3 Simple Steps to Generating Revenue

A former colleague reached out to me recently seeking help. He’d inherited responsibility for a set of retail outlets in medium-sized city. Unfortunately the inheritance did not come with a marketing budget and he was wondering how he could set the business on fire. We briefly discussed what their business was about, what challenges he faced, what his competitors were already doing and such. We brainstormed a little and then tried to put down some specific action items or at least things to try.

As I reflected on our conversation it struck me how much of what we’d discussed was true not just for this retail gig, but for any business. As with all great truths, they seem simple enough to articulate, but is well worth reminding ourselves periodically. More importantly, regardless of the tactics we’d use, and these will change with both our business types, time and place, these three strategic steps will rarely change.

Creating Awareness People need to know you exist, before they can buy from you. It’s even better if they know why you exist, what you stand for and how you are different. But you gotta start with folks being aware. How do you create awareness, especially when you don’t have a marketing budget? In my friend’s case, it begins with the tried and tested real world methods such as handing out flyers at the street corner or a man with a sandwich board neither of which costs much. In his case given milk and dairy products he sells, targeting local apartment complexes, with both inserts in newspapers as well as display booth maximizes number of folks who get to know he exists. Of course getting his current customers to spread the word – word of mouth – is a great way to get the word out. This works whether you are an online school, SaaS B2B service provider or social network for new moms. Thought leadership, writing for the local (or hyperlocal) paper, presentations at local schools (or corporates) are ways to identify your brand/store/product to value for the prospective customer. Content marketing in many ways enriches all the above and builds a long tail of awareness creation.

Generating Footfalls Ok, now you gotta a lot of people aware that you exist. Now you gotta get them into your store – physical in my friends case, possibly online in your own. This is what marketers think of as Call to Action (CTA). How do you get someone who’s aware of you to act upon it – usually by visiting you. Promotions, contests or freebies are common ways of generating footfalls – for instance the chappie handing out flyers at a street corner, could offer a free ice cream (or n% of a second purchase) as a way to induce footfalls. Online free e-books, flash sales, or other forms of giveaways could be used to induce footfalls. Keep in mind, what tactics you use to generate footfalls will change with the nature of your business, physical vs online stores, target audience, time and place. In fact tactics that work at one time may not work or worse yet backfire at other times. Generating footfalls need not be only about price or giving away stuff for free, but is always about providing value for the customer. Skin type testing, bra fitting, financial education – all these are things of value to the user that can help them cross your threshold, and it need not cost you money, at least not a whole lot.

Building a relationship All of us, however good or bad, can get one customer or some customers to buy. The trick is how do you get a lot of them buying on an ongoing basis, bringing others in or inducing others to buy. This requires that we build a relationship with our customers. Just because we want to have a relationship with them doesn’t mean they’d want one with us. Worse yet, if you did a poor job with creating awareness, either by misleading them or worse, they’d want nothing to do with you. Also if you generate footfalls under false pretence – using bait and switch tactics or worse, they not only run away but tell 10 other people to avoid you. So being authentic, understanding their needs is the first step in building a relationship. Consistently serving their needs, ideally anticipating, setting and exceeding expectations is the way to build lasting relationships. While not trivial, it’s not rocket science either. In my friend’s case, it’s knowing the regulars, keeping in touch with them, not just in the store but outside. In your business it may involve newsletters, making recommendations or connecting with partners or other service providers and above all listening to them, what they are saying and what they aren’t.

As the writers Sean Platt and Johnnie Truant advocate Write, Publish, Repeat, to become a successful writer, building business is all about Create Awareness, Generate Footfalls, Build Relationships. Repeat.

Good hunting.

Finding a customer – Where do you start?

customer noticeOnce again, a question posed at Quora, “How can a straight out of college entrepreneur find clients for IT service based start up?” triggered these thoughts. As I have been recently looking at college startups, the entire issue of finding that first customer has been hovering in the background. When I cast my mind back to what worked for me at Impulsesoft, SiRF, Synopsys and Zebu, here’s what I came up with.

Referrals If you have [a] customer[s], start with them and ask for references. Any time an existing customer refers you, either to someone else within their company or others outside, it makes closing that deal a whole lot easier. Even when someone declines your services, you should ask them if they can refer you to others who may be able to use your services

Leads If you are a raw startup without a single client, then I’d start by making a list of every working adult you know – and reach out to them – with a one pager (if in print) or a single email, briefly explaining your offering in plain English, and asking them to introduce you to potential customers. As Esther Dyson, angel investor & writer suggests, ideally in your email, you’d write a brief email, that your recipient can forward after only having to add the name to the Dear […] at the beginning and put their name at the bottom. Don’t forget to add every person you went to school, college or rock show with to this list.

