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Art of Profitability<br />Derek Sivers<br />sivers.org<br />
8 profit models<br />Think of how each one applies to you<br />
Customer Solution Profit<br />Up-front investment customizing a perfect fit<br />
Pyramid Profit<br />When customers are a heirarchy, add luxury at top, firewall at bottom.<br />
After-Sales Profit<br />Small, more profitable items after big-ticket sale<br />
Multi-Component Profit<br />Exact same product.<br />Same customer.<br />Different situations.<br />
Profit-Multiplier Profit<br />Use one<br />developed asset<br />to create many<br />different products.<br />
Time Profit<br />Front-load operations to maximize new innovationsbefore imitators arrive.<br />
New Product Profit<br />For trends:Over-invest on rise,under-invest before peak.<br />
Transaction Scale Profit<br />Limiting business toonly big transactions.<br />
Revenue is proofyou’re valuableto people.<br />
Profit is proof you’re doing it wisely.<br />
Derek Siversderek@sivers.orgsivers.org@sivers<br />
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eDay2010 Derek Sivers

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  • FreeConferenceCall: a telecom loophole called Traffic Pumping, where by setting up incoming numbers in rural areas, the long-distance carriers actually pay the company to receive calls. End user pays nothing.
  • BetterPlace: cellphone model applied to cars. Pay for electricity, get the car for free.
  • Art of Profitability. As creative as anything.Taboo: why? boring bits. Creative in work but not the profit bits.Facing facts of how valueable you really are: Just Plain FolksMoney as a neutral measure of how valuable you are.
  • Most businesses have just one profit model. Statue on pedestal. Danger.
  • Some forward-thinking businesses have next one ready: like Tarzan. Still danger.
  • Your business needs to be like a table with many legs. If one breaks, your table is still standing.Business design used to have long life of 10-30 years. Now it&apos;s 5-6 years. And it takes 2-3 years to change.So even if you&apos;re comfortable now, you need to get ready to change.
  • We&apos;re going to look at 8 different business models for 2 minutes each.Focus. Great exercise for your mind to understand the principle of a new profit model.I&apos;ll give a memorable example for each model, but please, for the next 16 minutes, think of how each one can apply to what you do.
  • Up-front investment in customizing a perfect fit. Such a perfect fit they&apos;ll never leave for another.Factset: target potential clients. send reps to deeply understand procedures and needs. customize software. stay to train &amp; fully integrate &amp; further customize.
  • Hostbaby: no fee until happy. hours on phone. show them how to maintain it. one fully understood, phone calls stop. net $2M/year with only 4 people in a small room.Can be used anywhere there is relationship-building.
  • Mattel Barbie: $20 doll. Cheap undercutters. EBay.
  • Apple&apos;s $59 iPod. Different hotel brands.NOT just a collection of products at different price points.Bottom has to be so efficient that it&apos;s impossible for a competitor to steal market share.Offer full-service now? Make a different brand that offers no service at all.Be the competitor you send customers to.
  • People are very price-sensitive for big-ticket items. Be competitive there.
  • People are very price-sensitive for big-ticket items. Be competitive there.
  • Small, convenient, more profitable add-ons to big transactions. $70 laptop bag. $200 floor mat on car.Opportunity: find a bigger business that is doing the bigger-ticket but not enough after, and providing their after-sales solution, letting them take a huge mark-up.
  • Exact same product. Same customer. Different situations!Coke. The brown liquid.Fountains = $__. 2L bottles = $__. Vending machines = $__. Bar = $__.
  • Can of coke. 1 dollar
  • 2l bottle: 1 dollar.
  • fountain
  • Use one developed asset to create many different products.Disney: Lion King. Movie, toys, theater production. Each a different product, but based on the same asset.
  • The initial R&amp;D is done. Don&apos;t reinvent the wheel each time.
  • Movie, toys, theater productionSoftware you&apos;ve developed for internal use, could also be adapted for other businesses, adapted for retail customers.
