Pitfall 4. Not making investments
Posted: Sat Dec 21, 2024 4:18 am
Phase 1: Margins are addressed
A retailer buys from the supplier and has in this phase obtained high margins through the end customer in the store who buys the products from them. This is the perfect starting point to 'nicely disrupt' this market. For example, Transferwise entered the market of banks that asked high margins for exchanging currencies. They could be as much as 90% lower.
Phase 2: The disruptor steals margins and scales
The disruptor takes less margin for themselves, which means the customer has to pay less. In addition, the disruptor often invests aggressively in growth and compensates for the loss of margin with the scale that 'online' offers them. Booking.com is a company that in 2003 flushed their set marketing budget down the drain and became 'Google's largest customer'. Their cash flow was negative and they invested even more aggressively by buying Priceline. All this has brought the right scale: in 2016 they had a profit of 2.34 trillion dollars.
Phase 3: The disruptor tackles the entire value chain
The disruptor uses their customer base to tackle the entire value chain. For example, by buying up labels and thus lowering prices on the supplier side. Or by introducing their own labels.
Zalando is a good example of this third phase. They started as an online retailer, but today their own labels account for 15 to 20% of overall sales . They have achieved this by using all the customer data they have collected for the development of these brands.
Also read: Revolution in your sector? This is the key to innovation
Even & Odd, one of Zalando's own brands
Investments are important in several areas. I would like to share one of the most interesting graphs in the book with you. This shows the ' winner takes it all ' mentality. Those who do not hong kong telegram data invest in buying traffic will automatically end up on the sidelines.
As companies spend more and more on Google, Facebook and other platforms, this drives up prices. In addition, they also hire conversion optimization specialists who ensure high conversion rates. Of course, this also costs a lot in technical adjustments to the website.
Companies that don’t invest in this often can’t achieve the same conversion rate. If advertising costs get high and conversion rates stay low, companies that haven’t made these investments won’t be able to keep paying to ‘buy’ customers. So there’s only 1 player left. The winner takes it all.
Be prepared to invest in new things, even if it is not immediately very profitable
Nowadays, gas stations earn more from sales in the shop than from diesel and gasoline. This was of course different. In the past, you paid the attendant who filled up the car for you. In 1960, this changed, because people started paying at the cash register. From there, the idea arose to also offer people coffee and something tasty.
A retailer buys from the supplier and has in this phase obtained high margins through the end customer in the store who buys the products from them. This is the perfect starting point to 'nicely disrupt' this market. For example, Transferwise entered the market of banks that asked high margins for exchanging currencies. They could be as much as 90% lower.
Phase 2: The disruptor steals margins and scales
The disruptor takes less margin for themselves, which means the customer has to pay less. In addition, the disruptor often invests aggressively in growth and compensates for the loss of margin with the scale that 'online' offers them. Booking.com is a company that in 2003 flushed their set marketing budget down the drain and became 'Google's largest customer'. Their cash flow was negative and they invested even more aggressively by buying Priceline. All this has brought the right scale: in 2016 they had a profit of 2.34 trillion dollars.
Phase 3: The disruptor tackles the entire value chain
The disruptor uses their customer base to tackle the entire value chain. For example, by buying up labels and thus lowering prices on the supplier side. Or by introducing their own labels.
Zalando is a good example of this third phase. They started as an online retailer, but today their own labels account for 15 to 20% of overall sales . They have achieved this by using all the customer data they have collected for the development of these brands.
Also read: Revolution in your sector? This is the key to innovation
Even & Odd, one of Zalando's own brands
Investments are important in several areas. I would like to share one of the most interesting graphs in the book with you. This shows the ' winner takes it all ' mentality. Those who do not hong kong telegram data invest in buying traffic will automatically end up on the sidelines.
As companies spend more and more on Google, Facebook and other platforms, this drives up prices. In addition, they also hire conversion optimization specialists who ensure high conversion rates. Of course, this also costs a lot in technical adjustments to the website.
Companies that don’t invest in this often can’t achieve the same conversion rate. If advertising costs get high and conversion rates stay low, companies that haven’t made these investments won’t be able to keep paying to ‘buy’ customers. So there’s only 1 player left. The winner takes it all.
Be prepared to invest in new things, even if it is not immediately very profitable
Nowadays, gas stations earn more from sales in the shop than from diesel and gasoline. This was of course different. In the past, you paid the attendant who filled up the car for you. In 1960, this changed, because people started paying at the cash register. From there, the idea arose to also offer people coffee and something tasty.