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Last Update: Monday February 17, 2020

Key Idea: Offer Add Ons

Medallion launched the Taxi Top business.  It  makes money for the taxi owner and Medallion.

Key Question:

A: 

Develop a product or service that your current customer need.

Taxi-Tops was a brilliant idea! The cab driver has zero risk, Medallion pays for the installation of the equipment which holds the sign on top of the cab and provides the labor for installing the sign. Medallion sells the ad space and collects the receivables. The cab driver exerts no effort, has no costs, and gets a commission on the advertising revenue. And the whole transaction is consummated with a trusted business associate … who would say no to that? 

Q: How does a business determine the new product offerings that will appeal to their customer base?

A: Unlike a lot of the challenges that face business owners, this is a question that can actually be addressed mathematically! It is unlikely that any two businesses in the world have exactly the same customer listing. Yours is unique. Every one of your customers buys from other vendors as well. Find out what they buy, and from whom. Look for natural synergies within your own product mix offering. You may find additional inventory items or services, which you are already positioned to add to your goods or services available for sale, that your customers would readily purchase from you.

Perhaps there is a vendor relationship that you could establish which would permit you to add another line of goods that your customers are currently buying from a competitor because it is not available from you. In the service industries, perhaps you could establish a strategic alliance with another service provider and bring a unique service to your existing customer base. Most businesses buy paper clips but if you sell industrial machinery, we're not suggesting you get into the office supplies business. What we are suggesting is that the existing customer relationships you have are one of your most valuable assets.

Medallion's Taxi Tops product was a logical extension to their core business and they were perfectly positioned to launch that new product with minimum investment and minimum risk. In a unique fashion, they were able to turn existing customers, the cab drivers, into partners in a new venture targeted at new customers, the advertisers. The underlying merit of product innovation for existing customers is the same, it's less challenging, i.e., it requires less effort, to develop a new product, than to develop a new customer relationship.

Think about it

What do your existing customers buy from other vendors that they would buy from you if you offered it? If you don't know, ask them! What would it cost you to expand your offerings and what profitability can you reasonably expect?

Clip from: Medallion Financial

New York City:  Meet Andy Murstein.   He is the grandson of the founder of a taxi business.   Andy has transformed that business to be a bank for immigrants, minorities, and women.

Andy's grandfather began as an immigrant taxi driver.  By the time Andy's dad joined the firm, they had a fleet.  They then began financing the acquisition of taxi medallions for new immigrants.  They became a Small Business Investment Company (SBIC) and now, after an IPO and subsequent rounds, Andy is buying up finance companies.  Within just three generations, this family business will have become a billion dollar business!

Medallion Financial has become a large SBIC quickly because they were already  making loans to immigrants and minorities to buy their taxi's medallion.  Andy is doing exactly what his grandfather suggested: "Stick to your niche and you'll get rich."


National Association

You can find an SBIC near you.   Listings are within the website of the Small Business Investor Alliance.

Medallion Financial Corp.

Andy Murstein, CEO

437 Madison Avenue
New York, NY 10022
212-328-2100

Visit our web site: http://medallionfinancial.com/

Office: 212-328-2100

Business Classification:
Financial Services

Year Founded: 1937

Offer Add Ons

HATTIE: (Voiceover) Medallion Funding recently formed an advertising company called Taxi-Tops. It is a perfect source of new revenue because Medallion pays their customers, the taxi cab owners, a fee. Then collects from the advertisers.

ANDY: In every few years or so a new opportunity comes around, and the Taxi-Tops was one of them. What we do is we go out to cab companies and we sign agreements with them to place the Taxi-Tops on top of their cars.

HATTIE: You own this physical thing.

ANDY: Correct. We own that, we do everything for them. There's no cost to them at all so it's really an easy sell. It's about money.

HATTIE: Okay, but you're in this industry so it's a match, it's a fit for you.

ANDY: Yes, it's good.

HATTIE: So the principle for someone who wants to expand their business is to look within the marketplace that they're already placed.

ANDY: Correct.

HATTIE: And see how can we add on that. That's efficient for you because you have all the contacts.

ANDY: Correct. I think it's very difficult to go outside your normal line of business. From time to time, we look at getting involved in areas outside the cab industry. There's a lot of setup costs and time that needs to go into looking into a business, making contacts, developing relationships. The tops work perfectly for us in that we knew the cab owners anyway because they're customers of ours.

We lend them money, we help grow their businesses. So it's a natural tie-in for us, and I think that's really the best way to expand businesses, is not develop brand new networks or brand new subsidiaries. It's really to tie in what you do best. You really need to develop a niche. My grandfather started a cab business 60 years ago and he used to say, 'In niches, there's riches,' and that's kind of our motto. We try to stay with what we do best.

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