3 ms·

You kind of ignoring that we live in the age of the internet and word-of-mouth can work a lot better than sales/marketing. Returns too, only matter if it actual

by merrua 12y ago

You kind of ignoring that we live in the age of the internet and word-of-mouth can work a lot better than sales/marketing. Returns too, only matter if it actually does fail, which given the premiss it doesnt. No reason why a exponential improvement in lightbulbs would be less popular than anything else people have looked at and said this is way better than that.

vidarh 12y ago
No, I'm not ignoring we live in the age of the internet. The age of the internet has not stopped spending on marketing at all, it's just changed where it gets deployed. Returns matter because it will fail no matter what, given that there will be a non-zero change of failure in every step from manufacture to end user distribution, to failures directly caused by the end user (what do you mean it it's my fault it broke when I tried to screw it into the wrong type of fixture and used lots of force?) to forces of nature (lightning frying everything). End users will try it whether they're right, or whether they they hit the thing with a hammer. If the premise is "is indestructable", then we are in fairy tale land, well past "a bit far fetched hypothetical land". My expectation was that the premise was more akin to "will last 1000 years absent production failures and when treated/used according to spec". I've dealt with customers demanding money back on an internet subscription because they didn't realise they needed a computer (this was before smart phones and the like) to use the internet.You will need to deal with returns. Even if only rebuff attempt at claiming money back. > No reason why a exponential improvement in lightbulbs would be less popular than anything else people have looked at and said this is way better than that. Name one single such product that managed to get worldwide penetration with no marketing from anyone. The point is not that such a bulb would not become popular if it came about, but that the cost of making any physical product a world wide success are high enough that a cheap product that's effectively destroying it's own market is not likely to be a good investment even if the potential final "one time" sales could be fairly large. Consider that e.g. OSRAM when they spend marketing money is maintaining a market that keeps buying product. Every customer they gain is likely to buy bulbs multiple times, so their marketing cost per acquired customer is likely to be far lower than an unknown entrant who needs to keep selling to new people. Keep also in mind that even with a promise of a 1000 year lifetime, it will take many years before the product will have proven itself sufficiently that people will have first hand evidence that it even outlasts common LEDs. Trust matters. If I had a bulb that'd last for 1000 years and cost $1, I'd keep my mouth shut, and market them at about the same price as LEDs, and claim they'd last 20% longer, and back that up with a warranty. I might even artificially limit their lifetime to, say, 2x the lifetime of the LED (or try to cost reduce to get there). Then I'd invest a good percentage of revenue into marketing, hopefully managing to outspend competitors on sales and marketing unit by unit. Whenever a competitor would improve length, I'd then release a "new model" maintaining the lead. But not immediately, and never with too much of a lead. I learned the hard way not to undercut / overcommit vs. your competitors with my first business: An ISP. We realised we could sell subscriptions at 25% what the incumbents could. What we did not realise at the time was why the incumbents were so expensive: It was not that they could not promise what we did for the price we did. It was that they did not see the mass market promise, and their margins were great as they were. So what happened was that 4 days after we launched, together with one or two other small ISPs that had also found the same price spot, the biggest ISPs in our market followed suit instantly, and started a price war that totally ravaged the market over the following 5 years. Nobody made any money until the major players had exhausted their war chests and carved up the market between themselves. What I learned was that 1) you should not assume your lead is as great as you think; assume the competitors either have stuff hidden away or at least have resources to quickly cut your lead; 2) you should not assume your competitors can't cut price, so don't underprice them enough to force them into a price war with you; unless you have deep pockets, you will lose, 3) you should not assume your potential customers will find you just because of price (and if they do,you'll lose them the moment someone underbid you). In general, assume that you upset the status quo at your peril - everyone will gun for you if you reveal your hand and demonstrate a too large of an apparent advantage. In well established market with large incumbents, unless you have massive capital behind you, it's a bit like walking up to a sleeping tiger and giving it a swift kick: not very conducive to your long term survival. It's better to come in under the radar. If you still want to change the world and destroy your market, do it once you've built up distribution and a war chest.
- merrua 12y ago
  I found your comment an interesting read, and I want to think about it some more. However this one part struck me as why I wanted to comment earlier, " assume that you upset the status quo at your peril ", this is the exact opposite strategy to "disrupt everything" that comes from silicon valley, so I think there is a bit of a sw/manufacturing ideology gap. I suspect neither side is 100% wrong, more disruption chances could success in manufacturing, some software should take a more conservative stance off the bat, but I think where your speaking from, we don't hear enough about.

