DEMAND, ENTREPRENEURS DISCARD THAT VARIABLE AT YOUR PERIL
Great products sell themselves.
That is a popular saying among business owners and entrepreneurs. Another variant of earlier origins — based in economics — is Say’s Law — Supply creates its own demand. Modern-day economists have long disproven Say’s law. I’ll go one further and give you reasons to refute that aphorism.
A lot of terms are used in business, which stems from Say’s law. Self-help books in explaining the success of businesses, constantly run with the theme of a product attracting customers by only its merit. A good instance is the zero to one terminology developed by Peter Thiel and Blake Masters. The summary of the term is on the importance of creating new products that have been unimagined before. Asides the apparent difficulty of creating something new under the sun, there is the problem that much like Say’s law the importance of demand as a concept is overlooked.
Therefore, as an economist, I’m here to run contrary to the popular opinion. I’ll state it clearly, the success of any firm is predicated upon “viable demand”. This runs through for small, medium and large sized firms. Even firms that seem to re-invent our imaginations, are bound by my statement. David King in an article, well highlights this point. He outlines seven market leaders, where there had been previous demand and observations of consumer interest.
Google — Yahoo, AltaVista
YouTube — Vimeo, Google Video
Facebook — Friendster, SocialNet, Myspace
Airbnb — Couchsurfing, Craigslis
Instagram — Hipstamatic, PicPlz, TwitPic, YFrog, (even Facebook Mobile!)
Uber — Cabulous, Zimride (Lyft), Sidecar, TaxiMagic
GoFundMe — Kickstarter, Indiegogo, Tilt
Any other industry that will survive in the business world must satisfy consumer’s need if they are to be successful. If an intended product has never existed in any alteration or similarity in the entire planet, it’s the universe way of saying it’s unmarketable.
Mr. Inventor (I never took his name) is an entrepreneur who created something entirely new. At an exhibition close to the University of Lagos, Mr. Inventor displayed what looked like the average toy car. It was anything but average. The short form of the story was that the toy car could navigate land terrains, the open skies and the clear seas. The toy-car seemed to be a bolt from the future and the cheers all around seemed to agree with that opinion. Mr. Inventor however, left the show empty handed, there was no single buyer of his merchandise. The product was exceptional in all accounts. But, it seemed idealistic for Mr. Inventor to expect parents’, students and young people hard-hit by a recession to buy expensive toy-cars.
Mr. Inventor shows how important market research for viable demand is. Time, resources and efforts spent could have been saved had he checked whether his product was marketable. Market research is usually done by experts, given their understanding of both consumer behavior and prevailing economic conditions. They’re however also famed for their huge bills. Usually, it is more advisable for startups to conduct their market research.
Market research is no longer difficult thanks to the large amount of data online. With the aid of social media platforms like ‘Twitter, Facebook and Instagram’, comprehensive research on ideal customers including their likes, penchants and dislikes can be gathered. The ideal customers are the demographic the product is directed towards. Fortunately, all sets of demographics including the aged share a surprising amount of information online and data scientists — or if that’s rather expensive, Google Analytics — is at the entrepreneurs’ disposal for analyzing whether such data shows there’s an interest in his or her commodity.
The replacement to Say’s law is the popular economic maxim “Demand and Supply”. This aphorism serves as a truism that demand and supply are two complex variables that are not determined by each other. Yet, the maxim explains that both are needed to get the value of any commodity. Every successful entrepreneur must realize this lesson and take a heed from Mr. Inventor that Demand is needed just as much as supply, and appropriate steps needed must follow accordingly.
