This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.

The No. 1 need for business success is a customer.

That’s pretty obvious, so why am I telling you this?

It may be obvious but most companies seem to quickly forget this essential fact. Small and startup companies desperately need customers to begin their journey to profits and sustainability. Many large Fortune 1000 companies forget the customers who made them successful.

Just look at all your daily life experiences in dealing with a phone company, an airline, a utility, your cable provider, a government provider, etc. In an effort to develop systems to deal with their size, they become impersonal and forget about the one constituency that propelled their success. In turn, the customers become increasingly frustrated with their treatment and become open to changes in their buying behavior.

You might posit that orders are most important, but, orders do not create more orders. Only satisfied customers do that. Happy customers whose expectations are met or exceeded become your best salespeople and effectively promote your wares by word-of-mouth, at no cost to you. You can’t buy more effective advertising than that.

Satisfied customers are likely to become long-term customers who will look forward to buying your new offerings. It is much easier to increase revenues through existing customers than to find new ones and much less costly. The bonus is that these satisfied customers get you new ones through singing the praises of your company, its products and/or services to their friends, family, and acquaintances.

Unlike other forms of media advertising, there is no cash outlay for this. There is, however, an investment in maintaining the quality, service, need fulfillment, value, timelines and warranty of your offering. If you deliver on these actions, positive word-of-mouth will enable you continued growth and sustainability. Likewise, if you fall short, you’ll have to deal with negative word of mouth, which can rapidly lead to your decline and is difficult and costly to reverse.

Your orders from products or services will eventually yield revenues which can be used for payroll, expenses, taxes, innovation. Most importantly, continued sales leads to profits.

So if we were to simply chart what we’ve said above, it would look like this:

Add the sales element to this equation and we have what I call the “Anatomy of a Business.”

Sales is often demeaned and downplayed by academia, students, ordinary people and even some business people. However, sales is a profession and key to any organization’s success. As we see above, the customer is also a key element because they make purchases, which creates cash flow–the lifeblood of a business. Selling is the process of persuading customers to initiate these orders. It can be a simple quick one-on-one encounter or a complex long-term process. Without sales, you will not get orders.

These basic principles are easy to forget but it would benefit all entrepreneurs to remember the anatomy of a business in their hectic schedules Of course, it gets more complicated when competition is added to the mix. When you add in dealing with other issues like having the right resources to accomplish your goals and creating a culture of integrity and innovation, remembering customer satisfaction can fall by the way-side.

So, amid all the chaos, problems, uncertainties, new opportunities and setbacks, don’t forget for a moment how all your decisions and actions affect your customers. Neglect them and be prepared to pay a high price. Satisfy them and prosper.

(This article first appeared at www.entrepreneur.com – 2/23/10)

If you enjoyed this post, get free updates by email or RSS.

This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.

This article is based on the contents of the book Bootstrapping 101.

The most effective advertising a company can get is more difficult to achieve but much more effective and lasting than traditional media advertising. It is word of mouth advertising and it’s earned rather than purchased. It is your customers’ opinion of your product, which can fluctuate from very vocal with praise to very vocal with derision.

Word of mouth is available to start-ups as well as large corporations. It can be achieved with minimal cash outlays by just doing things right. Word of mouth can be earned quickly or over a long period of time, depending on the product or service you are selling, and sometimes it’s instantaneous. After people view a new movie, they talk about what they’ve just seen. It could be “What a great picture” or “That was a stiff.” Descriptive word spreads quickly, and new viewers of that movie result if those who saw and liked it tell their friends.

On the other hand, word of mouth can take a long time to develop for some products; you’ll probably put a few thousand miles on a car before recommending it to others, or that new diet might not budge your scale for several weeks before finally proving all the work was worth it.

Here are seven factors to consider for creating good word of mouth for your company and its products:

1. Quality: From your first day of business, all company employees must be aware of the importance of maintaining quality, and systems must be put in place to monitor it. Any products or components outsourced must be rigorously inspected to see that your standards are met.

2. Service: Regardless of whether your product is a high or low service one, customers’ problems must be addressed and solved with a minimum of effort on the customer’s part and in a timely fashion.

