Sunday, April 12, 2009

Two Ways to Make Money: Revenue Streams

Whether you are online or offline; or, offering a service or producing a tangible product; your methodology can always be described in two ways:

  1. Selling your own product (OP)
  2. Selling someone else's product (SEP)

Let's try to poke a hole in this theory with some wide and varied examples.

  • You own a coffee shop: Here you are selling your own product. But if you wanted to get technical, if you are not growing and roasting you own beans then you are selling someone else's product. So really it's a combination of both.
  • You are a graphic designer: We are stepping into the more complex now. Here you are essentially offering a service, or selling your own product. Sure, it may not be tangible like a toffee apple, but it is your own creation. You are selling lines, colours and concepts. Some of the more 'spiritual' of you will glibly assert that you are selling 'vision'. Good for you- it still comes into catagory 1, OP.
  • You flip burgers @ McDonalds: Quite obviously you are selling someone ele's product. May I recommend a double quarter pounder. Without a doubt it's the best burger out there. Fact.
  • You are a writer/blogger: If you analyse this occupation correctly you can work out why some individuals can generate decent income and why others cannot- particularly if you are a blogger. Unless you are selling books, which would clearly be selling your own product, you will need to generate revenue through advertising. Hence, you are selling someone else's product! Whether this exists in the forms of Google Adsense, Chikita eMinimalls, or some other affilitate advertsing like Amazon. You make money when they make money, so it's SEP. I would like to spend some more time exploring this further at a latter stage, so stay tuned.
  • You are a broker/retailer/wholesaler: You are most likely selling someone else's product.
  • You are a Doctor/Lawyer/Professional: Here you could be in category 1 or 2. If you are selling a personal health service then you are clearly in OP. However, if you are some other form of professional, chances are you are selling SEP.

Of course there are both advantages and disadvantages of selling your own product versus selling someone else's. The majority of retail and wholesale business, and practically the entire world of consulting involves using someone else's product.

"The major advantage is time."

When the product is ready-made you can focus your attention on the customer. You don't have to worry about branding or labelling or manufacturing. You can be customer-centric. In this circumstance you are acting more as an advisor. You become an expert is a type of product or service so as to bring together two parties: product and person. You are broker. You are the people person.

The major disadvantage is your competitive edge. Lets say you are a mobile phone reseller. You are dealing with some quality products that are well branded and top of the line. Now how are you going to stand out in a crowd? Sure, if you are a plumber and 70% of your business is derived from directories like the Yellow Pages, just call yourself AAA Aarvark Al's Plumbing and you are set for clients. Do you want to end up competing on price? In 99% of cases that answer is no. That deserves some re-emphasis, NO! You simply cannot compete on price with giant retailers who spend more on staples than you do on rent. Bad idea. So what can you do?

Like many smaller retailers, you build a small but loyal customer base with exceptional service. But if that's not enough, what next? Compete on price? No, no, CAPITAL NO!

Specialise or neutralise. Those are your answers.

  1. Specialise: This means sourcing products of service methods that are rare and unique. For example, rather than competing with a giant liquor retailor, why not choose to stock boutique belgian beer? Try to gain exclusive distributorship for a particular product. That way you control the product and where it will appear.
  2. Neutralise: Take the next step and create your own product. Now this prospect may seem like a pipe dream or so interwoven with risk so as to render it incapable of meritorious consideration. But if you pull it off, the world is your oyster, clam, chutney or chorizo sausage. Bascially you are the new man in town. It's not difficult to see my excitement when I transition from new product development to spanish sausage within a few sentences.

So there is one final question you need to put to yourself. That is, what do you think about sales? This question is integral. I'm talkin' spanish sausage integral. Notice that both options, whether you are selling your own product, or someone else's, you are selling. The fact of the matter is you need to learn to sell. Learn or die! Have a nice day :)

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