Cold calling Despite claims that the world has changed and sales (& marketing) are not what they were, for a raw startup cold calling is a good way to both get a sense of what’s out there, what issues you will face when you try to sell (even with referrals) and refine your own pitching – of what problem you address and how what you offer is the right thing for folks. Best thing to do with cold calling is to have a fixed time each day (or n days a week), when you’d send emails or make phone calls to reach prospects. Cold calling is one of the hardest things to do and has low conversion rates, yet will serve you well in the years ahead. Check out The Complete Idiot’s Guide to Cold Calling by Keith Rosen

Networking/speaking/free services Offering advice, giving talks and a free hand out, such as a tip sheet at industry forums, to business groups or other networking forums is a great way to build leads. For instance if you offer services in network security, you’d talk about “Top 5 Security Risks to your Business” and provide a free checklist that people could use to audit their network security. This can of course be done on online forums as well such as LinkedIn answers or your own blog.

In bound marketing In many ways this is like networking & free advice but done with content on your own website as a means to deliver value that would drive traffic to your website. In other words bring customers to your site, particularly self-selected prospects, ones looking for a solution. Companies such as http://hubspot.com/ do a great job of both educating you about inbound marketing and providing tools to make it happen.

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Who’s pain are you trying to address?

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Over the last two months, I participated in a number of meetings with founders of startups – as an adviser, reviewer or investor. Interestingly in nearly every one of these meetings the same questions kept coming up.

In particular four different companies  –  two nascent startups and a couple in their early tweens – were facing eerily similar issues. Despite the startups being in very different spaces,  the varying ages of their endeavors and having  smart and motivated founders – they were all trying to come to grips with the lack of market traction. This despite a great deal of time spent talking to prospective customers, partners, building and launching working prototypes.

I must admit after the first couple of meetings it appeared they were having different problems. In one, a marketplace that was not getting suppliers nor buyers off the starting block, in another focusing on the technology to the exclusion of all else, and yet another having a solution looking for a problem. However, by the time the fourth meeting rolled around it was plenty clear, that all of them required a sharp focus on answering the question

“Who is your target customer?”

and more importantly,

“What pain are you trying to solve for them?”

Two years into our own start-up, we find ourselves returning to this question with reasonable – some would say troubling – frequency. When we got started on dog-earz, the newsletter tool for the rest of us, we defined our target customers as “marketing & sales folks in SMBs” and the pain we were trying to solve for them was How to keep in meaningful touch with everyone in your Rolodex, even if there wasn’t a deal on the horizon.

Of course, it helps, if your target customers actually exist (ours did) and are accessible (a little more difficult) and truly felt this as a problem (not clear). Our solution seemed more a nice-to-have vitamin rather than make-my-pain-go-away Aspirin. We hung in there, as we felt we were target users ourselves. With time it was clear that we’d better solve their pain rather than imagine that they will behave the way we’d. Seems obvious in hindsight, doesn’t it?

Things are not always as evident as we’d like them.  I once had an opportunity to talk to Phanindra Sama, founder of redBus.in about his understanding of what pain they are solving for their customers.  Phanindra shared his view that the pain his customers felt was not in purchasing bus tickets – as I’d have thought. In fact it might still be more convenient for a traveler to call someone to hold a ticket and pay for it at time of boarding – only one phone call needed, but it is the absence of reliable information – as in how many buses, when and at what price or location will leave from Bangalore to Chennai (or better yet from Jalandhar to New Delhi?) that was the customers’ pain point.

Ask yourself these two questions, repeatedly and validate them by getting out of the office and asking your target customers about their pain points. Once you nail this down it makes, at the very least, decision-making a whole lot easier. Knowing this is of course only a good start, but not knowing can kill your business.

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Firing A Customer – When Should You Do It?

exit.Talking about firing a customer sounds blasphemous in the present climate of economic slowdown. Nevertheless talk about it we must , if only to get acquainted with the idea well before we actually have to do it. The idea of having to fire an employee, while unpleasant, has definitely crossed the minds of most entrepreneurs. Even the notion of letting go of a founder, for various reasons, is within the realm of possibility once the reality of an impending business divorce stares us in the face. But firing a customer seems suicidal or at the very least worth a close examination of someone’s head. Even in the best of economic times, it is hard to part with customers who contribute a significant amount of revenue. So, can there be a good reason to do so in hard times?

Five years after we began our software product business we had our first break-even year. The following year we made a real but nominal profit which, after one day of feeling good, made us face the fact that we would have to work even harder to grow or stay profitable. This, I will admit, was disheartening.

