Start Up Blog

Every product or service has 3 price tags. We’ve been trained to focus on the first. Occasionally we consider the second and the third has been largely ignored in the post war era. I am sure there is some kind of economic model developed at Harvard to explain this phenomenon, but I’ll give you my simple version instead.

1^st Price Tag: The cost of purchasing the good or service. Usually represented in a dollar amount.

2^nd Price Tag: Cost to use, maintain or hold the product or service. The dollars you need to spend on it to get the value in use.

3^rd Price Tag: The wider environmental, social or personal cost. 

The 3 price tags don’t live on separate islands. Just like any complex economic, social or biological system they all interact. Think Newton’s 3^rd law. (yes, deep down I am a nerd) Unfortunately, for the last 30 years most companies, brands and governments have ‘pretended’ that this isn’t so.

What an opportunity. There is a myriad of ways we can leverage the 3 price tags. The first of those being to admit an interconnectedness.

Toyota have done an amazing job on this with the Prius Hybrid car.

The 1^st price tag is a premium ($40k-$50k), but it more than pays off on the 2^nd (1200km per tank of petrol) and 3^rd price tag (90% less emissions). Both of which beat every other car on the market.

No surprises that Toyota cannot keep up with demand for the Prius. Never ran an advertisement on TV either! Interestingly it’s the 3^rd price tag that makes the emotional connection with consumers. There’s a 3 month waiting list for a Prius in an Industry which is constantly announcing plant closures, mass redundancies and financial disasters.

Ok, you don’t have to go out and save the world to leverage the 3 price tag insight. It’s a reality in all product and consumer segments. Entrepreneurs who build a strategy considering all the 3 prices can really have an advantage - a path to market.

Which industries are currently ignoring price tag 2 and 3? Maybe you can be first in that market with this insight and give them a marketing lesson.

What have we paid for what we have got? The higher the price the greater something is valued. This price is not always monetary.  

• 3 years study for a degree
• 9 months carrying a baby

• 25 year mortgage for your home

• An hour a day in the gym for a healthy body

If you want to dance, you gotta pay the band.

Remember the rich kid at school. She didn’t seem to value things we would have treasured. If we’ve paid little or nothing at all for something how can we truly value it? There must be consideration.

In start up land, we need to remember the consideration we must give for chasing our dreams. We need to remember this when obstacles keep getting in the way, and when we have little cash (if any) coming in.  

I found myself, wandering around the CBD of Melbourne Australia searching for gifts. I justified the spending spree with the ‘creating employment’ argument.

I found it particularly insightful. The most dramatic social trends can be evidenced during the Christmas shopping rush. It’s the only time in the year when the majority of the population have their consumer behaviour on display simultaneously. The sheer weight of the numbers in most retail districts ensure a ‘robust sample’ of behavior.

Here’s some things I noticed:

Music Shops. Absolute ghost towns. No surprises here. An idea for all you record companies: Take a class action against the world! A prediction for free: the DVD sales keeping your boat afloat are about to disappear into the ether also.

Gaming Shop EB. Packed like a music shop would’ve been in 1986. Of which 80% of the sales were gong to PSP, not Xbox, not Nintendo, not PC games. How has their hardware delivery shielded them from zero cost digital duplication and how long will it last?

Surf Shops. The age of the hodad has never been stronger. It is all a matter of strong and continued brand investment. (non of which has ever been on TV) This industry was born in the early 70’s and  really hit it’s straps in the mid 80’s. Beach Culture, just like Music Culture hasn’t gone away, they’ve just adapted and innovated better. Once upon a time a surf shop had Surfboards, Wetsuits, Boardshorts and a few surf branded t-shirts. It was a manly domain. Now the store was 80% teenage girls. The power of vicarious living. Today a surf shop ranges, shoes, $20 rubber thongs, Bikini’s, every clothing item imaginable, DVD’s, all surf equipment, watches, jewelry, school stationary, wallets, luggage…I have to stop. Generation Y simply can’t get enough of this surf branded fair. Chances are they are spending 4 weeks McDonalds income on their friends and families for Christmas presents. Charging ultra premiums for textiles made in China must mean shares in Quiksilver and Billabong have a way to go yet.