3. Instructions: Many products need to be assembled or explained. The instructions accompanying the product must be clear and concise. Many companies fail miserably in this area and devote little time and effort to it. Poor instructions can turn off consumers to all your future products and create bad word of mouth. Even if your product doesn’t require assembly, customers will appreciate a thorough explanation of its uses and functions.

4. Communications: All contact with your customers and their inquiries must be courteous and knowledgeable. This starts with the telephone. Have a human answer your phones, not a computer like most large companies do. This simple move will start you on the path to good word of mouth with your customers.

   Your receptionist, who I call “The Director of First Impressions,” is a more important hire than most employers acknowledge. You want an upbeat, intelligent, pleasant person in that slot.

   Don’t forget that managers’ interactions with employees, suppliers and stakeholders affects the word of mouth of your product and brand, also.

5. Value: The value of the products you deliver to your customers is paramount if you want them to return and spread the good word about you. The value must meet or exceed their expectations. A good maxim to make sure all employees understand is under promise and over deliver.

6. High integrity: You want all your stakeholders and customers to trust you. This trust must be earned continuously. It takes time to develop, but can be lost in an instant. Customer and client complaints must be addressed and solved quickly. Problems cannot be ducked, delayed, or shifted. Mistakes should be admitted and corrected. People want to do business with and work for trustworthy companies.

7. Be a good citizen: There is no doubt that a company’s prime responsibility is to make money. So do not be embarrassed to earn a profit. However, I believe the company has a responsibility to take actions to enhance the quality of life of its community and employees. This good citizen appellation should not be just empty promises for show. If your intentions are pure, it is also good for your business, your family, and your sleep.

(This article first appeared at www.entrepreneur.com – 2/4/10)

If you enjoyed this post, get free updates by email or RSS.

Early last year, Tim O’Reilly boldly predicted that the Kindle could be gone within two or three years. After the iPad announcement today, it seems that his words will soon become reality.

With the same 9.7″ display size and similar prices, it’s hard to believe anyone would pick Kindle DX ahead of Apple iPad. And the biggest weakness of Kindle is the file format. Amazon forced publishers to user their own file format which can be read on Kindle only. Basically, all your books will be locked to Amazon which is the single point of purchase.

Tim O’Reilly believes:

what Amazon seems to have missed is the important role that “free” played in the success of the iPod. People didn’t populate their iPods solely with music purchased from Apple. It was easy for them to “rip” their own CDs into the standard mp3 file format and load their entire music collection onto the device.

On the other hand, iPad is using the ePub format, the open format from the International Digital Publishing Forum which is supported by a lot of e-book readers.

In this way, Apple can play the same game with their new iBooks Store. Although there is no easy way to “rip” a book, customers can load some of their own epub-based e-books purchased from other vendors onto the iPad. So no single bookstore will take over the e-book world.

According to Paul Aiken, executive director of the Authors Guild:

Amazon is selling e-books at a loss in order to spur Kindle sales – it sells books for $10, but pays publishers more than $10 per copy. But once Amazon gets control of the market, it will be free to impose price reductions – to force publishers to reduce their e-book rates to less than $9.99.

I am sure publishers don’t want to see that happening.

Although Amazon is the pioneer in this category, it seems they still haven’t found the best way to sell digital contents effectively. They should know that if books are not shareable and controlled by one vendor, the marketplace for books will be diminished eventually.

Both Amazon and Apple want to become the nation’s largest e-book retailer. Both of them have revolutionized their own markets with amazing innovations. Who will win this battle at last? While Amazon is the leader now, I am sure Apple will catch up soon, very soon.

If you enjoyed this post, get free updates by email or RSS.

It’s not a secret that we are working on something cool in the past few months. I am extremely excited to tell you that our little startup company, Primitus, is almost ready to launch. One year ago, Primitus was only a dream. But thanks to our investors, it’s becoming a reality now. After getting some early feedback on Hacker News, we have decided to build our first product – “Backbone“, an easy and affordable Human Resource Management tool for small business. Today we announced that we’re just few days out from beta release.

Let’s show you some of the basic features, benefits, and a few screenshots.

