When a new client starts working with me I send them a questionnaire to fill…
The ‘All or Nothing’ Business Model
Is your business model helping or hindering your business?
I watch a lot of ‘behind the scenes’ business shows like Kitchen Nightmares, Mystery Diners, Mary Queen of Shops and Tabatha’s Salon Takeovers. And the most common mistake they see is business owners developing a business model with too many options for the customer to consider, eg a menu with 20 entrees, 30 mains, and ten desserts.
Imagine that? Even just reading those numbers is making me feel overwhelmed.
Result: Customers do one of two things. They either don’t buy from that business at all because it’s too hard. Or they choose one of the three most common dishes they already know (which makes life easier for the kitchen staff).
Why does this happen? Because choice complicates the sale.
Showing customers everything you can do for them, all at once, doesn’t increase the bottom line as you might think – it actually stifles it.
What happens if you take the reverse approach and develop an ‘All or Nothing’ Business Model?
Let me share with you my recent travelling experience and see if you believe this is helping or hindering their business model, and thus the bottom line.
I had been travelling around the Margaret River region in Western Australia. And I saw an animal farm attraction which had rides as well as the option to pat baby animals. Now I wasn’t interested in going on the rides. But I thought it would be fun to pat lots of baby animals so I drove into the carpark to see what it might cost.
To my surprise, there was only one entry fee including the rides (except dodgem cars which were extra) of $20 per adult, pensioners $19 and children $18 – children under 2 were free.
Now, as a business model and niche, it looks great on the surface – very simple and easy to manage – for the small business owner.
But let’s look at it from the view of the customer
Firstly, if you were a family with two children, that’s $76 to pat some animals and go on a few rides. I believe this is a very expensive day out.
Secondly, I’m sure there are lots of people like me, including many travelling pensioners, who don’t want to go on the rides. However, we would love the opportunity to relax for 30 minutes or so and pat some baby animals.
But the ‘all or nothing’ business model didn’t consider people like me. Nor did it consider the cost they were asking families to pay. This was probably why the carpark was empty.
Now think about this: how many more customers could the business attract by adding in just two more pricing options:
- Option 1 $10 to pat the animals
- Option 2 $50 Family pass (two adults and two children)
How many more families and travellers would have come to the farm if these options were also available?
I know I would have stopped and as the carpark wasn’t full. Think about what an extra ten people a day ($100) could do to their annual bottom line?
By the way, it’s conservatively an extra $10 000 for doing nothing extra in running the animal farm.
Would you want that in your small business?
Would you want an extra $10K for doing nothing except creating another pricing option? I know I would.
Now I understand the importance of needing to stand out from the crowd and ensure your products and services (and pricing models) speak to your ideal customer.
And maybe the people who just want to pat the animals are not the customers this small business desires. And that could be a sound business decision for them to make.
BUT I believe you have to be careful to ensure you are not turning away potential customers. And quite frankly, easy money, by developing a business model which suits you rather than your customer.
So have you built an ‘All or Nothing’ Business Model which is actually hindering instead of helping your small business?
And if so, what’s one thing you can do to easily convert those customers? Those people who are driving into your carpark and driving back out again. Because one size definitely does not fit all.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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