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Opinion

Value For Losses

Mistaking users for customers has been the bane of start-ups

Value For Losses
Value For Losses
outlookindia.com
2017-03-11T11:49:43+05:30

The purpose of business, said iconic management guru Peter Drucker, is to find or create a customer. He defined a customer as someone who pays a business for goods sold or services rendered. Drucker made this point way back in 1954 in his book The Practice of Management. But several decades of boom, bust, bubbles and corporate collapses later, it seems businesses are still to come to terms with the truth underlying this one simple sentence.

Today’s start-ups, in India and abroad, many in the digital world, have confused ‘users’ with ‘customers’. They have conflated an expansion in the usage of their goods or services with the creation of customers. Whether it is the world of digital publishing, or online groceries, or e-marketplaces, or even ride-­sharing apps like Uber and Ola, the stupendous growth in usage has often increased losses for most players. In other words, potential customers have been bought with freebies or discounts, but they are yet to become truly paying customers where revenues are at least Re 1 above costs.

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