Why?

We believe that traditional enterprise HR management systems are too expensive and difficult to use, especially for small business. Because of these reasons, many small businesses hack together solutions for many of their HR problems with Microsoft Excel, pen and paper, or nothing at all. We want to reduce the massive technology gap between large enterprise and small business.

In this talent age, companies with the best talent win. Small business cannot ignore the importance of talent management. We want to simplifies HR management so small businesses can focus on developing their talented workforce.

Unlike complicated enterprise HR systems, Backbone is built for small business from day one. It was created to make solving simple HR issues simple. We looked at the needs of small business managers, included the best features, and take away everything else.

Benefits

Below are some of the goals we want to accomplish with Backbone:

- Help small businesses gain control over and do more with their workforce
- Give managers rich insights into their workforce
- Save time, improving HR operational efficiency
- Foster a more inclusive and collaborative culture
- Better retention and higher productivity
- Make information about company activities more visible, accessible and measurable

Twitter-like Microblogging Feature

Like Twitter and Yammer, Backbone allows users to post updates of their activities, follow others’ updates, and share great resources. Unlike Twitter and Yammer, Backbone also combines other business activities into the news feed. In the Backbone’s activity feed, users not only can see group and personal updates but also other business activities happening inside the application. In this way, managers can monitor all activity in one single place.

Employees Database 2.0

In the web 2.0 era, the old boring employees’ profiles don’t work anymore. Backbone tries to redefine what a worker’s profile should be. We make it easy to identify employees’ hidden talents through the tagging feature.

Analytic Dashboard

Our analytic reports help small business better understanding of HR’s overall performance and employee productivity.

Expense Reporting

Our application enable workers to take care of their own expense reports. Moreover, Backbone streamlines the processes for submitting and approving employee leave. Employees use it to view their absence balances, record their time off requests, and track the approval process of their requests. And managers can look at employees’ current, planned, and historical absence events; monitor absence trends as a predictor for employee engagement.

And more…

Company goals management, group management…etc.

Interested?

If you want to sign up for the private beta, simply go to our pre-launch page and fill out the sign up form:

http://backbonehr.com

The product is free during beta and we will donate $1 to Kiva.org for each qualified beta account. If you got a special demo invitation code from other blogs, you will get a special discount in the first year after the introductory period.

We look forward to hearing your feedback and incorporating your suggestions.

Thank you so much for your support!

If you enjoyed this post, get free updates by email or RSS.

This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Reiss is an Army veteran and graduate of Columbia University and Harvard Business School. He has been involved in 16 startups and is a three-time INC 500 winner. He has been the subject of two Harvard case studies and is a frequent speaker at University Entrepreneurial classes.

This article is based on the contents of the book Bootstrapping 101.

What’s important to the success of small-business owners and entrepreneurs? Knowledge, skill and talent.

However, many competitors have the same traits you do. The key to beating the competition and achieving success is mental, reflected in one’s attitude, totally controlled by the individual and requires no cash. This holds true in most human endeavors besides business–in sports, the arts and politics.

How many times have we seen the underdog team or player win over the more talented opponent? The difference is often attitude.

These 12 attitude attributes can put you in the right mindset for achieving entrepreneurial success.

1. Have passion for your business.
   Work should be fun. Your passion will help you overcome difficult moments and persuade people to work for you and want to do business with you. Passion can’t be taught. When it wanes, as it surely will in difficult times, take some quiet time. Whether it be an hour or a week, take inventory of all the reasons you started the business and why you like being your own boss. That should renew your passion.
   
   
2. Set an example of trustworthiness.
   People have confidence in trustworthy individuals and want to work for them in a culture of integrity. The same is true for customers.
   
   
3. Be flexible, except with core values.
   It’s a given that your plans and strategies will change as time goes on. This flexibility for rapid change is an inherent advantage of small over large business. However, no matter the pressure for immediate profits, do not compromise on core values.
   
   
4. Don’t let fear of failure hold you back.
   Failure is an opportunity to learn. All things being equal, venture capitalists would rather invest money in an individual who tried and failed founding a company than in someone who never tried.
   
