The bratwurst rule of marketing

When the sandbox is full, play elsewhere.

In September of 2004, I went to the North Georgia State Fair in Marietta, GA. While I was there I decided to get some food to take to my wife. My wife, who comes from Wisconsin. loves bratwurst. So I went from concession stand to concession stand looking for bratwurt. There was a superabundance of vendors selling hamburgers and hot dogs as well as some other foods but no bratwurst.

I got to thinking about all the vendors who were selling hamburgers and hotdogs and how well that illustrates one of the biggest mistakes made by entrepreneurs. Just because a product or service is extremely popular does not mean that it is the most profitable for you to sell.

Suppose you did some market research and discovered that if 80 people attended an event, 70 of them would want a hamburger and 10 would want a bratwurst. Which business would you decide to get into? The correct answer is "Insufficient data." You next need to know the competition. How many vendors are selling each product? How happy are the consumers with the currst service and quality of product? What available locations are undersupplied based upon the flow of traffic? Etc. Etc.

But to simplify this illustration, let us assume that the customer base is pretty satisfied with the current quality and service and that all other factors are pretty well balanced except the number of vendors.

Suppose that there are ten vendors selling hamburgers and no vendors selling bratwurst. Statistically speaking, if you open a hamburger stand, there will be eleven vendors each selling about 6 or 7 hamburgers and because you are the new kid on the block you have a dsiadvantage which requires intense marketing.

Now suppose you open a bratwurst stand. Seventy people may ignore your stand, (although some may buy simply out of curiosity) but ten will buy your brats. This means that you will probably sell more units than any of the other vendors - AND since you are the only one selling your product, you can probably tack on an additional 5 to 10% markup on your product without adversely affecting your volume of sales.

The lessons from this are -

Just because a product or service is popular does not mean it is the most profitable choice.
Market research is key to determining which products or services have the most potential for profit.
If the sandbox is full, play elsewhere.

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