A close examination of where we were revealed that we had grown excessively dependent on one customer. This customer was taking us in a completely different direction from what we set had out. While the customer’s contribution had grown year-on-year (and was paying the bills), it would soon become non-scaleable, leaving us with little to spare for developing new products or alternate sources of revenue.

After much soul searching, Microsoft Excel crunching and internal debate, we decided to let go of this customer — not scale back — but truly let go. It was not easy; the customer was Japanese, we had spent five years cultivating the relationship, their CEO had practically adopted our CTO and their projects were technologically challenging and highly profitable. Over 18 months they went from nearly 60 per cent of our business to zero. And hard as it was, it turned out to be the right decision. In this instance, the relationship and our company survived the break and we were able to focus and execute in a scaleable manner elsewhere, which resulted in our subsequent acquisition.

So how do you know when to let go of a customer? What is the right way to go about it? How do you handle the fallout of such an action with your own employees and other stakeholders?

The deadbeat

If letting go of a customer could be easy at all, it would likely be letting go of the category of customers who are deadbeat — customers that don’t pay or those that pay many months later, act as though they are bestowing a favour on you and, in the interim, run up a bigger bill yet.

Most start-ups find firing deadbeat customers difficult for two reasons. First, an entrepreneur’s innate and at times unreal optimism that militates against terming a receivable as bad debt and the customer as delinquent. It is hard to separate the deadbeat from the merely late, particularly in India where we have a business culture of paying our suppliers late, if not last. Things get worse when a particular customer contributes significant revenue (at least on the P&L) but is a drain on your cash flow. Adding insult to injury, most such customers tend to be far bigger than the start-up and have greater resources available to them.

As an entrepreneur, hard as it might be, the moment you admit that you — a cash-strapped start-up — are financing the cash flow of a much larger company, is the moment you decide to let go of that customer. Having made the decision, you should pick the when and how with care. As with an employee or a founder, the assiduous application of common sense is critical to the termination of a relationship with a customer. Also, not every customer who pays late, occasionally or otherwise, may need to be terminated. Payment terms in your industry, your own reserves and cash flow planning should be factored into your decision. However, do not shy away from a quarterly review of your customers’ and your own receivables history to see if any of them are deadbeat; you may even be making some of them deadbeat by accepting such behaviour on their part.

The divergent

This group of customers is the hardest to let go of. They are a good source of revenue and profit for you, they pay on reasonable terms and promise continued growth. However, where they are headed and want you to go is very different from where you want to go. The good news is that if planned and executed well, such disengagement could be the win-win situation that business books talk about. This calls for honest self-assessment of where you want to go and regardless of how good the money or the relationship, if this customer will not take you there, then, the ability to disengage.

Such disengagement is best done by meeting the customer, explaining your assessment of the situation and your concerns. The customer may surprise you or at the very least agree and appreciate your quandary and be prepared to work with you for a transition. The longer you put off such a discussion and decision, the more difficult and messy it will get.

The difficult

With deadbeat or divergent customers you can at least put your finger on a cause. While this may not make it any easier to fire or disengage from them, the rationale for action will be clear. You can state and defend your reasons, even if they are unacceptable to the customers and sometimes to your own team members. There will, however, be times when you encounter customers who are neither deadbeat nor divergent and yet cause you no end of grief by being difficult. Such difficulty could range from the interpersonal — they don’t treat your staff or even their own staff well, to ethical issues — they expect you to do things that you feel are not correct. Again, these could be as simple as pre- or post-dating invoices or shipping documents going all the way to kickbacks. Others may merely be inconsiderate, wasting your staff’s time, nitpicking on every occasion or bad mouthing you.

In other words, customers can act just as any individuals could, in an insensitive, rude or inappropriate manner. As with friends or acquaintances, you are likely to overlook the first or the rare transgression.

However, many start-ups and entrepreneurs who would never put up with protracted abuse in their personal lives, tend to be tolerant or even masochistic with difficult customers. The toll this takes in the long-term is the primary reason you should fire such difficult customers. All too often, the brunt of such abuse will be felt by the front-line staff.

Unlike deadbeat and divergent customers whose impact is largely felt on your business first, the difficult ones will undermine the entrepreneur’s or the management’s credibility which is far more damaging. The need to act decisively with such difficult customers cannot be overstated.

Twice a year, review your customer list and their behavioural scorecard with your team.

Those customers who repeatedly behave in a difficult, divergent or deadbeat manner should be flagged and dealt with appropriately. This will allow your organisation to thrive like a garden that’s well weeded!

This article appeared originally in my Start Up Logic column in the Hindu Businessline

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Marketing for Success

Most people seem to have a reasonable idea of what engineering (design and build stuff), finance (manage the money) or sales (make money by selling stuff) do in a business. Marketing is another story altogether, being confused with sales in the best case or perceived as a money-sucking black hole in the worst. It is likely the most misunderstood part of doing business.