   
5. Make timely decisions.
   It’s okay to use your intuition. Planning and thought are good. But procrastination leads to missed opportunity.
   
   
6. The major company asset is you.
   Take care of yourself. Your health is more valuable than the most expensive machinery or computer software for the company. You don’t have to choose between your family or your company, play or work. Maintain your health for balance and energy, which will, in turn, enhance your mental outlook.
   
   
7. Keep your ego under control.
   Don’t take profits and spend them on expensive toys to impress others. Build a war chest for unexpected needs or opportunities. This also means hearing out new ideas and suggestions no matter how crazy they sound.
   
   
8. Believe.
   You need to believe in yourself, in your company, and that you will be successful. This confidence is contagious with your employees, customers, stakeholders, suppliers and everyone you deal with.
   
   
9. Encourage and accept criticism graciously. Admit your mistakes.
   You need to constantly work on convincing your employees that it’s okay–even necessary–to state their honest opinions even it if conflicts with the boss’s opinion. Just stating it once or putting it in a mission statement won’t cut it for most people.
   
   
10. Maintain a strong work ethic.
    Your employees will follow your lead. It will also help you beat your competition by outworking them, particularly when your product or service is very similar.
    
    
11. Rebound quickly from setbacks.
    There surely will be plenty of ups and downs as you build the business. Learn from the setbacks and move on. You can’t change the past.
    
    
12. Periodically get out of your comfort zone to pursue something important.
    Many times you will feel uncomfortable in implementing a needed change in technology, people, mission, competing, etc. For the company and you to grow personally, you sometimes have to step out of your comfort zone.
    
    

Many organizational and leadership shortcomings can be overcome or mitigated with the good attitudes described above. All can be learned except passion, which comes from within. Take time out of your hectic schedule to periodically reflect on these attributes. You may be inspired to act.

(This article first appeared at www.entrepreneur.com-1/4/10)

If you enjoyed this post, get free updates by email or RSS.

With all the hype about the advantages of small company size in recent years, does growing big really mean failures to your company?

Bill Taylor, cofounder of Fast Company, just wrote a great article on the relationship between size and success on his Practically Radical blog. He recently did an interview with Jack Welch, the legendary former CEO of General Electric. And one of the themes of their conversation was about company size.

While Jack agrees the disadvantages of big institutions, like waste and bureaucracy, he still believes managers and entrepreneurs should want their companies to get bigger. He said:

For one thing, it’s evidence that you’re winning in the marketplace. For another, it gives you the opportunity to bring in more people, which gives you access to more talent, which allows you to tap into more ideas, which you can then spread more widely – and start winning all over again.

In this talent age, which companies don’t want to get more brain power? But for many companies, managing talent is the hardest part. How can a company scale without suffering the costs of size? Jack has an answer for us:

“I want to be big, but then run the company like it’s the corner grocery store.”

Obviously, this sounds easier said than done. And some people even argue that GE was never run like a corner shop either. But that doesn’t mean it is unachievable.

In fact, there are many new companies which are BIG and SUCCESSFUL in the past decade. For example, Google, Amazon, Apple, Netflix, Salesforce, VistaPrint, Research In Motion, Zappos…etc. All these companies were started by a small team of people. But right now, they have thousands of workers, great corporate culture and tremendous success.

After all, IF you have the management skills and leadership to make your company remain quick, responsive, and flexible, why stay small? (Assuming you have an ambitious goal).

Don’t be remain small just because people think you are cool.

Start small. Grow big but remain agile.

In the future posts, I will dig into different strategies that help growing companies to become smarter and remain quick, responsive, and flexible.

Photo source: januszbc @Flickr

If you enjoyed this post, get free updates by email or RSS.

During Startup School 2009, Mark Zuckerberg, chief executive of Facebook, and Tony Hsieh, chief executive of Zappos, talked about two contradicted theories on employee retention and hiring:

Facebook aims to recruit talented, entrepreneurial hackers who may not want to stay for long, while Zappos wants to hire the best people to fit its culture and try to keep them as long as possible.

Obviously, these two fast growing internet startups are highly successful. So is it possible that these very different approaches can actually achieve the same goal? Is employee retention really that important to startups?

