Jeff Bezos, Amazon’s chief and founder, recently told the US magazine Wired:
“There are two ways to build a successful company. One is to
work very, very hard to convince customers to pay high margins.
The other is to work very very hard to be able to afford to offer
customers low margins. They both work. We’re firmly in the
second camp.”He added: “We’d rather have a very large customer base and
low (profit) margins than a smaller customer base and higher margins.”Mr Bezos added. “Our vision of a perfect customer experience
is one in which our customer doesn’t want to talk to us.”
Low profit margins, mass customers: Amazon.
Higher margins, smaller customer base:Apple and most MLM companies.
Your job: “Work very, very hard to convince customers to pay high margins.”
How? Know what’s important to your customers. Then, show them the value of
the product or service you offer, based on what matters to them.
That’s what Apple does. Not everyone buys the iPhone, but enough people do
to make the company uber successful. And customers can’t stop raving.
You up for it?
Ok, what is a margin?
Ahh, that is short for “profit margin” – the markup percent.
Amazon and Costco are “low margin” businesses. They sell
with low markups and have masses of customers.
Apple, Tiffany’s (and most MLMs) are a high-margin
business – the markups are higher. And people pay the higher prices
because they want what those specialty items do for them.
Does that help?
I like the larger number of customers. Brand yourself with enough people, and you will have a great business.
Sam,
You write, “I like the larger number of customers. Brand yourself with enough people, and you will have a great business.”
That will be hard to do – I mean “brand yourself with enough people” because MLMers are not selling commodities
like Amazon or Wal-Mart do. You’re selling yourself and higher-end products or services. that means higher markups) than
products Amazon sells. They do NOT want customer conversations, as Bezos said. People who buy higher end products, like
iPhones or Mac computers go to the Apple retail stores to meet with someone at the Genius bar. MLM product customers
are the same in that way. If they’re paying more for something than they’d pay at Wal-Mart, say vitamins/supplements, those
folks want and expect some contact with the sales person. So that means your number of customers will be smaller
than a place like Amazon, who seeks small markups and little or no customer interaction necessary.
Loyal committed customers who trust the brand built on continued innovation, experience and support versus people buying cheaper products pertaining to do the same. Do you want loyal customers who will want to buy now or tyre kickers waiting for a ‘bargain’?