Last week, I met with two startup entrepreneurs marketing products that were poles apart. One company was developing a feminine hygiene product for women in developing nations. The other was building a website to help Americans with a certain type of learning disability bolster their self-esteem.
On the surface, these two companies could not have been more different. But from the perspective of a business model, they shared a common problem–how to get the users of their products to pay. While millions of women and girls in developing nations need the product that the first company is making, very few of them can afford it. They make do with homemade solutions instead. While millions of learning-disabled children and adults need the second company’s product, there’s so much free information available on the web already that few people would be willing to pay for it even if the company could show that the information on its site was better.
What’s the answer? Third-party payers.
Think about the last time you took your child with a fever or a runny nose to the doctor. Who paid the bill–you or your insurance company? If you’re like most Americans, it was your insurer that paid the bill (minus your co-pay or deductible). If doctors had to limit their practices to people who were willing and able to pay them directly, the only doctors practicing medicine would be plastic surgeons.
Clearly, both entrepreneurs who came to see me last week need to find third-party payers to pick up the tab if they want to gain market share for their products. For the feminine hygiene company, the buyer might be a government agency or NGO (non-governmental organization) willing to distribute the product for free in order to do social good. For the learning-disabilities website, the buyer might be a school district that’s willing to paying a licensing fee in order to make the content available to its students. Once the site got enough traffic, it might ultimately be able to sell advertising to marketers looking to reach its audience with targeted products and services, another way to get third-parties to subsidize its content.
The bottom line: The quickest route to a sale isn’t always the most direct one. One third-party payer that can buy in bulk and give away your product for free may be worth 1,000 retail customers who just don’t have the money.
This entry was posted on Monday, October 19th, 2009 at 9:25 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.Leave a Reply
