”
Lizzy: “I guess not.”
Unless you’re in New York, where you can write an adult services jingle and air it on cable TV.

I’m Stephen Henn for Marketplace.

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