Ivan Sidorok – co-owner of NGMK Group, founder of Mabius Food Startup Centre, on how to make money on niche products.
HOW TO MAKE MONEY ON NICHE PRODUCTS
For our parents’ generation, the mark of success was brand-name products on the kitchen table. The Internet has immensely changed consumers’ preferences. For us food is what gives us some sort of identity: a healthy lifestyle, vegetarianism, etc. Today, people are willing to overpay for goods that reflect their values.
In the last five years giant brands have lost about $28 billion, according to our data. This money went to local product markets, a market that large corporations saw no point in participation: why should a big company fight for an audience of 100,000 customers? However, if you have a portfolio of 1,000 brands, each of which has 100,000 customers, then the point becomes clear. Niche products are not direct competitors with national and transnational brands, and therefore, there marginality is higher.
WHY E-COMMERCE IS BETTER
How does a music storeowner increase profits? He should display the best-selling records, say, about 1,000 items. But offline store shelf isn’t infinite, so the owner can’t put thousands of top disks, even if he has his own customer base. The Internet has solved this problem: the shelf has become endless. Storage costs are close to zero, and even if storeowners sell a product to just a hundred customers, for him, it’s a profit. The Internet makes it possible to find customers for products which previously were gathering dust in warehouses.
HOW TO DECIDE IF A PRODUCT IS WORTH LAUNCHING
The term push-marketing is when a company invents a product and «pushes» it on the market. At Mabius, we do the opposite, a «pull» approach: we get to know our customer’s interests and wants, primarily through the Internet. Crowd-funding platforms, such as Kickstarter, are the best tool for this, as they either confirm or deny our predictions on how popular a new product will be: if there are orders, this means there is a customer base.
Pull- marketing is often more effective than push-marketing: you spend much less money since you don’t launch the product into production until you receive a positive response. We are constantly communicating with potential customers. There are always active people who aren’t too lazy to fill out a questionnaire. If the customer doesn’t show an interest, you can continue trying to “push” the product on the market at any cost, but this isn’t our method.
HOW TO FORM A MARKETING STRATEGY
In reality, only 50% of the marketing budget yields a result, but no one knows which part, so it’s necessary to do 100%, and maybe, something will catch.
HOW TO RETAIN VALUED EMPLOYEES
Managers need to understand that the time of brute force is long gone. Two hundred years ago, basic values were derived from land: it could be captured and kept, and everything which grew on it could be appropriated: this is how the aristocratic landowner class lived. After the Industrial Revolution, value was created through banks and factories, but there was still a clear link to land: you couldn’t just build a factory anywhere. With the help of the army and police, it was possible to keep power and profit from the surplus value that the workers created.
Now added value is created in the intellectual field. Intellect is a substance that no one can forcibly take from you. The only thing you can do is to create “magnets” for the intellect – spaces that will attract it. If you creating a company that works with intellect, you don’t need any violent tools in your arsenal, as this will just frighten away good employees.
HOW TO GIVE SUBORDINATES FREEDOM
When making a decision whether to work with a person or not, I look not at their discipline, but at their efficiency: an employee can come to the office for one hour, but produce a much higher economic result than a person who sites at the office and works all day. In the office, I don’t regulate subordinates’ schedules. Everyone has a flexible schedule, except for drivers and employees responsible for infrastructure.
But don’t be fooled that a lack of control is the key to success if you take control out of a vertical hierarchical structure, for example, in the army, everything will fall apart. It is impossible to automatically transfer work principles from a horizontal system to a vertical one without preparing people in advance. There have been cases when leaders, imbued with the spirit of freedom, have said, “Let’s all just be friends!” and people cheerfully agreed. And then the company died. You need to carefully examine who you work with and recruit people whose goals resonate with your mission.
HOW TO HIRE A TEAM
I am always interested in what drives the people who come to work with us, and why they wake up every morning. If a person cannot answer this question, then they cannot create an intellectual product. I ask them if they already have a set path or if they are still searching. If it’s the second, I’m sympathetic. Our company is a community of people that are also in search of something – this brings us together. The main thing is the willingness to choose the path together and follow it.
HOW TO RESPOND TO NEW CHALLENGES
A couple centuries ago, external circumstances changed very little, so the tradition of respecting elders came about. Elders were considered to be the bearers of experience, and this was of practical value. Now, the environment is changing rapidly. At the same time, the way we lived five years ago and today is already so vastly different. The experience of the “senior” employee has become irrelevant.
Half century ago, a successful company manager’s task was to support a healthy “ecosystem”, which isn’t enough these days. The only way to keep touch with reality is to constantly attract new employees with fresh views to the “ecosystem”, and people from the external environment who can tell the company about the climate from “the outside”: show the world that exists today, explain how it reacts. The processes need to be organized this way so that the internal environment isn’t blind sighted.
HOW TO LEARN NEW THINGS
Does it make sense for a girl who wants to marry a soldier to get a job at a literary university? Perhaps, she finds a soldier there, but the chances of this are zero to nil. If you want to get married to a soldier – go work in a military school. If you want to succeed as a businessmen, put yourself in an environment where this will be realized. Different cities have different potential, value, and energy. New York is good for finance, while California is better for startups. In order to succeed here, you need to get out of your comfort zone. Everyday difficulties keep us from making such a move. I constantly travel around the world, meeting successful people who support my enthusiasm and give me “food for thought”. Contacts with the right crowd is a criteria for success in business. This is serious work, and you need to spend time on it, but this is just one of the keys to rapid growth.
It’s important to keep everything in context. Playing sports with a weak opponent is a waste of time. I am interested in how successful companies such as Google and Apple run their business. You need to keep your eyes and ears wide open.
HOW TO CHANGE THE WORLD
A startup is an irrational thing. If you look at the statistics, nine out of ten startups do not take off. Would a smart person cross the street knowing there is a nine out of ten chance he will be hit by a car? Probably not. But for some reason, more and more people are going into startups. From a statistical point of view, trying to be part of that 10% is a highly dejecting enterprise, but it’s them who are changing the world.