by merrua 12y ago

vidarh 12y ago

No, I'm not ignoring we live in the age of the internet. The age of the internet has not stopped spending on marketing at all, it's just changed where it gets deployed. Returns matter because it will fail no matter what, given that there will be a non-zero change of failure in every step from manufacture to end user distribution, to failures directly caused by the end user (what do you mean it it's my fault it broke when I tried to screw it into the wrong type of fixture and used lots of force?) to forces of nature (lightning frying everything). End users will try it whether they're right, or whether they they hit the thing with a hammer. If the premise is "is indestructable", then we are in fairy tale land, well past "a bit far fetched hypothetical land". My expectation was that the premise was more akin to "will last 1000 years absent production failures and when treated/used according to spec". I've dealt with customers demanding money back on an internet subscription because they didn't realise they needed a computer (this was before smart phones and the like) to use the internet.You will need to deal with returns. Even if only rebuff attempt at claiming money back. > No reason why a exponential improvement in lightbulbs would be less popular than anything else people have looked at and said this is way better than that. Name one single such product that managed to get worldwide penetration with no marketing from anyone. The point is not that such a bulb would not become popular if it came about, but that the cost of making any physical product a world wide success are high enough that a cheap product that's effectively destroying it's own market is not likely to be a good investment even if the potential final "one time" sales could be fairly large. Consider that e.g. OSRAM when they spend marketing money is maintaining a market that keeps buying product. Every customer they gain is likely to buy bulbs multiple times, so their marketing cost per acquired customer is likely to be far lower than an unknown entrant who needs to keep selling to new people. Keep also in mind that even with a promise of a 1000 year lifetime, it will take many years before the product will have proven itself sufficiently that people will have first hand evidence that it even outlasts common LEDs. Trust matters. If I had a bulb that'd last for 1000 years and cost $1, I'd keep my mouth shut, and market them at about the same price as LEDs, and claim they'd last 20% longer, and back that up with a warranty. I might even artificially limit their lifetime to, say, 2x the lifetime of the LED (or try to cost reduce to get there). Then I'd invest a good percentage of revenue into marketing, hopefully managing to outspend competitors on sales and marketing unit by unit. Whenever a competitor would improve length, I'd then release a "new model" maintaining the lead. But not immediately, and never with too much of a lead. I learned the hard way not to undercut / overcommit vs. your competitors with my first business: An ISP. We realised we could sell subscriptions at 25% what the incumbents could. What we did not realise at the time was why the incumbents were so expensive: It was not that they could not promise what we did for the price we did. It was that they did not see the mass market promise, and their margins were great as they were. So what happened was that 4 days after we launched, together with one or two other small ISPs that had also found the same price spot, the biggest ISPs in our market followed suit instantly, and started a price war that totally ravaged the market over the following 5 years. Nobody made any money until the major players had exhausted their war chests and carved up the market between themselves. What I learned was that 1) you should not assume your lead is as great as you think; assume the competitors either have stuff hidden away or at least have resources to quickly cut your lead; 2) you should not assume your competitors can't cut price, so don't underprice them enough to force them into a price war with you; unless you have deep pockets, you will lose, 3) you should not assume your potential customers will find you just because of price (and if they do,you'll lose them the moment someone underbid you). In general, assume that you upset the status quo at your peril - everyone will gun for you if you reveal your hand and demonstrate a too large of an apparent advantage. In well established market with large incumbents, unless you have massive capital behind you, it's a bit like walking up to a sleeping tiger and giving it a swift kick: not very conducive to your long term survival. It's better to come in under the radar. If you still want to change the world and destroy your market, do it once you've built up distribution and a war chest.

merrua 12y ago
I found your comment an interesting read, and I want to think about it some more. However this one part struck me as why I wanted to comment earlier, " assume that you upset the status quo at your peril ", this is the exact opposite strategy to "disrupt everything" that comes from silicon valley, so I think there is a bit of a sw/manufacturing ideology gap. I suspect neither side is 100% wrong, more disruption chances could success in manufacturing, some software should take a more conservative stance off the bat, but I think where your speaking from, we don't hear enough about.