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Market Models

I've been thinking about market models lately, and recalled an illustration I came up with about eight years ago which I used to describe the dynamics of how business software was sold differently to discrete categories of business size.

So, I redrew it below. The theory went along the lines of:

Small businesses have low complexity but high price sensitivity / low purchasing power, large businesses have very high complexity and comparatively low price sensitivity / high purchasing power. Mid-sized businesses are the problem children with high complexity and but still high price sensitivity. Business complexity is also a pretty good proxy for cost of sale.

Small and Large category customers tended to have direct relationships with software vendors (for different reasons) but mid-sized businesses were forced to deal with intermediaries like resellers, specialists or niche vendors / integrators. It also explains why small business software vendors never grow upstream, and vice versa - the cultural and go-to-market model differences are too profound. 

I've not yet re-worked this model for cloud apps, but it will be interesting to see what (if any) changes emerge.

Click for big.

Reader Comments (1)

Interesting model, thank you. One of my clients runs a laundry business and your analysis has got me thinking about their client profile - I think it's great when models and principles are transferrable! Jeremy

November 17, 2012 | Unregistered CommenterJeremy Devlin-Thorp
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