I was recently thinking about the changing business model for many brick and mortar stores, like Best Buy. Where Best Buy used to be price competitive, they now charge a steep markup in-store. People making these purchases seem to be mostly those unaware of the true price. I occasionally purchase from their stores as well, when I absolutely need a physical item and can not get it shipped. Chris had the pleasure of listening to me vent about the absurdity of purchasing a $25 ethernet cable the other day.

Basic economic theory holds that competition should put downwards pressure on prices to where they approach equilibrium, and are fairly close to the cost of manufacturing. Yet this is not happening for ethernet cables. Why is that?

When you boil it down, it seems to be convenience -- you're able to purchase the physical item when you want it, and examine it before you purchase it. Going further, though, convenience doesn't only apply to in-store items.

Weebly is a great example of the power of convenience. When we started off, we heard "Oh, web hosting... that's a commodity" quite a bit. Most people considered it a "solved" problem, and quite boring. But the problem of designing visually appealing content, uploading media, and hosting web pages was far from solved, and a simple, easy to use solution gained quite a bit of traction fairly rapidly.

Which begs the question: "How do you model convenience?"

When analyzing competition, it's quite easy to model out all of the service characteristics, such as features and price. In fact, if you compare Weebly to several horribly outdated web site creators, the feature list might not look that different. The user experience, on the other hand, would be. Where Weebly shines is its simplicity and ease of use. Or, more simply: convenience.

Hopefully, someone with experience could shed some light. How do you model for convenience?

 


Comments

Nivi

Wed, 26 Nov 2008 9:05:22 am

Improved convenience is a classic new market disruption.

Search for the word "convenience" in the Innovator's Solution:

http://books.google.com/books?id=ZUsn9uIgkAUC&printsec=frontcover

Page 51 is a good start.

 

World Internet Summit DVDS

Thu, 27 Nov 2008 12:44:52 am

Nice blog , i have bookmarked it.

 

Derek S.

Thu, 18 Dec 2008 9:03:37 pm

If you are really interested in exploring the answers to this in a bit more depth, I'll be happy to talk to you about it. One thing I will say: convenience can be thought about in terms of opportunity cost. how much extra money (or utility, or whatever) did you gain by getting that ethernet cable a few days earlier? Did it allow you to do meaningful work that is likely to increase Weebly's profitability? That right there would be a good start. There are lots of intangibles to factor in as well. This might be best discussed over drinks.

 

Zepp

Mon, 05 Jan 2009 12:45:07 pm

With not having the prices closer to the manufactured cost that really makes it convenient for the retailers not the customers. Depending on the demand and the market lowering the prices of products could result in more sales thus a bigger income.

 

Sarpedon

Tue, 06 Jan 2009 7:32:37 am

Ethernet cables are not sold as cheaply as they might be because most retailers understand that people have no idea about the true cost of manufacturing such items, little idea about purchasing them from alternative sources and no idea how to make one themselves! Also, retailers are experts at 'loading' their sales - so that they offset savings offered on bigger items by pumping up the cost of 'peripheral' items. If someone is prepared to pay me $25 for an ethernet cable, I ain't gonna tell 'em they can have it for $2.50!!

 

Stephen

Mon, 09 Feb 2009 8:42:07 pm

I like your site and am thinking about setting up a blog/website. My eye goes to the word "model". Modeling convenience is pretty soft. You may propose to those around you that your business concept delivers convenience but the most honest and reliable feedback comes from sales which can only partially be linked back to the convenience that you were sure that you were providing. What if it really was convenient but the price was way too high? Another problem with convenience is that over time what was once seen as a positive convenience becomes accepted as the norm especially if there other competitors. Pretty soon your “delighted” customer has a new, higher standard for what would cause her to say that your product is convenient. I like the pictures too, by the way…

 

siamese cat

Sat, 23 May 2009 12:41:54 pm

That was somewhat humorous . . . thanks for the post!

 

Mike

Sun, 14 Jun 2009 10:12:41 am

</b>How do you model for convenience?</b>

The answer is: you can't, because convenience doesn't exist in the first place.

If there was a model for convenience, it would be non-linear, chaotic, and perfectly symetrical. Equivalent to predicting where multiple polynomial curves will land, which is currently mathematically impossible, even if only one polynomial curve landing prediction was attempted. The best is a medium to large range landing zone. Still only perspective, based on acceptable accuracy, which is: individual personal preferences.

Convenience is a by-product or end-product of any number of perceptions.

</b>The only thing that can be modeled is inconvenience.</b>

You having payed an absurd $25 for a 10 cent ethernet cable is a good example of inconvenience which can be modeled.

1. You couldn't physically browse all of the stores and compare prices within a reasonable amount time. [fuel cost, travel time, etcetera, could be graphed.]

2. You didn't use the phone book (or multiple phone books) to call up every store (within your perceived reasonable range) and ask for their price and stock availability. [not aware of this option, not aware of travel cost cutting, etcetera, could be graphed]

3. You couldn't make it yourself [lack of awareness/knowledge, lack of tools, etc.]

4. You forgot to buy in bulk directly from the manufacturer or ask for product samples so you can test whether it suits your needs, [unaware, don't know how, don't have contacts with that business, etc.]

</b>Articles That Should Not be Contrued With Convenience</b>

'Opportunity Cost' is nothing more than 'Steal As Much As Possible' or 'See How Much You Can Get Away With Before Customers Are No Longer Repeat' or 'Before Any Laws Catch Up'. There are thousands of good examples for this, but the best study are the failing companies or companies that have blundered badly in their business practices and have survived somehow. [I deleted my examples -- too long. (deleted business citings: Energy, Financial, Manufacturing, Telecommunications, Engineering, Chemical/Pharmaceutical)].

</b>Inconvenience Modeling</b>

Basicly, picks at a function or product and lists all the inconveniences or dis-likes. Or innovates something that currently doesn't exist or hasn't been realized yet.

From there the perception of a convenience is merely a fix, upgrade, addition, combination of functions into one, a brand new innovation, more options, a completely new product, etc.

These inconvenient things can be modeled. Since convenience doesn't really exist, it may wear off as a fad (one time wonder), or evolve into something completely different, or become a continuous innovation in of itself.

Overall, the Business Plan is the model for convenience, if done well. It's the basic focal point.

"If the wheel isn't broke, re-invent a new one." - Every tire company (Why they're still in business).

 

John

Thu, 17 Sep 2009 3:03:35 am

Nice content man ! I would like to subscribe ur blog from now on..

 

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