In my previous article, I wrote about how Robert Kiyosaki was stumped with a seemingly unsolvable business problem—his product was perceived as a commodity and he couldn’t compete on price profitably. So, how did he solve this intractable problem?
The only way out was to stop targeting the product at the low-end, where the cheap customers were, and shift his attention to the high-end where customers were willing to pay good price for quality and value. Instead of competing on price to be the cheapest game in town, he positioned it as the most expensive game in the world!
Now, stop here and think about it. Your first reaction may be to think that Robert Kiyosaki was heading for business suicide. If he can’t compete on price, then wouldn’t raising the price to that high be nuts?
That’s where the genius of his brainwave came into play. Instead of targeting Cashflow as a game to the masses at Wal-Mart or other retail stores, he targeted it as an educational tool to customers who value education. These customers belonged to the high-end. They value education so much that they were willing to pay thousands to attend seminars. Cashflow would be marketed as a seminar-in-a-box that cost only $200. From this perspective, Cashflow was no longer a commodity. It became a highly valuable educational tool for the more sophisticated.
But how was Robert Kiyosaki going to find such customers?
At that time, his business partner was working on the Rich Dad, Poor Dad book. So, their strategy was to shift the marketing focus from Cashflow to the book. The book would become the brochure to market Cashflow. It would help them find the customers for Cashflow.
At $200, the margin would be high enough for him to reinvest into growing his business. As I wrote in “If you build it, they wouldn’t come, unless…”, many businesses remain small because they are trapped in a vicious cycle. If Robert Kiyosaki fought to compete on price, his margin would be squeezed and not be sufficiently large enough to pull him out of it and we will not hear of Rich Dad company today.
So, I will turn my attention to YOU. What lesson do you take out of this story? How do you apply it to your business?