THE GOLDEN RULE: A successful business without customers

SHARE   |   Sunday, 25 January 2015   |   By Nelson Letshwene

Every investor is always looking for businesses that can bring in hassle free money. I was listening to a Money Planet podcast on my phone when the idea of a business without customers was discussed. Their point was about how a successful gym business is supposed to run. It is supposed to encourage people to sign up for membership say for a year, but essentially discourage them from showing up at the gym. If all the members showed up at the gym, there won’t be enough space to accommodate them. So, it’s a good idea for the gym business if they sign up, but never show up. A restaurant would collapse if its customers did not show up, but a gym prospers when customers don’t show up.
This led me to start thinking about other businesses without customers. I subscribe to Time Magazine for example, which is a weekly magazine; but thanks to our postal services, I never get my magazine on time, and then I get a whole pile for the month in my mailbox. I tried to unsubscribe but then they came up with the App which I can download. You can’t subscribe to the App alone. You must subscribe to the print edition, and then get the App “for free”. The reason for this is that their advertisers will only pay as much as they do, as long as they have millions of subscribers in print.
Other businesses that would prefer not to have to service their customers, but collect their money include the security companies. They have to sell as many alarm units as possible, and then sign up as many households as possible to the 24hour monitoring system; and then pray that no alarm ever rings. They keep a small unit of patrol men. If all the alarms in the city went off, there would be chaos. So, it’s a successful business if the customers never press the panic button or ever call.
Many hotel chains also sell packages where you can get a free night in one of their hotels if you paid an annual membership. The money is made by driving up membership into the thousands, and hoping that they don’t all show up at the same time.
Think about the technology industry that sells you a gadget, and then sell you an extra three year guarantee on top of the manufacturer’s warranty. They know that before the manufacturer’s warranty is over, a new gadget will be out and you will want to upgrade, at which point they will sell you a further guarantee, which you will never need for the same reason that you never needed the first one.
See how cellphone companies get you excited about sending an sms to them just so that they can take your airtime, and then you are back buying more airtime from them.
The key to being able to build businesses like these goes with understanding consumer behaviour. Many business people don’t take the time to understand their consumers. A course in consumer behaviour might change this.
Reading this as a consumer gets you to think whether you are giving money away for free; and reading this as a business owner or entrepreneur must get you to think of ways to collect more money from your customers. If you examine these, they have to do with subscriptions, premiums, and the law of numbers. To your success! Follow the blog on www.thegoldenruleblog.wordpress.com or follow me on twitter @101silverline



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