Back to the on-screen lesson ·
Demand as three counts and two rates rather than a feeling, and the list of things a customer already does instead — with doing nothing at the top of it.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will count demand as passed, stopped and bought rather than by how the evening felt, work out the stop rate, the buying rate and a per-hour average from the totals, and list the alternatives a customer already has — including the do-nothing option, and what the business must be better at to win the switch.
You can say who the customer is and what they are buying, and you can keep a tally. This lesson asks how many of them there are, how many of those are interested, how many buy — and what everyone else is doing about the same need right now. Those two questions together are what an owner means by demand, whether they know it or not.
| Term | What it means |
|---|---|
| Demand | How many will buy, at a stated price, in a stated period. |
| Passed, stopped, bought | Three counts at a stall or shop door: reach, interest and sales. |
| Stop rate | People who stopped divided by people who passed. |
| Buying rate | People who bought divided by people who stopped; sometimes called conversion. |
| Substitute | Anything the customer uses instead, in your trade or not. |
| Do-nothing option | Not solving the problem at all this time; always available and always free. |
| Switching cost | What it costs the customer — in money, time or effort — to change from what they do now. |
Demand is a thing you count, not a thing you feel. A busy evening and a selling evening are different evenings, and the owner behind the counter cannot reliably tell them apart. The cure is a pencil and three marks — passed, stopped, bought — an hour at a time, for a week.
Every customer already has a way of coping. They are getting the thing done somehow: a supermarket, a neighbor, a week without a phone. That is the real competition, and it is rarely another business in your trade.
The one owners leave off usually wins: doing nothing. It costs the customer nothing and pays nobody. So an offer has to beat what they do today, which is a different bar from being better at the craft.
Another way: table
The same need, met three ways, with doing nothing in its own column.
| Business | The substitute in use | Doing nothing looks like |
|---|---|---|
| Monica's Market Stall | the supermarket on the way to work | no fruit this week |
| Bright Home Cleaning | a neighbor's cousin, paid in cash | cleaning it themselves on Saturday |
| Northside Repairs | the network shop, a week's wait | living with the cracked screen |
Read the last column and ask what it would take to lose to it.
Another way: steps
To turn an opinion about demand into a figure:
Pick a period and stand there. An hour at a time, for the hours the business is open, on ordinary days as well as busy ones. A week of counts is better than one good evening.
Mark three things. Passed: people who came within sight of the stall or the door. Stopped: people who looked, picked something up, or asked. Bought: people who paid. Make the three marks by the hour, so the busy and quiet hours can be told apart later.
Total each column and work out two rates. The stop rate is stopped over passed; the buying rate is bought over stopped. Each points at a different part of the business: the stop rate at the pitch and the sign, the buying rate at the offer and the price.
Write down the price and the period. Demand is always at a price, in a period. Nine an hour bought at four dollars on a Tuesday can be tested again; there is demand cannot.
List the alternatives. For the people who stopped and did not buy, write what they probably did instead, with doing nothing first.
Check the counts by making sure each column is no larger than the one before it — nobody can buy without stopping — and that the hourly figures add to the totals. Then count again on another day: a rate that holds across days is a fact about the business; one that swings wildly is a fact about the day.
The gaps are where the money is. Two hundred passed, thirty stopped, four bought is a different business from two hundred, six, four — and the takings are identical, so the register cannot tell you which you are running. The first needs a better offer for the people who already stop; the second needs a better sign, because hardly anyone is stopping at all. Working on the wrong gap costs the same effort and changes nothing.
Once the alternatives are listed, the question changes from how do I beat the other potter? to what would make buying from me easier than what this customer does now? The answer is usually about the size of the switch.
A customer changes when the gain is larger than the switching cost: the money, time, effort and risk of doing something new. The supermarket on the way to work has almost no switching cost for Monica's customers; her stall has to be on their route, open when they pass, and quick. Doing nothing has no switching cost at all, so beating it means making the first step tiny — a same-day slot, a free quote on the doorstep, a trial clean at a small price.
This is why many small businesses win not by being the best at the craft but by being the easiest option: nearest, quickest, clearest. The craft makes the switch worth making; convenience makes it happen. An owner who knows what the customer does now can design the offer around the gap between the two.
