Archive for January, 2011

Finite Customer Pool

Tuesday, January 25th, 2011

Decreasing pool of customers

For whatever reason, I’ve been thinking about businesses-to-customer and business-to-business relationship. I came to the realization ultimately, even if two industries are not competing in the same market, they are still competing against each other. They simply might not have realized it yet. Am I saying that if you work in the restaurant business, you’re also competing with the guy who runs the jewelry business? Yes. Is Disneyland competing against book publishers? Yes.

The truth that is easily forgotten is the fact that every business is taps into the same grand pool of consumer residual income and time. This resource is finite. No matter what the activity, they must decide how many hours to allocate to it. No matter what they’re spending their money on, they must still make cost-benefit decisions from that pool of limited resources.

The web has changed a lot of things. It has allowed storefronts to not compete against the shops in their immediate proximity, but draw crowds from places great distances away. This means that not only are they competing with their immediate neighbors, they’re potentially competing with a company half the world away.

The web enables companies to compete globally, this means more customers, and this also means more competition. They can be making 10 folds what they were making yesterday, and then for weeks have no customers. For example, in “The Search” by the CEO of Wired Magazine, he cites a case of how a shoe company was making money hand over fist because they were the first link on Google for shoes. Then their link lost its place and instantly, the company lost that revenue flow. The modern age provides a lot of potential for income, but also comes with a higher potential for volatility.

Companies need to keep track of their industry, what type of product they’re selling whether it is luxury, or normal goods, whether they make their money locally, or non-locally, and whether or not their consumers still have the time and money to spend on their products. They’ll also need to make sure they maintain even better customer relationships because there are simply more options out there. With all this competition amongst producers, it’s a great time to be a consumer, unless that producer is paying your bills……