Five Minutes With Jack Ramblings Of An Insane Internet Marketer

August 15, 2010

Episode-23- There are Only Two Types of Products

Filed under: Podcast — Tags: , — JackSpirko @ 8:35 pm

I can hear you now, “two types of products, nonsense!”, but alas it is true.  Of course you could make a list of soft products, hard products, consumer, b2b and keep going.  Paper, metal, plastic – on and on right.  In so many places and so many sectors you can go down list after list and I have the arrogance to tell you there are only two types of products?  You are damn right and I will prove it to you too.

When you want to master something as complex as marketing it is more about how you think than what you do.  Thinking lets you create campaigns, cease opportunities and find success when your competitors are falling on their asses!  To think effectively, you must first get rid of clutter and evaluate your world in the most simple terms possible.  Complexity comes later as needed and only as needed.  The fact most people don’t get this is why so many really smart people can’t seem to find their own asses in a dark room.

So what are the two types of products as far as a marketer is concerned, they are….

1.  Needed

or

2. Desired

Needs are the market most people think they want to be in but it is the worst market in the world for the small player.  Needs (in our modern world anyway) are food, water, electricity, gas, phone service, etc.  These markets can make you money but only as a cog in the machine you can never really own them as a small player.  The cost of entry into the “food market” (note I mean the general food market) is so steep and margins so thin as to be a playground for the rich kids where you are not welcome nor can you afford the tuition the school anyway.

Desired products are things people “want” vs. “need” and while you are smart to not focus on wants in your home when balancing a budget it isn’t what most consumers do.  In the middle of a recession people buy custom surf boards, fancy running shoes, the latest fashions and movie tickets.  No one needs these things, they want them.  Hence margins are higher, niches more defined and opportunity much larger than in the needs market.

Understanding this lets you even play in the “needed” world while selling to the wants.   Take food for instance, try to compete with a new grocery store selling random crap from Kraft, Heinz, etc and you will get steam rolled.    The best you can hope for is killing yourself to set up one or two “successful stores” in towns so small the big chains ignore them.   If you want to try it in Jacksonville, Dallas, Atlanta or LA, you better have a billion dollars and you still an go broke if you don’t get it right.

Now turn it around though and sell a food (need) that is specialized to a desire (want) like say locally produced honey.  No one needs it, no one, seriously it has benefits but I don’t need it and neither do you.   Yet because people WANT it they will pay 2-3 times more than they will for SueBee’s honey on the shelf of a Kroger or Albertson’s supermarket.

The lesson here is bigger than just sticking to selling what people want vs. need, it is also about what I call “selling to the want” vs. trying to convince your customer that he needs what you are selling.  In the end I will put it this way; people blow money on what they want, they are cheapest when it comes to filling a need.  Most will drive an extra block for 3 cents off a gallon of gas but not bat an eye at a well made late or nice glass of red wine.  So always sell to the want.

Tune in next time when I reveal the only three classifications of  desired products.

  • Like or Dislike: Thumb up 0 Thumb down 0

    I like this model.

    Lately, I’ve been trying to “get” economic activity and rid myself of limiting beliefs, so I’m creating a hacker’s model of the economy in order to get into a mindset where I can start understanding wealth and such better. Am still working on this but here are some metaphors:

    cash flow = bandwidth

    money = bits & bytes

    value = intangible quality that compels people to exchange bits & bytes

    employee economy = 300 baud for crap job, 56k for decent, ISDN or ADSL
    for high status…. still it’s just a frakking
    modem

    corporate economy = tap into Internet backbone

    become ISP = become employer

    0-day vuln = unexploited market niche

    franchise = viral license (GPL)

    taxes = QoS (ie reshape traffic for policy reasons)

    regulations = firewall

    ads = SETI@home etc (ie get people to give u their bandwidth)

    social engineering = sales

    port scanning = analyze competitor

    savings = RAID

    outsourcing = botnet

    credit = extra servers in cloud

    linkbait = honeypot

    4hww market testing = regex

    different ways of exchanging value ie banking, investments, B2B, B2C,
    barter, retail, info products, etc = network protocols

    different business models = programming langs

    basic societal/economic institutions = Unix base utils

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    Glad you liked it, wait till the next episode I think I will really floor you with it.

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    One minor nitpick is that the need/want division is somewhat arbitrary, for instance with cell phones which you say are a need now. I get what you say, here are some other ways of framing it:

    hypercompetitive businesses vs differentiated businesses

    quantitative businesses vs qualitative businesses

    margins vs ideas

    mass production vs craftsmanship

    big pond vs small pond

    “infrastructure”-level goods (food, water, cellphones, medicine) vs “application”-level goods (computer games, e-books, concert tickets, Star Wars figurines)

    short tail vs long tail

    demographics vs niches

    I am very cautious with analogies and models these days though (a byproduct of reading too much R.A. Wilson, heh). For instance it has been said that “at a certain point, enough quantitative change becomes qualitative in nature”. The need/want model is a GOOD model, don’t get me wrong, but as always we shouldn’t let it shut out options. Sure, starting a need based company is probably going to be a stupid choice 99,9% of the time, but there is still going to be advances made here, even by the single individual. W.E. Deming’s management philosophies, which revolutionized Japanese industry, comes to mind here. If you can invent something like that then you CAN dominate a need business.

    I have a theory lately that to become a millionaire you go into the want market, to become a BILLIONAIRE you should think seriously about the need market. We have an article on this topic in the upcoming issue which I think you will enjoy.

    Sorry for rambling so much 🙂

  • Like or Dislike: Thumb up 0 Thumb down 0

    Ramble all you want but all you are doing is complicating the simple. The entire point is to strip down to the most simple and learn how to think.

  • Like or Dislike: Thumb up 0 Thumb down 0

    In hindsight, I agree with you. I have a tendency to often seek more complexity than is necessary, which is not useful.

  • Like or Dislike: Thumb up 0 Thumb down 0

    To be fair it isn’t that your are wrong you were just missing the point of simplification.

    Cell phones = communications = need

    But applications for cell phones = want

    Software to improve phones = want

    The next innovation in cell phone entertainment = want

    Make sense?

    Also billion to be made in the needs markets is correct but you have to be a millionaire before a billionaire unless you inherit it or pull a Mark Cuban.

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