SPEAKER_00 0:16

Okay, today men and I would like to face and discuss the challenging question: does anyone really want what you sell? Because really the underlying demand is kind of our first port of call when we're really thinking about a business, a business's ability to grow and scale and produce consistent profitability. Because at the end of the day, if you have weak demand for your product or service, then it really doesn't matter how strong your business engine is, can have a fantastic reach strategy and really make every Australian understand, you know, who you are, what you do, all those sorts of things. And you can hire the best team. But if no one really wants what you're selling, then you're still going to have a mildly successful business, even if you can nail all those other factors. So really what you need to be able to do is articulate very succinctly and simply what problem are you solving and for whom. So that means you've got to have a target customer or target customers, could be a couple of different cohorts in mind, and really articulate clearly how you solve it and how you're solving it differently to perhaps your competitors. You know, sometimes you see on Shark Tank or these sorts of shows where people do business pitches, you know, they'll come up with a better mousetrap, you know, a product that's redesigned that might save a millisecond or maybe look a little bit better or, you know, do something a little bit different. But there's a lot of these that fail because, you know, they're not really solving a problem. They might be nice to have, they might look a little bit nicer, they might work slightly better. But, you know, for people to change their behavior, for people to, you know, buy consistently, for people to pay a higher margin so that you're able to generate a profit a better profit margin, it has to be compelling. The value or delivered by the product or service has to be compelling relative to their existing arrangements. So we really got to work out, you know, is it a nice to have or is it a genuine solution to a known problem? And also a really good question to ask ourselves is what's the cost if the customer doesn't buy? So if they don't use your service, if they do it themselves, or you know, if they use their own existing kind of workaround that your product sort of solves, what's the cost? You know, what's the friction? What's the financial cost? What's the emotional cost? What's the status cost, risk, all these sorts of things? If there's no cost, you know, if they're if that you've got a problem to, you know, if you've got a solution looking for a problem, that's a better way to say it, you know, you're ultimately not going to have it's going to be difficult to build a really sustainable business. So really we want to look at the underlying buyer motivation meaner.

SPEAKER_01 3:01

That's right, Stuart. And I really probably laid this out in really three tests. And that's it comes out to urgency, frequency, and affordability. Urgently refers to how urgently the customer actually needs that solution and how often they'll buy, so the frequency of it, and whether they can actually fund it to when the need arises. Now, we've used the example of GPL or GP GLPO1s, for example, in the last podcast. And that that's a really good example when it comes to this. It's the customer urgently needs to find a solution. They're overweight, they're not happy with their looks, they affects their health, whatever it is, and they need to frequently buy it. Okay, because it's not a one pill and it's all all fixed. It's a fact that it's an ongoing measure. It's an ongoing measure to help them sort of lose weight and mitigate their their health and and aesthetics and so forth, and then they will fund it, they'll find a way to fund it. They'll define the product as an urgent requirement. So a customer says yes today only when doing nothing makes things worse. So basically, if in that situation with the G GLPO ones, if they do nothing, they're just gonna consistent consistently be unhappy with the way they look, they're gonna continue to be unhappy, for example, and they're gonna look for a real trigger event rather than it's being of general interest. Now, conversely, if I think about something with a low frequency, so if you think about, for example, a legal practice and you're starting out a legal practice. Now, when it comes to law firms, it's very transactional work, okay. For example, if you're a conveyancing practice or you've got a conveyancing arm, not everyone's if you buy a property today, you're not doing that on a weekly basis or an annual basis. There's a generally a life event that occurs once, and then you just got to wait for general referrals or the brand to bring you more business inwards. Very, very different to if you've got an urgent need for something else. So, in those types of businesses, the model completely changes. You really need to sort of sharpen the pencil around your reach, your target, and understand how you're actually going to build that brand recognition and get more business through the door. So when you're marketing something new, it's really important to ask yourself do they have the budget for the problem that you're solving? Can they fund it at that point in time when the need hits, or does the purchase require years of saving, such as, for example, of private school fees? Now, I would argue that there's always a strong demand for private school fees for but for the general public, it requires a lot of savings, a lot of sort of work to get into the right areas and so forth. So it's really understanding what what you're trying to market and how you're going to get to that target customer. Now, the hardest version of the demand problem is where customers don't want or don't know what they want just yet and what the problem is actually is.

