 Finding Buyers that Fit Using Gustavo's Pyramid
Patent owners looking for buyers often start with the best known companies. Usually these are the large multinationals who are the hardest to convince to try something new in their product line. And even if the inventor succeeds he or she may often have to take a lower price because the mass markets that these companies serve demand lower prices.
A former boss of mine once described to me a strategy for managing market entry of new products that gets around some of these difficulties. I call it Gustavo's pyramid, after its creator. I'm not really sure if he invented the concept but I learned it first from him so I'm happy to ascribe it to him.
Gustavo's pyramid looks like a triangle divided by lines into 3 or 4 segments. Parallel to the triangle are two arrows one pointing up to the top of the pyramid and one towards the base. The one pointing toward the base is labeled volume and the one towards the top is labeled price.
Each tier represents a customer group. The top most tier will pay the highest prices but for the smallest quantities. An example of this group is specialized markets like the defense department (famously known for paying $500 for a toilet seat). This tier is also the one that likes to try out new things as they always want to have the latest and greatest of everything. In their area of responsibility, performance always trumps price. The second tier from the top is commercial markets. This group is more price sensitive than the top tier but it is also a good deal larger. Commercial entities with their specialized needs will often pay more for a product that does the job better. There is either one or two more tiers. The mass market is the bottom tier but if you divide it in two horizontally, the third tier is the "first adopters". These people will pay more to be the first ones on the block to have something new. Finally we get to the bottom tier, the mass market which includes the vast bulk of buyers but also those who are most likely to wait for proven technologies and also to wait until the price is come down to something they can easily afford. "Gustavo's Strategy" which goes with his Pyramid, is for the promoters of a new product to go after the markets in the order of top to bottom. By so doing they can obtain from the higher tiers not only the money to finance entry into the lower ones but also they can perfect their product along the way using not only money but also knowledge from their activities in the upper tiers.
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