Oversubscribed

Successful businesses create more demand than supply and find niche markets to generate desire.

Every year there will be some expensive new gadget or device that people really don’t need, yet they’ll desire it nonetheless.

There’s nothing mysterious about this since it all comes down to popularity and scarcity: When everyone else has a certain thing, you’ll want to have it, too. And when something is so popular that it’s hard to come by, that’s when something becomes really desirable.

You may have learned the laws of supply and demand in grade school, but these days, the secret of success is in the laws demand and supply.

When there is more demand and buyers than there are products and supply, this causes a business to become oversubscribed. This might sound bad, but it’s actually a good thing. Indeed, it’s a powerful means of generating profit.

One of the best examples is the iPhone. Whenever Apple releases a new version, it’s guaranteed to sell out before the phone even goes on sale. Now, this isn’t a problem for Apple. They want people to see long lines of iPhone enthusiasts waiting for days to be the first ones to buy the latest model. It’s free promotion that shows how huge the demand is.

However, demand can shift over time. For Apple, their iPhone needs to remain desirable even as companies like Samsung get increasingly competitive.

One of the biggest challenges to staying oversubscribed is knowing how to respond to a market that becomes flooded with similar products once there’s an obvious demand.

In the 1980s, plastic surgery was an oversubscribed business, with a handful of doctors that could charge enormous fees and still be fully booked. But after thousands of other doctors joined in, prices had to be greatly reduced in order to remain competitive.

So a great way of remaining oversubscribed is to carve out your own niche market with loyal customers.

Moet & Chandon, the makers of Dom Pérignon champagne, is a good example. While there are a lot of champagnes out there, Moet & Chandon have managed to build a luxury brand that is regarded as the best of the best. So customers who want to impress know exactly where to turn.