SPEAKER_00 5:40

And that's a really important one, Mina, really to understand do I need to educate my target customer base about what the problem I'm solving or do they already know? Here's a bit of a crude example. Like if you're running a funeral parlor, a funeral service, you know, anyone that has lost a loved one, a close loved one, knows they need to go and find someone that's going to do all the arrangements and look after everything. Most people realize in that circumstance that they want someone that's going to be able to sort of hold their hand and walk it through, walk them through it. So from a funeral parlor's perspective, educating their target customer about the problem they're solving is not an issue. But an example of, you know, a situation where you've got to educate a customer, it's a it's a pretty boring and dry example, I've got to admit. But say some lawyers will review trusteds or self-managed superfund deeds, for example, just to make sure that they're still relevant, up to date with the law, allows you to do everything that you want to do. Now, pretty boring service, right? But also difficult to sell because anyone that's running their own self-managed super fund, let's take accountants out of this mix. But anyone that has their own self-managed super fund doesn't necessarily know if they need their deed reviewed or not, or whether in fact it's just a complete waste of time and money. Because of course a lawyer is always gonna say, yeah, let's review it, but do you really need it? What's the benefit and what's the risk associated with not doing it? Well, if I was marketing that service, that's gonna be a challenging thing to market to. Because firstly, not only how I'm gonna find those people that run those um self-marined super funds that are actually interested in listening to what I've got to say, but then you've got to actually educate them about why and and how and when would it be worthwhile to review their trustee. And the challenge means that the customer acquisition cost is much higher because education is is expensive. You need kind of repeated exposure, you need social proof, you know, you need examples of how it's going to impact them, you need a really clear narrative, and you typically need a large budget to be able to implement an outbound reach strategy like that. But to borrow Mina's GPL1 example around Zempic and Manjaro and so forth, you don't need to have an education campaign. If you're a pharmaceutical company or you're a competitor to one of those, you just need your only reach strategy is making sure GPs are able to prescribe the medication. Because we know that, you know, the with social media and whatever, there's already a huge underlying demand for those medications. Ultimately, you just need to get in front of the right people that are actually going to prescribe it rather than educate what are the benefits, what are the risks, how much does it cost, all those sorts of things. So we've got to be realistic around the product or service that you're selling. Do people know that they've got that problem? Are people already looking for the solution? The other thing we need to really think about, Meaner, is whether our market of potential customers and clients, whether it's growing or whether it's shrinking.

SPEAKER_01 8:35

That's right, Stuart. Industries are rarely staying stagnant, right? They're either growing or they're dying. And it's really under it's really important to understand where your market and industry are. Because end of the day, customers, technologies, and competitors are all moving. Look at Uber and the taxi industry as an example. Completely changed the way that industry worked and it put a lot of what was deemed to be, you know, golden assets in terms of licenses out of business. So it really it really means that you really got to understand your underlying industry. A growing market is a tailwind where results compound. A shrinking one means even competent operators, you could be really great at what you do, but you're just shit uphill. So if I talk about an industry, for example, that's close to home and using accountants as an example. Now, accountants 20 odd years ago, they really had a point of difference. Their value proposition was very different. You really needed an accountant, the information wasn't readily available. You didn't have things such as or that sort of the my govs and the like where you can actually lodge your own returns. It was a lot very sort of paper driven. And unless you sort of had the knowledge or understanding as to how to fill out, for example, paper tax returns, you weren't going to be able to do it. You needed to engage an accountant. Now these days, there's a lot of information out there. You think about, for example, podcasts or blogs or AI to a certain extent. There's a lot of information readily available out there. So people are becoming more informed, more educated. So accountants have had to shift and understand the industry. And the successful ones have done that. They've become more advisors than they have paper pushers. It's been less about the tax returns, less about understanding what goes into each label, and and more of the role of understanding and being involved in people's businesses. That's demographic shifts, that's behavioral shifts. That's where someone has actually come in and done the right thing and understood what has changed structurally in the market and adapted to it. Now we can all have opinions, but at the end of the day, the truth is on our PL, whether those dollars are actually coming through the door.

SPEAKER_00 10:31

Yeah, that's right, Mina. At the end of the day, we can have uh very strong opinions about our industry, where we sit within it within our industry. We can have really strong opinions about our why people should be paying us for our product or service. But at the end of the day, the truth really is on our P ⁇ L. People can give us compliments. You know, you've got a great business, you're so friendly, you offer a great service. But at the end of the day, if they don't stick their hand in their pocket and pay us the price that we're looking to charge to be able to build a sustainable and growing and thriving business, then ultimately we don't have a good enough product. And we just need to make friends with maybe the underlying demand just isn't strong enough for the product or service that we're offering, or maybe the product or service we're offering is substandard. It's not doing what it should be doing. Either way, we can't argue with the revenue line on our profit and loss statement. And that means that if our if the demand for the product or service we're selling is genuinely weak, the answer is not try harder or spawn spend more money on marketing or do those sorts of things. You know, the answer's probably somewhere it like build a tighter niche, re-pivot, refocus, redesign the product for a different cohort of uh potential buyers, maybe change the messaging or change our pricing. It's really lies with us as the business owner and the founder to really come up with a sustainable business model that is actually going to produce a consistent and compelling product. So that's really the key theme behind today's episode. Let's really make friends with it what is the level of underlying demand for the product or service we provide. Is it sustainable? Is it growing or is it shrinking? And to what extent do we have control over these factors? You know, is it a case of pivoting, exiting, growing, or doing more of what we're already doing? Okay, next week we're going to talk about the challenge of thin margins and how to navigate those particular circumstances. And until then, bye for now.