When it comes to business advice, I can never get enough of the Oracle of Omaha. That’s right, it’s time for another Buffett-based blog. This fits in nicely with what I’ve been talking about all summer and is really a continuation of the niche (and niches) theme.

We’ve been spending a lot of time lately discussing the question: “Can you raise prices when you want to?” It’s a good test to see if you have a business or not—otherwise you are, by definition, a commodity.  And as I’ve said before, the only way to de-commoditize is to specialize.

The origin of Netflix is a classic example of doing something no one else is doing and charging what you want to charge.  Unfortunately for Netflix, though not so much for consumers, Hulu, HBO Now, and Amazon decided to jump in and provide some very healthy competition. Unless they happen to own stock in Netflix, this has been a boon for binge-watchers.

Andrs Cardenal of The Motley Fool goes deep into Netflix’s investors’ concerns, writing, “Netflix should keep in mind the lesson that customers don’t like a price increase even if content has been expanding when making pricing decisions in the future. The company could also improve its communication, so that customers better understand its value proposition.” That’s key to building a niche: if you can’t help your customer understand why you are worth more, then maybe you’re not. And if you’re not worth the money, it’s time to tweak that niche!

Cardenal uses a great Buffet quote to illustrate his point:

The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business. Warren Buffett

Made any great, binge-worthy Netflix discoveries lately? Let me know in the comments. And as always, if you’d like to discuss how to differentiate yourself from the competition and build (or tweak) your niche, send me an email at Scott@doubledareyou.us and we can set up a time to talk.

 

photo credit: The Intro Machine via photopin (license)

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