What’s The Most Important Thing In a Market?

When you think about markets, what is the most important part of it?  Sellers?  Buyers?  Supply?  Demand?  The product?

No, it’s a competitively discovered transparent price.

Having a competitive market to discover and transmit the price to the rest of the world allows supply and demand to adjust rapidly creating even more efficiency.  Transparent price tells everyone where to allocate resources.  Should they put more resources in, or pull some back?

Centrally planned prices cause markets to go out of whack.  So do prices where there is no transparency.  The medical market is exactly like that.

At the same time, if you are running a business and all you do is compete on price you are in trouble.  You aren’t running a business you are running a commodity.

I read this piece by Seth Godin and it inspired this post.

Price informs our decision about whether to buy or not buy.  But, a lot of other things inform our decision too.  Why do you drink Coke over Pepsi?  They are basically the same thing.  Why do you buy Domino sugar over private labelled sugar?  Different detergents?

One facet of business that I think engineers often underestimate is how much marketing and sales add to an organization.  Those are the things that can help build barriers to entry and customer lock in.  Certainly, design and UX can do it too.  But how your customers “feel” about your product means a lot when choosing.  Not everyone is Spock.