Ethical selling for early stage businesses

The usual common adage is to define selling as offering someone value for a price, to achieve an outcome of 1 + 1 = 3. Business schools offer their academic versions (i.e. 4 P's of marketing).

These are not wrong. As business practitioners, we need to go more nuanced and first principled than that.

The central problem is that you have something useful to offer to a subgroup of people in the universe, how do you get to that subgroup, via the most efficient method. 

A high touch extreme case: You fly down to the person, knock on the door, and beg the person to use your product - but this cost of acquisition will be too high. A low touch extreme case: You create a Facebook account, post some pictures and expect the person to self-convert and pay on your website - we know this is more naive than effective. It's a whole monster of sophistication with knobs and configurations for you to fine-tune to your exact business needs. 

The sliding scale of whether to go high touch or low touch typically depends on the customer value - a private banker needs to golf, wine & dine the client. Also, there are the shades of ethical selling vs non ethical selling (misrepresenting).



You can see this as a demand/supply economics chart, as you lower price/increase supply, the demand increase. For businesses, at the current price point and specifications, how do you get to that subgroup of people with ready demand?

Brokering is the key concept there. It's about matching yourself to the right subgroup of people out there. You can choose to reach the demand side yourself (i.e. direct sales) or choose to utilize a 3rd party platform to do it (i.e. advertising). In advertising, you pay a price for the platform to help you. A good outcome is when the lifetime value (LTV) of the user is greater than the cost of acqusition (CAC) which includes advertising. 

Many facets of human life are about matching people together. Relationships - putting 2 compatible people together. Employment - matching business needs with workers of the right skills. Businesses - offering the goods & services of the right specifications to the buyer for the right price. Financial markets - future cash flows to buyers are who willing to pay at the right price today.

Advertising offers leverage on this. You pay a fair price for the platform to match you to the most appropriate demand side. The matching algorithm can be extremely sophisticated. You want to target the right demographic, the right aptitude to pay and also with the intent to purchase at the right time. All these screams of collecting data points on the prospect's behaviours and this are where data mining and behaviour tracking comes in.

Elementary wisdom says sell to your friends, family and your direct connections first. This is fine when starting, or operating at a hobby level. For this to be sustainable, you have to push it out to the real business world and face feedback and reality. You have to offer a solution which is above the buyer's opportunity cost of doing it, and be attractive compared to the alternatives out there.

As an early business fighting in a wide market, structurally, the business is unable to pass on economies of scale as much as the incumbents. What the business can do is to offer better service and target niche segments in a more customized manner.

I think advertising works and this is a path Rocketship will embark on in the near future. Google's Search Engine Results Pages (SERPs) is putting more focus on paid ads and search optimized results will gradually fade off in terms of significance. It's bad for companies that have invested time and effort and building up the backlinks for SEOs, and good for companies who can play the advertising game and lever well.

The path to take on now is to figure how to maximise reach to the subset of people out there in the universe who have the propensity to pay for the current specifications, in the most cost efficient manner possible.

Happy to discuss this online and offline with you all.

- Editor