In my opinion, Facebook’s current method can only produce strong near-term outcome. After all, technology is one of the most talent-intensive fields. If your employees think that moving out is more attractive than moving up inside the company, your corporate culture probably is not designed for a long-lasting company.

If you expect many of your best talents are going to leave the company in 3 to 4 years, will you still provide any career development planning for them? It is not only bad for the company’s effectiveness but also creates extremely expensive costs.

To reinforce the idea that employee retention is essential to create a great workplace, let’s look at one more internet company which is using Zappos’ method – Netflix.

In the famous 128-page presentation about their corporate culture, Netflix talks about something interesting related to “loyalty”:

People who have been stars for us, and hit a bad patch, get a near term pass because we think they are likely to become stars for us again. We want the same: if Netflix hits a temporary bad patch, we want people to stick with us.

And of course, this doesn’t apply to every case:

Unlimited loyalty to a shrinking firm, or to an ineffective employee, is not what we are about.

As you can tell, Netflix truly values their employees and they are trying to build a long term relationship together. Given Netflix’s successes as a fairly large company, it would seem that their strategy is working quite well. They are creating a high performance culture and attracting stunning employees.

Besides, Netflix expects their employees to seek what is best for the company, rather than best for themselves. Just like any sport teams, some players have to sacrifice their own interests for the good of the team. A coach will never ask a player to come and learn all the skills, and feel equally happy when the player wins a championship for another team after 3 or 4 years later. Great teams will try their best to keep all their best talents. I believe startups should do the same.

If an extremely talented hacker didn’t want to stay in your company for long, I would argue that if you should hire him/her in the first place. Ultimately, ability and loyalty of an employee should be equally important to every business.

What is your view on employee retention? Which way do you prefer? Facebook’s or Zappos’? And how do you view your employees? Are they long-term or short-term assets? Let us know in the comment section. Your feedback is priceless to us. Thanks.

Photo sources: Mathieu Thouvenin @Flickr, mathoov @Flickr

If you enjoyed this post, get free updates by email or RSS.

This guest post was written by Bob Reiss (@bobsreiss), the author of Bootstrapping 101. Bob has been involved in 16 start-up companies. He is a graduate of Columbia University and Harvard Business School. His company R&R/Valdawn was named to the INC 500 list of America’s fastest growing companies three years in a row. Two of his companies have been the subjects of Harvard Business School cases. He is a frequent speaker to Entrepreneurship classes at many of the major business schools. He has written an earlier book on Entrepreneurship called Low Risk High Reward.

This is one chapter in Bootstrapping 101. For the introduction and table of contents, please click here.

Competition for customers in most industries is extremely intense. This is exacerbated if the customer is a large one and your product is not particularly unique or patent protected. Your customers are also in a high pitched battle with their competitors. This can be seen in your everyday life. Look at the competition in cars, retail stores, food stores, homes, computers, music, etc., for your dollar. This extends into the industrial sector and personal services.

Here are some non-cash ideas to help  you better compete.

Exclusives

If you have any type of new or unique product and no money to promote it, think of offering a key/large customer an exclusive. The exclusive can be for 30 days to a year with a performance clause for a time specified renewal. When we were in the game business, we would introduce a new game to the leading department store in each major city. We sold them on an exclusive basis for 30 to 60 days in return for their running an ad for our product at their expense. Your exclusive could be narrowed down to a particular channel. For instance, I  know of companies that gave Amazon.com an exclusive for all internet selling in return for them giving special promotional pushes for the product. Examples are running 2-day sales or pop-up ads when customers look at a related product (i.e., a wine game when a customer searches for one of their 9,000 wine books).

You could simply give an exclusive to a large retailer for buying it and putting it in all their stores: Radio Shack with 6,000 plus stores, Costco with 400+ stores, Wal-Mart with 3,000+ stores, etc. Exclusives can get you immediate orders, free ads, better position, earlier pay terms, earlier orders, etc. The result is more credibility, more cash, and brand building at no cost.

