Saturday, 7 March 2009

Misery as business model


"The worse the economy gets, the more money I make," is my ideal of the perfect business model. Everybody is able to make money when the Gross National Product is growing a 4% per year, but the real challenge is to keep your customers when money is tight.

During the last twenty years, marketing thinking seems to be focused on the fringes of the mass market. This selective approach has received different names, such as "niche marketing" or "speciality marketing."

Focusing your marketing efforts on your most profitable or most accessible customers is a clever sales strategy, but I doubt that it can be elevated to the category of "business model." Small thinking usually remains small until in shrinks into oblivion.

The theory behind niche marketing is that it is better to be a big fish in a small pond, that just another player in the huge ocean. Interesting point, but is it really true? Let me put forward some strong objections to the prevailing ideas:
  1. During economic downturns, small ponds tend to dry out fast.
  2. Providing solutions to a restricted number of customers makes you highly vulnerable to criticism, whether fair or not.
  3. How solid is the future of a business that supplies nice-to-have products instead of products that meet essential needs?
  4. Do you want to peg your professional future to the success of a specific fashion?
  5. Would you invest your savings in funding an enterprise that provides solutions to non-pressing problems?
In these difficult economic times, we are watching niche companies and speciality retailers go bankrupt one after the other. On the other hand, enterprises that cater to essential human needs are staying afloat due to their ability to generate repeated business from a stable pool of clients.

What conclusion can be drawn for someone who wants to start a business? Forget about niche markets and focus on fundamental problems. Look for misery, look for a problem that annoys and irritates people. If you can solve that problem for a fair price, you have found yourself a solid business model.

[Text: http://johnvespasian.blogspot.com]

[Image by Jule_Berlin under Creative Commons Attribution License. See the license terms under http://creativecommons.org/licenses/by/3.0/us]