Roger Abramson: With Barriers To Entry So Low, What Stops People From Under-Cutting The Competition? (Part IV)

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Most people fail to appreciate that some of us are billion-a-year achievers, making money about 40,000 times more quickly than the average American. Most of us have some small fraction of this potential, but aim too low to ever discover what it could be.

What you earn is literally a drop in the bucket compared to what’s possible. Our schools don’t teach us to be mediocre. We’re taught to be damn-near broke and STAY that way.

• If you’re somehow making $10 million – $50 million per year, then you’re actually achieving less than 1% of human financial potential.
• Ten million a year ain’t rich. It’s actually far closer to broke than it is to rich.
• 99% of us are closer to broke than we are to $1 million a year.
• Only 5% of us will save as much in a whole lifetime.
• Most people will retire flat broke or in debt.

Money motivates people. It also makes them do incredibly stupid things.

• Like working hard instead of working smart.
• Like following a crowd destined for financial failure.
• Like sacrificing their future to make a quick buck.

Buying behavior is predictably counter-intuitive. In market tests, setting higher prices often increases response. Meaning MORE people buy when it’s more expensive.

People don’t think like you and I. Yes, there are bargain shoppers. For most people, price isn’t their top priority. It barely cracks their top ten list.

Because of economies of scale, like purchasing power, efficiency and frugality generally belongs to the big box stores. And it’s a huge advantage. Wal-Mart is the biggest company in the country, known for its low prices.

Trump isn’t known for having the lowest prices. For example, he charged a staggering $1 million dollars for a one-hour speech at the Learning Annex. At that rate, he actually does repeat business, because his name draws a crowd. He was able to command a 50% higher fee for his next 17 speeches.

“He’s worth every penny.” – Bill Zanker, The Learning Annex, on Trump’s speaking fee.

To be perfectly clear: You simply can’t compete with Trump on price.

Every public speaker will gladly take his spot for $1.4 million dollars. Price ain’t the primary factor. It’s not even in the top ten.

On cattle, the brand was a stamp of quality. A man’s staked his reputation on the quality of the product marked with his brand. It’s efficient. You don’t need to ask if the cattle is corn-fed, free-range or well-bred. The brand instantly tells you what you’re getting.

Seeing the brand evokes an almost Pavlovian response. My generation is literally neurologically conditioned through Operant Conditioning to associate the Pepsi with good feelings. How? They’ve carefully associated themselves with Britney Spears, Michael Jackson, Enrique Eglasias, Pink, Beyonce, Queen, big arenas, and the Superbowl.

In other words, the flavor isn’t the only neuro-association happening. Seeing the word “Pepsi” operates at a subconsicous level, and it’s designed to drive buying behavior.

Red Bull competes with other soft drinks and charges about $2.90 per 8-ounce can by differentiation. It’s in a smaller can, and it’s associated with extreme sports.

Essentially, Pepsi and Red Bull are both energy drinks. The “Pep” in Pepsi is about putting pep in your step.

A case of Red Bull is selling on Amazon for 18 cents an ounce.
A case of Pepsi is selling on Amazon for about 8 cents an ounce.

A new company is successfully competing against multi-billion dollar energy drink competitors, and they’re charging 125% more per ounce.

Think gasoline is expensive? Try 16 ounces of bottled water, which sells for more than the cost of 16 ounces of gasoline.

Want even more expensive water? Try a disposable one-ounce water spray mister, selling for $4 – $40 dollars an ounce.

Yup. You can actually go out and buy a tiny bottle water that’s a over 1,000 times more expensive than gasoline. The differentiator: Its brand name, packaging, and possibly a floral scent. Make no mistake…

They’re actually selling WATER for up to $5,000 per gallon.

On a warm day at yoga class, you can spray it on your face so you won’t sweat.

You want to know what gets in the way of a startup’s success? The same thing that impedes science: Our preconceived notions about what “should” work.

I’ve taken examples from all different industries to show that human behavior is equally insane andpredictably irrational in all industries.

By predicting and testing buying behavior, you’ll have a tremendous advantage, regardless of price. And competition, no matter how entrenched, may become utterly irrelevant.

Does that help?