Better Service

Contrary to popular opinion, most purchasing is not based on the lowest price. Service is a key component in many buying decisions and can take many forms: shorter turnaround in shipping than competitors, customer training on your product features and how to use or sell it, friendly and knowledgeable people manning your phones, customer friendly website, dealing with problems quickly and fairly, admitting, correcting, and paying for mistakes.

One of the key factors of our success in the watch business was our service and special offers. The business was mature, highly competitive, and a me-too industry. We entered the industry with a unique novelty approach that featured artwork on the face and a rotating disk with art as the second hand. For instance, our most successful watch was a cute cat with a rotating mouse going around the dial that the cat always just missed catching. These watches were easy for competitors to copy. However, we copyrighted each design and consistently earned money from infringers. We offered two elements that propelled our success.

1. Special exclusive designs for a low minimum of 200 watches with no premium cost to the buyer. This was in contrast to large watch manufacturers who asked for a minimum of 10,000 watches. We accomplished our low minimum by working closely with a small Chinese factory, by using standardized parts, and by our willingness to break even on these orders. We knew the profit would come on the re-orders. Our low minimum allowed us to break into the world of Disney, selling to their retail stores, theme parks, and catalog division. All three wanted exclusive merchandise that could only be bought through them. Our small minimums allowed them to test all their ideas without paying a price for mistakes. We were rewarded with large quantity orders for the watches that tested well. We also rewarded small customers who supported our line with periodic exclusive designs. The result was loyalty and increased business.
2. Quick turnaround. This was and is increasingly a key component for small business success and survival. It reduces your cash commitment to inventory and likewise for your customer. It also reduces risk. You need to give a lot of attention and thought on how to realize quick turnaround. We analyzed every component used in a watch and the delivery or manufacturing time of each. We discovered the bottleneck in time replenishment was the unique printed dial on each watch. Every other component was easily available and in stock from many suppliers in China. Fortunately for us, the printed dial was a very low cost component. So we took chances and built up inventories of dials on watches we projected would sell well. The dials cost $.05 each; but in our pricing, we figured it at a $ .20 cost. This gave us the cushion for discarding unused dials.

   We shipped all our watches from China to a public warehouse in Long Island without boxes, which were printed in the U.S. Air freight is a widely competitive business, particularly between UPS and FedEx. Therefore, we eventually flew watches in for $.17 each. We also discovered that the processing of shipments through customs varied greatly by which city they entered. The net result was that we could get watch reorders within two weeks of the order while our competitors’ lead time was generally two months. This was a tremendous plus for us with our customers and reduced our cash needs.

Special Terms

Cash strapped businesses with high profit margins should seriously consider additional discounts for immediate or quick payment.

Toy manufacturers usually ship most of their products in the fall. To plan production, particularly with overseas manufacturing, they need orders early in the year. So they successfully offer a special early buy discount to their customers.

Many companies offer volume discounts or rebates. They spell out the discount earned at various volume levels. These discounts can be achieved as you reach the level or can be rebated at the end of the year. This encourages your customers to place more of their business with you rather than sharing with other suppliers.

Private Label

Many products lend themselves to be made under the customer’s label rather than your brand. The disadvantage to you is you don’t build your brand, and margins are usually lower. The advantages are you don’t need to maintain back up inventory, your order lead times are better, and you should get your payments quicker.

Your entire business should always be customer oriented. Special offers are particularly effective in building your relationship with a customer and does not drain your cash.

This is one chapter in Bootstrapping 101. For the introduction and table of contents, please click here.

If you enjoyed this post, get free updates by email or RSS.

At a time that many people building safe businesses and not enough startups trying to change the world, are we, as entrepreneurs, still supposed to dream big? Should we build a company that will go public someday? Or should an exciting startup define success on a $170 million exits?

While I am happy for Aaron Patzer, the founder of Mint.com, the world has just lost the Steve Jobs/Bill Gates/Scott Cook of this generation because of this acquisition. Many young entrepreneurs have to find another role models to look up to now.

Growing a company from a startup to IPO sometimes requires more than ability and knowledge. It also takes a strong will for an entrepreneur to want to build a lasting company. I am sure there are entrepreneurs somewhere building the next big things right now. And I hope this “Startup to IPO” blog post series (Part 1, 2, 3, 4) can inspire them to keep fighting for their dreams.

