Uwa’s Birthday was fast approaching and John didn’t know what to do about cake; on one hand, he had Chika his secondary school classmate, whose birthday cakes were the toast of Instagram, from the design and the icing. The cakes were something to behold, however having tasted them, John wouldn’t say they were bad, but he’d seen better for cheaper prices. On the one hand, he had Uncle Akpes, who supplied uniced cakes to the local supermarkets and also baked birthday and wedding cakes on orders. While his cakes were arguably the tastiest John had ever had, and at very affordable rates. What he had in the abundance of a great product; fluffy well-baked cakes at affordable prices. He lacked in “Packaging”. Because while Chika, was willing (for an extra fee of course) to have the cake delivered to Uwa in a properly fitted box, complete with a well-constructed love note, and a saxophonist to serenade the background while she took hold of the cake. Uncle Akpes on the other hand, when the issue of a surprise delivery came up, the best he could come up with was putting the cake in a taxi cab and calling Uwa to go wait for the cab guy in front of her office. And when John mentioned the Saxophonist and love note, Uncle Akpes just laughed, dismissing it as unimportant. While this may come across as ignorant behavior to some people, John understood that Uncle Akpes was from a different generation who prized functionality over aesthetics. So, while John was well aware of what Uncle Akpes brought to the table, he couldn’t look past the shabby delivery which was supposed to be an essential part of the birthday surprise experience. And on the other hand, while Chika could bring all his birthday fantasies to life, in terms of packaging and delivery, when it came down to it, the cake wasn’t sweet, which at the end of the day defeated the entire purpose. Thinking to himself, John frowned, and wondered why it was so difficult to find both features in one person…
While the above case may prove to be an extreme example on the subject, the point is to show that while the older generation of businessmen and women espoused great craftsmanship above all else, we as millennials and Gen Z are focused on marketing and sales and by extension, we have become great salespeople and have perfected the art of selling as most of us grew up transacting our businesses via social media amidst tough competition. Hence, the packaging and razzmatazz attached to Chika’s product delivery.
However, while being a great salesperson is a fantastic thing, without a proper product or content strategy, “sales and marketing” is just a short-term strategy in terms of business sustainability. In more plain English, if all you do is focus on marketing; whether it be online or offline, without paying attention to the product being sold, you will get a lot of first-time customers with no repeat customers because your products aren’t as great as it has been advertised.
At the same time, for the older generation whose sole focus is on delivering a great product (although poorly packaged). It becomes easier for the younger generation to poach their customers since as salespeople they are more “consumer-focused” like the Chika example who was willing to go all out with; home delivery, a handwritten note, etc.
Having highlighted both of their strengths and weaknesses, the purpose of today’s write-up is to establish a bridge that can link entrepreneurs in both the younger and older generation, so that both can share in each other’s values. For example, if you go back to our opening story, it is not difficult to guess that, if John had found a caterer who was consumer-centric like Chika, while at the same time offered the same products quality as Uncle Akpes, he would have automatically dumped both choices and gone for this new option without a second thought. As such, it is very obvious that to win in the long run, one would need to be product-oriented i.e., creating a great product that will serve consumer’s needs as well as consumer-focused.
Beginning with entrepreneurs in the younger generation, social media from; Instagram, to Twitter, Facebook, and Snapchat, have created a monopolistic competition across several industries. By monopolistic competition, simply means where a group of competing firms while trying to differentiate themselves by their branding and packaging strategies, are essentially selling the same thing when you take a critical look at their products. This form of competition is characterized by heavy marketing (which we see with the many sponsored posts on Instagram) and an attempt to differentiate their product to the customer. In this form of competition, the start of the industry is characterized by what the economists call “supernormal” profits and this we have seen steadily with online vendors selling their wares for twice the open market price of that same product. However due to the low barriers to entry and lure of supernormal profits, this type of market tends to attract a lot of competitors in the intermediate run (i.e., between the short and long run). And with more suppliers flooding the market, the more the average profit margins begin to decline. As more entrants enter, it drops lower still and when the curve reaches its peak which is characterized by a lot of businesses in the market and the lowest margins in that industry, a lot of businesses begin to fail and close up shop, because at this point it has become a survival of the fittest.
So, imagine a situation where handwritten notes, saxophonists, and home-delivered cakes become a standard across the industry. Coupled with a large number of competitors replicating this standard across their various businesses, there will no longer exist any justification for Chika’s exorbitant prices based solely on these features. Because at this point these features will no longer be a novelty and patronage will now be based purely on a properly developed product, which in this case is the cake; well baked, fluffy, tasty, etc.
Hence it just goes to show that, to survive long term in most entrepreneurial industries (since most are monopolistic) one needs to perfect the art of proper product development and cost management; which the likes of Uncle Akpes in our story have perfected, as most of the business people in this era used these trades to raise families and take care of their bills for years incoming, while we the younger entrepreneurs on other hand are most times trying to keep our finances in order.
On the other hand, for the many “Uncle Akpes” reading this article (i.e., those operating with this mindset), you need to move past the “if it isn’t broke don’t fix it” thinking. Because consumers these days want more custom-built experiences (better known as mass customization) like the; note and home delivery features mentioned in the article. Although, going by the monopolistic competition described in the earlier paragraph, businesses such as these that focus on good products versus those focused only on “packaging” would survive the long-term onslaught caused as a result of high influx of competition and low-profit margins across the industry. These businesses have to first survive the short-term rise in competition caused by more innovative new entrants, before talking about surviving the long term.
Hence, while the likes of “Chika” and similar new age entrepreneurs have a longer-term problem, which is “package over product” “uncle Akpes” and his kind, have a short-term problem, which is “product over packaging”.
For an entrepreneur to be able to survive from this era to the height of the curve to the decline of the industry, one needs to be able to bridge both mindsets, which is combining the product-oriented approach of the old school business owners and the packaging mindset of the new-age entrepreneurs. To progress through the curve from the start of the industry to the height where it will be saturated with a lot of competitors and subsequently the decline of the curve when as a lot of businesses close up shop, profit margins begin to rise again and survivors begin to earn a normal profit.
Credit to Mr Ejale Business Solutions & Consulting
