7. Shallow Analysis of Competition
The third reason ties closely to the first two and revolves around the students' significant misjudgments concerning competition. Specifically, 63% of students admitted that they were unsure what their competitive edge would be. Upon closer investigation, this issue was found to have three interrelated components.
Misjudging the Impact of Pricing Strategies
This is primarily connected to the problem of reaching an adequate audience. Over half of the students (57%) believed that there would be a pricing point at which their offer would become irresistibly competitive due to its excellent price-to-value ratio. However, this assumption proved to be flawed on multiple levels. One of the key issues was that the cost of effectively marketing that offer to a sufficient number of potential customers inflated the actual net cost of performing the procedure. Essentially, it didn't matter how much they lowered their price; the associated marketing costs would negate any profits they hoped to make from the procedure.
It's crucial to recognize that performing a procedure is rarely cost-free. An artist might consider their own time as having no alternative cost, which is a reasonable assumption. Yet, this doesn't account for the myriad of other expenses involved. These costs include proportional rent for each procedure, supplies, transportation, communication, marketing, and even basic living expenses like housing and food. When tallying up all these necessary costs for starting the business, the harsh reality becomes evident: many promotional discounts or simply setting a lower price point might actually require the artist to seek additional funding. This is because the cumulative operating costs can surpass the total income from client fees. Therefore, the artist invests more money in such cases to continue offering services at lower rates or discounted prices.
Underestimating Competitors' Adaptability
We touched on this earlier in this article. Students often significantly underestimated how their competitors would adapt to market changes. Rather than maintaining a "status quo," competitors were often found to be dynamically adapting to evolving market conditions. This suggests that many students mistakenly assumed market conditions would remain static. They thought that competitors' offerings, marketing activities, and discount strategies would remain the same as they were when the students first started their training. The reality was often much more aggressive.
Misjudging Actual Market Prices
Another related aspect that many students miscalculated involves the pricing set by active artists in the field. Many students entered the industry with a vague perception of "high prices," which fueled dreams of substantial earnings. However, when they conducted more thorough research as practicing artists themselves, over half discovered that their competitors were charging less than they had initially thought. Specifically, students found that competitors were asking, on average, 25-40% less for their services than the students had assumed.
Hierarchical Cannibalization: A Hidden Challenge
You might find it surprising, but one specific sub-category of competition that complicates launching a career in this field is "hierarchical cannibalization." So, what does that term mean? Basically, if the student's trainer operates within the same geographical area, they will likely compete for the same clients. The geographical scope is generally defined as either within an approximate 120-mile radius or within driving time ranging from one to 1.5 hours.
When does cannibalization not occur? Direct competition is less likely if the trainer's price point is significantly higher—by over 120% than the student's. However, if the prices are similar, cannibalization is almost inevitable. This isn't limited to the trainer-student relationship; the same principle applies to academy hierarchies. Here, cannibalization can be triggered by any artist in the same geographical area who holds a "higher status level" within the organizational system.