What pain are you relieving?

I was recently asked by a former Army division commander, “Are you selling pain-relievers or vitamins?” He went on to explain that people will pay for pain-relievers because they need to relieve the pain (a need-basis). Vitamins, on the other hand, are only purchased on a want-basis; when people had the discretionary income to purchase, and they want the sometimes-alleged benefits that they hold. Would a person survive without these vitamin supplements? Absolutely! Would a person survive without those pain-relievers? Yes, but most would prefer to alleviate the pain, especially if it is chronic. Hence, it would be better to be in the pain-reliever business than in the vitamin business. Or to put it in another way, it is better to be in the need-basis business, than the want-basis.

Need-based and want-based demand

For the purposes of this discussion, we distinguish want from need through discretionary and non-discretionary expenditure. Discretionary expenditure is one which people can do without, and will resort to only if they have money left over after all non-discretionary expenditure is paid for. Non-discretionary expenditure, therefore, are those which a person would need to purchase, like food and rent, before all else.

What constitutes need-basis? Competition, survival, or growth are all elements that constitute need-basis. Take the ultra-competitive education space in Singapore. Many parents want their child in Primary 6 to score 250 points and above so that the child can go to a top school. Or they would want their Secondary 4 child to score 7 points for the same reason. They will pay top dollar for a good tutor to help their child achieve these results. They need the tuition to boost their child’s competitive edge, and they might do away with a lot of discretionary expenses to meet that need.

Contrast that with adult education. What has Singapore resorted to do? Without government funding, most adults would not want to relearn and reskill. The need to spend money on upgrading themselves is much lower (almost non-existent) compared to the need to boost their child’s competitive edge. Hence, they would not want to spend on themselves, even if it meant earning more in time, and they would channel all their resources to their children. The only time a Singaporean would want to upskill, is when their opportunity cost is low, almost zero, or, of course, they had money left over after all the needs are met. Hence, government funding for such programs would have to be sustained so long as there are people who need them, but do not want them.

What business are you in?

So are you in a vitamin business or a pain-reliever business? This is important because it will determine the way you market your products. Obviously we all want to be in the pain-reliever business because there is need for it; and people with those needs will look for you. This just goes to show why there are so many eateries in Singapore. Everyone needs to eat; and since most people are now disinclined to cook their own meals, they will have to go out for it. People also need to dress up. We cannot go around naked, so there is a need to clothe up. Hence there are many clothing stores. And people need to stay connected. Why do we have so many fancy phones, and so many shops selling these phones? Because this need to stay connected will fuel the new and after-markets (they like to stay connected through many new-fangled ways!)

But what if you were in the vitamin business? If you are selling massage chairs, for example, you are in the vitamin business. If you are selling TVs, you are also in the vitamin business. If you are selling vitamins, obviously you are in the vitamin business. People don’t need them, and the way to sell these products, is to try to create the demand for it. Try to make them need the product. Move the massage chair from a furniture category to a health category; ditto vitamins. Move the TV from an entertainment category to an information category. The more we are able to form the need-basis for our want-basis product, the more we can create the demand for our product, and the better we would be in selling them.

So if you want business growth, ask yourself what pain you are relieving? When you can identify that, you can start to build a pain-reliever business.