By Kai Itameri-Kinter
That perennial right of passage, the EU backpacking trip, has long spawned dreams of cultural enlightenment and younger drinking ages in youthful minds across America, thanks to budget airfares and Europe-on-a-shoestring guides. Recently, a company called Sandeman’s has put such trips within reach of even the smallest budget with free walking tours of major European cities. These tours are powerful disruptors because they not only overcome a major barrier to consumption and address a real “job to be done,” (cheap entertainment, socializing, etc), they also excel against competitors who overshoot the bottom tier of the tourist market.
Comfortable bus tours with professional guides and high ticket prices are great products, but likely not worth the cost for low-budget student travelers, who are unattractive to larger firms focused on these high-margin products. These overshot customers pose a disruptive opportunity for less professional yet comfortable free walking tours that are likely “good enough.” Free tours also create potential further growth, because young students may not be the only tourists with cash constraints and similar desires. Addressing their needs may help uncover overlooked opportunities elsewhere and span traditionally segmented market demographics.
You may ask, how does a free tour make money? Here, real innovation has occurred in devising a business model that attracts customers, who are then encouraged to give tips once they receive a great product, or in this case, a great experience. Payment by tips also provides the student guides a real incentive to perform. These guides, who don’t require the stability of a set salary, are essentially willing to work at no cost to the company. However, even more profit comes from directing tourists to certain restaurants with mid-tour lunch break specials, and to certain pubs for pub crawls at a set price. These attract the kid who was likely going to go out anyway and wants to hang out with the new friends he met on the tour. More sophisticated options like this illustrate the opportunity for low-end disruptors to move up-market and continue to take business away from established, overshooting competitors.
Sandeman’s and firms like it (such as Harvard’s Unofficial Tours) have taken a cue from their student customers, who have long understood the value of work that is simply good enough (think last-minute papers just meeting the length requirement). This allows them to create an appropriate model that overcomes a major barrier to consumption and establishes a foothold for future growth, while keeping competitors off-balance and unlikely to respond to seemingly inferior offerings.