Bill Matthies

Micro Economics In A Macro Economy
January 3, 2007

A manager’s reaction to statistics, possibly your reaction, says a lot about how they view their business.

Even the press regularly makes conclusive statements when reporting numbers: “Too few people, less than 20 percent, say they will take a driving vacation this year due to the rising cost of fuel.” There are at least two problems with this the result of one or both can ruin a company. One, the judgmental conclusion that 20 percent is indeed “too few,” and two, the resulting implication that the fate of those companies whose business is tied to driving vacations will suffer as a result of there being “too few.” Neither is necessarily true.

We all tend to think, talk and unfortunately act on what we hope will be majority beliefs. “Everyone will buy one of those.” “No one would pay that much.” Notice that in both examples the language goes beyond a simple majority (51 percent) to include literally 100 percent. In reality the only things 100 percent of the population share in common is that we were all born and we all will die. Beyond that, we are generally reduced to simple minorities, 49 percent or less, and more often what I call “significant minorities.” But you know what? You can make a hell of a business out of small(er) groups of people. In fact if you are reading this, you probably already do.It’s called the CE industry: a loose federation of products, none of which is sold to everyone; often only to a simple majority, and occasionally to a significant minority of 25 percent, 15 percent or even less.

I’m a research-based consultant who has made a great living helping clients grow their business. I estimate my client list is no more than 5 percent of all it could be and I am 80 percent OK with that, 10 percent of the time. A significant minority if there ever was one.

Posted by Bill Matthies on January 3, 2007 | Comments (0)