Good service vs. good marketing

What should you do if you stumble upon a great idea for a product with high demand in a certain market segment? Many first-time entrepreneurs have found themselves in this situation before, and most of them do not manage to turn their idea into a successful business. While there are many things that can go wrong in the process (within or beyond your control), a very common mistake you could make is thinking that the quality of your product will undoubtedly lead you to success. Unfortunately, a good product will not be enough if you don’t have a good business model backing it up.

Amongst the many people that have made the same mistake in the past is budding entrepreneur Andrew Strube. As he describes on his website, Andrew moved into a house inundated with stink bugs in 2009. He tried to find a solution for it but he couldn’t find any product in the market that worked effectively against the bugs, so after running out of options he designed and invented the world’s first indoor stink bug light trap. He had come up with a good product that worked perfectly and fulfilled a need that was unsatisfied until then. He patented his product and started taking orders online, what could go wrong?

During the first two months Andrew took in almost $100,000 in sales. However, sales have been flat ever since. Even though the start looked promising, his company did not have a good growing business model. As soon as the product was out in the market, corporate competitors developed their own, and they have now taken the entire market share with what is an inferior product, but better delivered. As a lone entrepreneur, Andrew had limited ability to compete, but with a solid business model he could have found investors or corporations willing to invest or partner with him. This happens to be a constant for any business, and is one of the reasons why branding is so important for a company: if your product is not good, you need to know how to sell it; but even if you have the best product in the market, you still need to know how to sell it! We’ll illustrate this with a couple of very clear examples.

McDonald’s, Burger King and big corporate fast food chains sell a product of very little quality. In fact, probably most of the freshers that have just arrived to Imperial clueless about how to fry an egg will be able to produce a better hamburger in a few months’ time than the one you get with your Big Mac. However, I can assure you that they won’t make as much money if they decide to start selling them. Fast food corporations prioritise their food making and delivering system over the quality of their product, and that is a business model that has proven to be successful for them. It allows them to scale up their business fairly easily and build a strong brand so that the company can grow far beyond the size of small and medium enterprises.

Let’s now look at Rolex, a company whose aim is to make the best looking, most precise watches in the world. They have been producing the best watches for over a hundred years, but the quality of their product itself would not have been enough to for the company to reach their current dimensions. They follow a solid business model that has made Rolex watches a status symbol rather than just precise watches. Their branding allows them to sell their product as a luxurious good, obtaining high margin profits for it.

As you can see, these are both examples of extremely successful companies, and what they have in common is not that they provide a good product or service, but the fact that they are driven by a good business model that allows them to create a solid brand. That being said, we should not underestimate the importance of delivering a good product, but without a proper business plan you will not be able to grow your business to its full potential.

So let’s go back to the key question: What should you do if you have a great idea you want to turn into a business? First of all you should identify your market segment (who your potential customers are) and the value you deliver to the customer. That’s what makes your product good: the fact that it fulfills an existing need and the fact that it works the way it should. You should think about how you will deliver your product: the channels through which your customers want to be reached and the relations you want to develop with your customers. Think about the resources you need and whether you can partner up with someone else that can provide them to you. By solving all these issues you are effectively elaborating your own business plan.

Finally, you will have to create a brand that people can identify, and this is the tricky bit. There is plenty of material online and on textbooks on how to build a successful brand, but you will have to make sure that this brand is consistent with your business model. You will want to focus on different areas depending on the strengths and weaknesses of your service, as well as the nature of your target market segment. Finding the appropriate balance between a good product and its successful marketing will enable your company to reach its full potential.

Maximo is a representative of Imperial Entrepreneurs. For more information see www.imperialentrepreneurs.com