Counts at a stall are a sample of demand, not all of it. To turn them into an estimate an owner can plan with, three more steps are needed, and each should be written down so it can be checked later.
Scale the counts to the period. If an average evening sells 15 and the stall trades 12 evenings a month, the month sells about 180 — at this price, this pitch and this season. Keep those conditions beside the figure.
Say what would change the rates. A better sign might lift the stop rate; a clearer price or a smaller first purchase might lift the buying rate. Each is a guess until it has been tried, so an estimate that assumes a better rate should be labeled as an assumption and tested before anything is spent on it.
Say what would change the passers-by. A new pitch, a different hour or the seasons change the first count, and no amount of work behind the counter makes up for too few people passing.
An estimate built this way can be wrong, and it will say how: the rates, the footfall or the conditions. An estimate built on a feeling cannot be wrong in any way its owner will notice, which is exactly why it is no use for deciding how much stock to buy or whether a new pitch is worth its rent. Keep the counting sheets with the estimate, so the next count can be set beside them.
Before signing a lease, a couple planning a café stand across the road from the empty shop for three weekday mornings from 7 to 10 and count. They see an average of 410 people pass each morning, most of them walking to the station. Next door is a newsstand that sells coffee from a machine, and 38 people a morning come out holding a cup. The chain café two streets away is busy, but it is not on the way to the station.
So the alternative in use is machine coffee from the newsstand, bought by about 9 percent of passers-by, and doing nothing — no coffee until the office — for most of the rest. If the new café could win the 38 and persuade another 5 percent of passers-by who currently buy nothing, it would sell about 38 + 20 = 58 cups a morning. At a contribution of 2.40 a cup and 22 trading days, that is about 3,060 dollars a month from the morning rush alone.
They set that against the rent of 2,600 a month plus other fixed costs, and decide the morning alone will not carry the café. They sign only after counting lunchtimes too, and they design the café around the switching cost they saw: a window counter facing the station, card payment only, and a cup in the customer's hand in under a minute.
Shops measure the same three counts with door counters and registers: footfall (people entering), and conversion (the share who buy). A shop whose footfall is steady and whose conversion is falling has a problem inside the shop — stock, staff, price; one whose conversion holds and footfall falls has a problem outside it — the street, the season, the sign.
Counting takings instead of people. The register says nothing about those who came near and left, and those are the sales you can still get.
Listing only competitors in your own trade. The bakery down the road is visible and is not where your customers went — they went to the supermarket, or had toast.
Leaving out doing nothing. It is free and takes no decision. A comparison that omits it flatters every other option.
Assuming better work wins the switch. Being better makes the switch worth making; it is not what makes it happen. That is the switch being small — on their route, at their hour.
Reporting a demand with no price and no period. There is demand for this cannot be checked; nine an hour bought at four dollars on a Tuesday can.
Write Monica's three totals for four hours.
$\text{passed } 180, \ \text{stopped } 44, \ \text{bought } 15$
Three marks, an hour at a time.
Find the stop rate.
$44 \div 180 \approx 24\%$
The evening felt busy because a quarter of passers-by stopped.
Find the buying rate.
$15 \div 44 \approx 34\%$
Two in three of the interested people walked away.
Count those who stopped and did not buy.
$44 - 15 = 29$
That gap is the number worth working on.
Name where they went.
$\text{supermarket, or no fruit this week}$
Not to another stall; most to the alternative on their route, some to nothing.
Write the offer.
$\text{screen replaced for } 60, \text{ same day}$
What Northside sells.
Write the named rival.
$\text{network shop: often free, a week's wait}$
Cheaper and slower.
Write the unnamed rival.
$\text{living with the crack: free, no wait}$
The option nobody puts on the list.
Count last month's inquiries and repairs.
$40 \text{ asked}, \ 22 \text{ repaired}$
Eighteen people asked and did not go ahead.
Find the buying rate.
$22 \div 40 = 55\%$
Nearly half chose an alternative.
Say what to be better at.
$\text{finished today, with the price on the door}$
Beat what they do now, not what you are proudest of.
Write the counts.