In this last post, we will look at how these four elite companies (Vistaprint, Rackspace, OpenTable, Salesforce.com) differentiate and market themselves when they just got started.

Pursue Customers that Competitors Hate

In the printing industry, companies usually hate to work with small business customers because of the low printing volume and low profit margin. They rather go after big companies which spend large amounts of money on printing. Yet VistaPrint had a different strategy. Their founder, Robert Keane, once said:

Our experience gave us confidence that there was a market with micro businesses. Other companies did not want to pursue them. Everyone else thought it was a horrible market. We happened to be in the right spot at the right time.

In order to achieve this goal, they have developed technology to automate desktop publishing and manufacturing so that they can sell products at low quantities and superior prices. However, there were another problem. Another reason their competitors hated the micro businesses market was because these customers are not easy to get to. VistaPrint solved the problem through direct marketing but in an unusual way. They gave their products away for free to generate buzz. According to Robert,

That became a runaway success. At the time, full-color business cards were selling online for $85 and $200-$300 at traditional printers. We gave them away free with a $5 shipping and handling fee. That offer was so successful in getting people to try us that it became an acquisition engine that drove our business. Our business model got to scale very quickly.

This free sample offer also built up the credibility of the company. So the customers will buy other things when they come back for the second time.

Do your company and competitors ignore a portion of potential customers now? In fact, even President Obama targeted a tribe (young people, minorities and the poor) that were usually ignored by traditional candidates during his presidential campaign. If you want to be successful in a crowded market, you have to be creative and do something very different from your competitors. Love the customers your competitors hate. They may just be the ones who help your company grow to the next level.

Must-Have Business

During tough times, if your company was a must-have business for your customers, I am sure your company will do pretty well. OpenTable happens to be that kind of business. Like AdWords and regular affiliate programs, OpenTable’s customers only have to pay for results providing an extraordinary lead-generation marketing tools for restaurants. Like one of their customers said:

OpenTable.com has given us new ways to understand who our guests are, and what they want. Their system is helping us utilize the Internet to communicate more easily with consumers, and makes it easier to cater to the desires of our regulars…52% of the reservations that OpenTable.com delivers to us are first-time visitors to the restaurant, which means that OpenTable.com is bringing us significant numbers of new customers, as well as giving our regulars an easy and efficient way to visit us.”

Their system revolutionized the way that restaurants are managed and marketed, and add depth to the way that they welcome and communicate with their guests. OpenTable allows their customers to see who is eating at the restaurant at any given moment. So the restaurants can treat some guests like regulars. Oftentimes, their reservation system is indispensable to the diner, too. Like a restaurant owner said:

Next to the name of one regular, who has a habit of bringing in women he is not married to, is an instruction to make sure the man’s wife has not booked a separate table for the same day…Of another, who takes many of his first dates to Town Hall, the instructions read, “Do not treat like a regular!”

The bottom line: is your product a pain killer (got to have it) or a Vitamin (nice to have)? If you could create values to your customers during downturn, your company will be in a great position to continue to outpace the competition after the bad times.

Specialize in Just One Thing

When asked the key to success for Rackspace to become the fastest-growing managed hosting company, Pat Condon, the cofounder, believes their customers have chosen Rackspace because of their sharp focus.

We specialize in just one thing – managed hosting. We’re focused exclusively on managed hosting with Fanatical Support, and as a result we’re very good at it. Think about it this way: If you needed to have brain surgery, what kind of doctor would you choose? A general practitioner or a brain surgeon? I’d know I’d choose a brain surgeon – a brain specialist.

Moreover, combining this focus with their Fanatical Support, they have created a brand with tremendous value. Whenever potential customers hear about Rackspace, they will have a positive impression of the company. In fact, 60% of their new business comes from referral showing their existing customers are fully satisfied with their services.

