If Your Business Model Requires An Overly Restrictive Contracts... You Have No Real Business Model

from the that's-not-satisfying-customers dept

We've discussed in the past how consumers are gaining more power over companies these days (and how that's a good thing), and that leads to a separate, but also interesting observation: if your business model relies on denying customers what they want -- such as through the use of overly restrictive contracts -- your business model is in trouble. Thomas O'Toole has a good discussion about some recent lawsuits involving overly restrictive contracts that try (and usually fail) to prevent customers from doing what they really want to do. First, it discusses the recent attempt by MediaFire to stop the distribution of a Firefox extension that routes around MediaFire's ad-driven business model. Second, it discusses a legal fight between Virgin Mobile and MetroPCS over whether or not MetroPCS can legally reprogram Virgin Mobile phones to work on its network.

The thing that shines through in both instances, however, is that they involved companies who didn't rely on providing the best product for consumers, enabling them to do what they wanted -- but instead, relied on contracts with overly restrictive terms designed to prevent customers from doing what they want. As far as I'm concerned, in most cases, business models like that won't be long for this world. Consumers are increasingly fed up with bogus legal restrictions that try to prevent what the technology clearly allows. If you're trying to create a business model, the second you consider putting in ideas that inherently limit your consumers from doing what they want, you're asking for trouble. A smart business model enables more customers to do what they want, and does so in a way that makes everyone better off. While there are still companies who can get away with anti-consumer business models enforced by overly restrict contracts, it's not a long term strategy for success.
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Filed Under: business models, restrictions


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  1. icon
    Hulser (profile), 19 Oct 2009 @ 11:07am

    Temptation

    Consumers are increasingly fed up with bogus legal restrictions that try to prevent what the technology clearly allows.

    I couldn't agree more. One level of consumer frustration is with the level of technological progress. For example, George Costanza asking "When are they gonna have the flying cars, already?" That's bad enough, but at least understandable. But when you know that something is now technologically possible, but it's being restricted because of some misguided business model or IP law, it becomes exponentially more frustrating.

    I think that's why all of these attempts to hold back the tide of technology are (eventually) doomed to failure. Even with the threat of legal action or having their Internet connection taken away, people know that you can have more music than any normal person in a previous generation could buy in a lifetime at their fingertips. How can you expect to have a long-term business if you're relying on people resisting such a great temptation?

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