$60 \text{ leaflets}, \ 2 \text{ calls}$
The leaflet reached 60 households.
Find the response rate.
$2 \div 60 \approx 3\%$
Before blaming the leaflet, name the alternatives.
List what the other households do.
$\text{a neighbor's cousin for cash; clean it themselves}$
Two alternatives, one of them doing it themselves.
Say which is harder to beat.
$\text{cleaning it themselves: costs nothing}$
Beating it means being worth a whole Saturday morning.
Design a smaller switch.
$\text{a first clean at half price, booked by text}$
The first step is made tiny.
Count again after the next 60 leaflets.
$\text{calls} = 7$
The count can be compared with the first.
Find the new response rate.
$7 \div 60 \approx 12\%$
A smaller switch roughly quadrupled the response, and the count shows it.
300 people passed the counter, 45 stopped and 27 bought. Find the stop rate.
$45 \div 300 = 15\%$
Stopped over passed.
Find the buying rate.
$27 \div 45 = 60\%$
Bought over stopped.
Name the alternative for the 18 who stopped and left.
Four of the businesses in this course. Each customer already has a way of getting the same thing done. Match each business to the alternative its customer is using today.
| A gift card from the supermarket | The supermarket on the way to work | A sandwich from the shop next door | The network shop, which sends the phone away for a week | |
|---|---|---|---|---|
| Maya's Ceramics | ||||
| Monica's Market Stall | ||||
| Neighborhood Kitchen | ||||
| Northside Repairs |
Complete the worked solution: in one evening 200 people passed a stall, $20$ stopped and $8$ bought. Read the three counts.
Find the share of passers-by who stopped.
$20 \div 200 \times 100 =$ s $\%$
This rate is about the pitch and the sign.
Find the share of those who stopped who bought.
$8 \div 20 \times 100 =$ r $\%$
This rate is about the offer and the price.
Count the people who stopped and walked away.
$20 - 8 =$ w
These people were interested and did not buy.
Name what they are doing instead.
$\text{the supermarket, or no fruit this week}$
The alternative, with doing nothing on the list.
Decide which rate to work on first.
$\text{the lower of the two rates}$
The weaker step is where a change would add the most sales.
Monica's count, totaled: $12$ people bought over the four hours she stood at the stall. How many sales did an hour produce, on average?
Answer:
Monica's Market Stall is competing with the supermarket on the way to work, which costs the customer a little cheaper, and already on the route. Which alternative do owners most often leave out of the comparison?
On Saturday $247$ people passed Maya's stall, $80$ stopped to look and $56$ bought a mug. What percentage of the people who stopped bought something?
Answer:
Monica stood at her stall for four hours with a pencil and marked three things every hour: people who passed, people who stopped, people who bought. Fill in the totals.
| People who passed | People who stopped | People who bought | |
|---|---|---|---|
| Five to six | 49 | 9 | 3 |
| Six to seven | 45 | 9 | 5 |
| Seven to eight | 57 | 13 | 6 |
| Eight to nine | 29 | 12 | 4 |
| Totals |
A mobile dog groomer visits customers at home. A groom costs her $19$ dollars in shampoo, fuel and the hour it takes. The alternative her customers use today is the salon on the main street at $38$ dollars, and her own booking book says nobody has ever paid more than $8$ dollars above the salon price for the visit. For which prices in dollars does the evidence support charging?
This task has no paper form; do it on a device.
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Monica stood at her stall for four hours with a pencil and marked three things every hour: people who passed, people who stopped, people who bought. Fill in the totals.
| People who passed | People who stopped | People who bought | |
|---|---|---|---|
| Five to six | 51 | 12 | 5 |
| Six to seven | 43 | 14 | 5 |
| Seven to eight | 60 | 15 | 4 |
| Eight to nine | 33 | 10 | 4 |
| Totals |
You can turn an evening of trading into three counts, two rates and a price, and name what a customer does today instead of buying from you. Tell someone which alternative every owner leaves off the list, and why it is the one that usually wins. Next: turning the skill you have into an offer somebody can say yes to.
15. Your turn: Neighborhood Kitchen's lunch hour, step 3
$\text{the sandwich shop next door, no line}$
The alternative on their route, faster than the counter.