  • Innovative product attracting imitators? Front-load operations to get profit before it dissolves.Realizing others can imitate you fast, front-load your efforts, so the minute it&apos;s announced, you&apos;re on full blast, and can make a big profit before imitation wears it down.
  • Operational processes like contacting big customers two weeks in advance, giving full private presentation, lining up media articles in advance, calling all customers again three days before. Training all reps to be fully ready to answer all questions the minute it&apos;s announced.
  • When total market profitability rises, peaks, and crashes, over-invest on rise, under-invest on crash.Radios, TVs, VCRs, Walkmans, desktops, laptops, servers, sedans, minivans, SUVs. Faxes, fax-printers, fax-printer-copiers.
  • The history of each one of these products suggest that the curve is right. Left side of the parabola: Gold Rush. Top: Pike&apos;s Peak. Right side, where the parabola&apos;s down slope met the horizontal axis: No Profit Zone.
  • Overinvest, by a factor of three, on the left-hand side of the parabola Underinvest, again by a factor of three, on the right-hand side.On the left-hand side, above all else, fight for mindshare. Be seen as the leader in the new category in the mind of the customer. Merchandise your product mercilessly. Be everywhere.
  • Start measuring things that will give you clues that you&apos;re approaching Pike&apos;s Peak.Reverse the investment ratio about a year before hitting the peak.Not getting out of the market, just managing the business to be in a great position on the day things start getting ugly.Pull back on advertising, because everyone knows the product from early grab-mindshare merchandising efforts.
  • Keep margins high while others&apos; margins crumble.
  • In a real-estate firm, the top-earning broker sold the least number of houses. How? Only big ones.
  • Any brokerage-type business that gets a percentage of the transaction side should consider this:&quot;You take what you can get&quot; as much as you can get. That&apos;s what every salesman says about every customer. Got to get the revenue, However unprofitable it might be.
  • Shape your service to focus on the big transactions only, and it will change how you do business. Follow their needs. Perhaps not as aggressive, but easier to reach. Where you meet for lunch. What you drive.
  • only profit lets you keep doing anything.finding more ways to be profitable = finding more ways to be helpful and wise.
  • Transcript of "eDay2010 Derek Sivers"

    1. 1.
    2. 2.
    3. 3.
    4. 4.
    5. 5.
    6. 6. Art of Profitability<br />Derek Sivers<br />sivers.org<br />
    7. 7.
    8. 8.
    9. 9.
    10. 10. 8 profit models<br />Think of how each one applies to you<br />
    11. 11. Customer Solution Profit<br />Up-front investment customizing a perfect fit<br />
    12. 12.
    13. 13. Pyramid Profit<br />When customers are a heirarchy, add luxury at top, firewall at bottom.<br />
    14. 14.
    15. 15.
    16. 16.
    17. 17. After-Sales Profit<br />Small, more profitable items after big-ticket sale<br />
    18. 18.
    19. 19.
    20. 20. Multi-Component Profit<br />Exact same product.<br />Same customer.<br />Different situations.<br />
    21. 21.
    22. 22.
    23. 23.
    24. 24. Profit-Multiplier Profit<br />Use one<br />developed asset<br />to create many<br />different products.<br />
    25. 25.
    26. 26.
    27. 27. Time Profit<br />Front-load operations to maximize new innovationsbefore imitators arrive.<br />
    28. 28.
    29. 29. New Product Profit<br />For trends:Over-invest on rise,under-invest before peak.<br />
    30. 30.
    31. 31.
    32. 32.
    33. 33.
    34. 34. Transaction Scale Profit<br />Limiting business toonly big transactions.<br />
    35. 35.
    36. 36.
    37. 37. Revenue is proofyou’re valuableto people.<br />
    38. 38. Profit is proof you’re doing it wisely.<br />
    39. 39.
    40. 40. Derek Siversderek@sivers.orgsivers.org@sivers<br />
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