Myer Department Store: Miss shop was dead (they all must be at the surfshop). In fact the only really busy area in Myer was the electrical and beauty departments. Beauty and fragrance was really happening. They even had a DJ doing some mash ups and make up artists helping their customers live the dream. Great Theatre, no discounts.

Entertainment: The mall was filled with buskers all of which had great crowds. The need to be entertained won’t ever go away. The smart retailers know this and were using this insight as a part of their retail offer (see above)

Coffee: It was over 30 degrees, but everyone still wanted their latte. Lesson: seasonality can be overcome with great marketing.

Borders Books. Books are not just about reading. A book is a trophy, that sits nicely on a coffee table as a sign of intellect. The line was 50 people deep. (I counted). The physical element of book retailing can still be an advantage retailers. Many consumers don’t know what the are looking for until they see it. it’s hard to d this on line. Borders also had a really smart offer providing a $10 gift voucher for spending over $50, but it has to be used in January.

Credit: Everyone was using their credit cards. I hardly saw a dollar note the entire day. Which could mean a number of things. They could be using their 55 days interest free. Perhaps they are spending beyond their capacity. It is my estimation that many will worry about the credit card bill when it arrives. This was especially prevalent with the Want It Now Generation Y. How many bank shares do you own?

I have to stop or this blog entry will never end…. 

We must ask ourselves: Which of these insights can be used for investing and start up purposes?

By the way, all the things we noticed are yet to be reported in any financial newspapers, or research reports just yet. Get out there and go trend watching.

It’s easy to forget the number one rule when ensconced in your start up – the Single Minded Proposition. So many good ideas…. You have to forget them all except one, and own that in the mind. In case you’ve forgotten here’s a good reminder of a great product with a totally single minded offer:

                 The Postage Stamp    

It does one thing from start to finish. There is no confusion in the consumers mind. It does this thing until it reaches its destination. Stamps have been singled minded champions for nearly 200 years.

Sometimes it’s what your brand doesn’t offer that matters.

Financials follow behaviour. The action of people always comes first. The best way to understand the numbers is to know the behaviour that will lead to them.

When you read the financial performance of a company, they’re really reporting what people did, not a set of numbers that live in isolation. This may sound like a ridiculous reminder, but in financially obsessed world investors, cubicle dwellers and entrepreneurs alike often forget this. When we remind ourselves of this fact, you can not only predict the future, but you can create it.

You need to know your internal numbers and profitability. But if you’re trying to predict your start ups fortune by owning the numbers, then you’re really just counting chickens…

Once upon a time I thought it would be a good use of my time doing an MBA. I was quite into my ‘career’ and thought that this would enhance it.

It still can in enhance career prospects in some organizations. But before you embark on upwards of a $30,000 investment and 3 years of your spare time consider this. MBA’s are only a ticket to the ball game, and if you’re an aspiring entrepreneur this ticket is not required.

The fact is MBA’s were designed for management with a non business undergraduate degree to enhance their business acumen. They are essentially undergraduate course work regurgitated. Add to this the fact that everyone in conglomerate X already has one and the point of difference it once provided has disappeared.

In a web 2.0 world marketing & entrepreneurship are moving so fast, University course work simply can’t keep up. I think we’re better off following todays leading thinkers (all of which have blogs) and taking a vocation of business related learning. If you really want to stand out, learn another language, learn how to build an e-commerce website, be a leading thinker on social trends

By the way, the name is a giveaway: Master of Business Administration, not Master of Business Strategy… and who wants to become an administrator?

There’s a 50% chance of success and failure. Half of what happens depends on what you do, half depends on the gods.

Worry about your 50% and know that the other 50% exists.

Life is half preparation and half chance. You can’t plan for everything becasue the world is in a constant state of flux. Put simply, things will work or they won’t. That’s fine, so long as you remember, the more often you go in to play, the more chance you have of things going your way.