I was going through a series of things I found interesting in the past and wrote a piece about them, and I came across this...I still find it interesting!
At one point of your life, you have tried to sell an idea, a tyre or even a service in a competitive and sometimes unfair market. Unless you beat the market for lemons, your idea, product or service may be beaten to the ground by others.
If you wanted to sell your good quality second hand car at Ksh. 500,000 and your friends decided to sell their cars as well which may be not of good quality as yours might be, they will be willing to accept ½ of what you expect that is Ksh.250,000. Since the customer will not be in a position to tell which is of better quality, he will be only willing to pay Ksh.375,000 which is ¾ the cost of a good quality second hand car. That means, the person with the good quality second hand car will get a raw deal and the person with not so good quality will get a great deal…That is a market for lemons.
In India in the 1970’s, good quality, fresh milk was rarely available because so many traders added water to the milk to increase their profits. The low quality milk drove out the good quality milk out of the market since the customers could not tell the difference… That is a market for lemons.
It follows, that your great idea, product or service may not prevail in a market for lemons.
The Indian National Dairy’s Board provided the market with a machine (probably a lactometer) that could test the water content in milk and the customers were able to determine quality milk and thus built their trust in milk they were buying…they beat the market for lemons.
Remember customers will try ‘low cost providers’ because the majors have not given them any clear reason not to.
Next time, you want to sell your idea, product or service, be creative, and find a way that your audience can build the desired trust and confidence. Once you beat the market for lemons, then you can have your niche’.
