Thursday, July 17, 2008

Chinese Soft Drink

Please do not use the Chinese soft drink argument:

"If I sell only ONE can of soft-drink to everyone in China, I'll have $1billion in revenue!"

or, its cousin:

If we get 0.05% of the marketplace, we'll make billions!

This sounds like you are being conservative, but it obscures the issue. If you are talking about home PCs and the market for operating systems, you could say, "I just need 0.05% of PCs to buy my operating system, and I'll be rich!" Ask Apple how that's working out for them competing with Microsoft. On the other hand, if you are in a field of gold bars and you've only got enough time to grab 0.05% of the field, you'll probably do great (or, at least have one shiny gold bar).

As always, the difference comes down to the actual competitive situation in the market - and THAT'S what matters. If you want to sell a compelling story, don't talk about getting miniscule slivers of the market. Instead, talk about HOW you will get the revenues you are projecting, who you will target, etc. It's much more compelling to say you'll get 80% of a certain addressable market (and list the reasons) than say you'll get .05% of a HUGE market, but not say how.

1 comment:

TomH said...

Seth Godin has a few great posts about this, particularly this one.

It almost never works because the challenge of reaching that many people is just too great. It's too risky and too expensive. Doesn't matter that you're only hoping for a dollar or a penny. The price isn't the challenge, it's the difficulty in spreading your idea.

He proposes that any business should always focus on being the best in the world - the "world" defined as whatever market you choose, that you can profitably become the best in.