For Rackspace, some of their most effective marketing actually came from serving their customers fanatically every day. It’s no surprise that their customer turnover rate is one of the lowest in their industry. Their customers not only stay with Rackspace but also purchase more from them as well. According to Pat,

Our customer base grows organically every month, month-over-month. What this means is that even if we didn’t sell anything to new customers, our existing customer base would keep purchasing additional servers from us. This has caused the Rackspace business to grow at a fairly rapid pace and it is something of which we’re extremely proud.

Rackspace has proven that the most effective marketing strategy sometimes just doesn’t cost you that much. How do your customers feel about your company? Do they have a positive impression of your business now? Do they recommend your services to others? If you want to find out these answers, creating a customer development survey probably can help you get started.

Strong Relationship with the Media

Salesforce.com, on the other hand, uses a totally different approach in marketing. They do marketing on the cheap through public relations and creating buzz. The company has a reputation of being able to work the media very well, especially for the founder, Marc Benioff. He is very outspoken and not afraid to take on their giant competitors like Microsoft, SAP and Oracle. He once said:

Relationships with the media are really important. The media has a more important voice today than it has ever had. We don’t advertise. We only have one marketing vehicle, which is editorial, and our ability to get our message out and communicate it effectively.

Besides disparaging large competitors as dinosaurs, 20th century fossils and monopolists, Salesforce.com is very good at guerrilla marketing as well. They once hired actors to stage mock protest rallies outside a competitor’s conferences, which brought tremendous attention to their company. The reason of doing that? Like Marc said:

In both good times and bad, people are always eager to hear about challenges to the status quo.

After all, does your company have a position in the market? Are you trying to be all things to all people? Find the customers who share your vision and stop blindly follow your competitors in the industry.

Conclusion

After this post series, we have heard consistently that their leaders have defined success on a very big scale. And it seems they are all using similar but actually different approaches to achieve their success. So stop looking for the silver bullet now. There are million ways to scale your business rapidly. Find your dream and fight for it till the end (hopefully).

I would like to end this series with a quote by another highly successfully entrepreneur, Glenn Kelman, the founder of Plumtree and Redfin:

If first-timers don’t create public companies, nobody will.

“Telling young entrepreneurs that they’re not ready to be a Jedi yet, just because they’re young” is simply wrong. Fight on to victory!

Photo source: nickwheeleroz @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing

If you enjoyed this post, get free updates by email or RSS.

“The Mind Reader“, Steve McCallion from Ziba Design, recently wrote a series of great posts about Consumer Experience on Fast Company Magazine.

Steve argues that entrepreneurs are always looking for a silver bullet or killer app but forget that orchestration can also create significant value to their customers. According to Steve:

In an orchestration it’s the collection of things that create value, not necessarily the things themselves. It’s not the individual notes in the song, but the collection of those notes. When creating meaningful experiences, it is often this orchestration that is the primary source of value creation.

By innovating the user experience using a “metaphor”, a collection of products and services together can help your business win in a competitive market. Steve believes:

A metaphor creates value by transferring associations from a previous experience to a new one. It functions as shorthand to help people understand the offering and what it means in their lives.

So how can you use “metaphor” as the silver bullet or competitive advantage for your company?

Steve gaves us some good examples in the offline world. These companies redefined their respective categories by leveraging the power of metaphor to create a meaningful experience for their customers.

A lot of the products selling in these companies are obvious and shared by other competitors (may be except for Apple). However, orchestrating the obvious around a metaphor helped them become winners in their industries.

Can we do the same on the web? I think so. Below are a few examples of online businesses which understand the power of metaphor.

Do you know any other web businesses using the power of metaphor? Let me know in the comment area. Thanks!

I find this idea very similar to the concept of “Those little ladders in your head” in the classic marketing book – “Positioning” by Al Ries and Jack Trout.

The authors believe our mind will reject new idea that is new and different. It accepts only that new information which matches its prior knowledge or experience. To put it another way, if your product is truly new, you should look into the mind of the potential customers to see what mental images already exist and then select one you can tie your product/company into. Using a metaphor is a good way to do so.

Did you pay too much attention to find a silver bullet or create a killer app for your company? Have you make your business meaningful to your potential customers using the power of metaphor? Never ignore the obvious.

Photo source: steve xavier @Flickr

If you enjoyed this post, get free updates by email or RSS.