Overhype

by Mike Masnick


Filed Under:
bottom up, sales, top down



There Are Numbers Less Than 1%

from the reasons-to-buy... dept

I've pointed out in the past, that any time you hear a company talk about their business model in terms of "if we only get 1% of that market... we'll still be huge," you should run away (and, it's even more ridiculous when you hear some talk about 10% or 15% of a market). This is top down thinking, but it's not how businesses work. There's no guarantee of any percent. Instead, any business needs to focus on bottom up reasoning -- explaining why the very first person will buy. Then the second. Then the third, and so on. Taking the top down approach is wishful thinking. It's making a huge assumption that people will just buy. Taking the bottom up approach is actually building a business. It's recognizing who the customer is, what they want and how to best get it to them. It's tempting to do the top down approach, because it looks so tantalizing and easy. But business isn't easy. It's hard work.

I'm reminded of this, with a submission from JohnForDummies about a Derek Sivers blog post, discussing a musician friend who took out an ad in a magazine with 1 million subscribers, repeatedly saying:
"If only one percent of the people reading this magazine buy my CD... that'll be 10,000 copies! And that's only one percent!"
But, as the musician learned there are numbers much smaller than 1%, as he ended up selling just 4 copies of the CD.

This is, in some ways, similar to the give it away and pray business models that we sometimes see people trying. Giving stuff away for free is a good part of a business model, but it's not an entire business model by a longshot. Anyone looking to use free as a part of a business model also needs to go further and do the hard part, the bottom up part, where they figure out how they're going to get anyone (not a percentage, but specific people) to actually find something worth paying for on its own. Because $0 from a million people is still $0. But, reaching 1,000 people with something of value that they want and can't get any other way... that's the start of a business model.

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  1. identicon
    Freedom, 29 Sep 2009 @ 11:22am

    Great Article...

    One of the great things about a world economy and the Internet is the increased access you have to a huge customer base. This leads to this thinking of if I can just get x% to buy, I'll be a huge success.

    I know for any idea that I come up with in my business. I just start "pitching" it around and see the reaction. When the reaction is good, I push and mold a bit more and so on. When the reaction isn't, I just drop it. I take the old - throw enough cr*p on the wall and some of it will stick. What I don't do though is spend major money pushing the idea until I already know the results.

    What is interesting is that even in big companies that have the money for multi-million eye ball advertising, they ignore the base question a lot of times before jumping into the water - why would someone buy this.

    One of the biggest mistakes I've seen successful business owners do is assuming that just because they think something is a great idea, product, whatever, that everyone else will as well. Once you've been successful at a business venture you tend to have some spare cash and you typically push forward using cash instead of seeing if the product is actually something that people want. They in essence use cash as a crutch and assume that since they were successful before they'll be again and with cash they can ignore the obvious market issues until it runs out.

    Freedom

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