Tuesday, December 16, 2008



A. Identify a Need and Fill It at a Price the Market Sees to be a Good Value
When asked what he’d do if he lost his wealth, Henry Ford said he would simply identify an unmet need, fill it for what people believed to be a good value, and he’d have his fortune back quickly.

Remember an online business is still a business, and all the fundamentals still apply.

Yes, the internet’s unique advantage is that it lets you spread information very cheaply and quickly. This has transformed numerous industries that prospered because they had control over that information. For example, almost any kind of brokerage or communications media business has seen its traditional revenue sources cut or disappear.

Those that have survived or prospered found other ways of providing value.
B. How to Create Perceived Value
Forget about trying to define the true value of anything. What matters is how a real buyer that can pay sees the value. There are different ways to create perceived value in your product or service. The usual ways include:
· Quality: product is perceived as better made, better looking, more durable, better performer, etc. For example, BMW or Rolex have lots of cheaper competitors, but these are perceived as better performing, better designed, more durable, etc.
· Price: offer a cheaper substitute of acceptable quality.
· Convenience/ease of use/ ease of availability, fast delivery. For example, fast food, private delivery services, or any kind of food sold in public venues like stadiums, train stations, or convenience stores.
· Reliability, trustworthiness: For example, anyone with an established brand name/goodwill/reputation can charge more because people trust them. Franchise businesses, name brands are classic examples.
· Uniqueness/difficulty of duplication/barriers to entry into the business. Examples include: businesses with unique or patented technologies, publicly sanctioned monopolies like electric utilities, or businesses violently protected and dominated by organized crime.
· Prestigious: prestige = desirability x [limited availability]. Desirability here usually comes from perceived high quality, for example luxury cars or homes. But prestige is not always directly linked with money. For example admission to perceived top university programs, teaching positions, or government jobs. Being chosen is what confers prestige, not the cost or compensation.

C. Finding That Unmet Need: A Truly New Idea Versus a New Twist on an Old Idea
· Examples of a New Twist on an Old Idea: Japanese cars offered better value, reliability, and fuel economy. Starbucks added quality and variety to coffee. Franchised fast food offers a low cost, trustworthy, tasty meal.
· Examples of Something Truly New. The electric light bulb, the first cars, personal computers, etc.

Usually faster to find an existing product and add one or more or the ingredients from section B above.

No comments:

Post a Comment