Marketers, in turn, are often perceived by other employees as spending the company’s money on flashy ads or on exhibitions and junkets that involve travel to resorts and fancy meals. The words ‘entertainment expenses’ seem to dance before their eyes when they think of marketing. While some or all of this may be part of marketing, they don’t make us a marketer any more than reading the business pages of a newspaper makes any of us a stockbroker.

So what is marketing and what are marketers supposed to do? And why should you care? Theodore Levitt, the American economist, in his seminal book The Marketing Imagination asserts that “marketing … view(s) the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs.”

He also makes the distinction: “Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is about.”

Even if entrepreneurs agree that marketing is important, they sabotage themselves in a number of ways stemming from not comprehending how best to go about it. The real or often perceived expense of marketing is the most common concern that cash-strapped start-ups have.

When company founders are technologists, there is a belief that superior technology or product performance sells itself. Marketing, I argue, is a critical function for entrepreneurial ventures. It is every employee’s job, starting with the CEO, and is too important to be left to the marketing department alone.

Discovering needs
The dictionary definition of the word discover is to “determine the existence, presence or fact of.” Discovering customer needs is rarely as simple as asking them — though that is always a good place to start. And it helps if you begin this even before you start building your product or service.

Once customers state a need or requirement, repeatedly asking the question ‘Why’ helps. When a mother states “I wish I had more time to exercise” or “I wish I could feed my children healthier food,” she may be talking about the lack of household help or her commute time or how much organic food costs. So understanding the core problem to be solved is important, and many a time the customers themselves may be unaware of it till they go through this multiple ‘Why’ questioning. Even when the desired outcome is clearly stated, such as “Increase the gross margins for our digital cameras” or “Shrink our order fulfilment time by 50 per cent and reduce mistakes to one part per million,” asking ‘Why’ ensures you are working on the right problem.

The first job of marketing is to discover the pain points for the target customers and define them as requirements. Once we have a well-defined set of questions (what and why), we can look for the answers (how).

The challenge for entrepreneurs or start-ups is that they usually get started due to a perceived gap in the marketplace such as “Buying tickets for inter-city bus travel should be easier than it is.” Being men (and women) of action, they immediately set out to solve this problem. Of course, once you have a part of or the whole solution and then get it out there in front of people, you find that your product or service is not exactly setting the world on fire. This is why discovery prior to product development is an important piece of your marketing success. In real life, you don’t do discovery only at the beginning, but iteratively at each stage of your product or service’s lifecycle.

Creating and arousing demand
The most mystifying aspect of entrepreneurship is that once you have built that better mousetrap, not only is the world not beating its way to your doorstep, it’s not even returning your calls when you try to tell them about your solution. As a good marketer you did your homework and discovered that people found buying inter-city bus tickets painful. So you developed your easy-to-use, Internet-based online bus ticket booking system and yet it’s greeted with a great yawn. Creating and arousing demand, what technically the marketers call demand creation, is a critical marketing step. In a previous article, I noted “Build and they will come” only works in films. It is for marketing to get customers to move from “I have a problem” to “This is a good solution to my problem,” where ideally “this” is your product or service.

Creating and arousing demand will require re-acquainting the customer with the learnings of the discovery phase. Tell your customers, “Adding GPS to your digital camera is a good way to differentiate yourself from the competition and it will allow you to hold your price and hence stop the decline in your gross margins.” This way you state the key problem they have, your solution for the same and how the solution works.

Satisfying the demand
The most dangerous stage (and cause of much teeth gnashing for marketers) is the transition from demand creation to fulfilment or satisfying the customer need. Having comprehended the customer’s needs in the discovery phase and evangelised your solution in the demand creation phase, if you don’t execute well in this last phase, your competition is likely to satisfy the customer and enjoy the fruits of your labour.

So having a clear plan to fulfil the demand you’ve created and executing it is key in this last stage of marketing.

Satisfying the demand created rarely ends with product delivery as this only highlights other unmet needs or even the gap between the expectations raised and the reality of your solution. Ensuring customer satisfaction through sustained support and a new iteration of discovery, creation and satisfying is needed. So don’t begrudge your poor marketing guy’s dinner expense — he’s on a tread mill, get on it and support him and sign that darn expense report!

This article first appeared in the Business Line print edition dated May 5, 2008.

Customers – finding, keeping and letting go…

A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him,” said M.K. Gandhi. As with many of Gandhi’s teachings, it is hard to disagree with him, but harder still to follow his simple advocacy of direct action.

Customer

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If your business involves direct interaction with the customers who walk in the door, Gandhi’s advice is a great place to start. However, it is just as likely that your business requires your going to the customer (selling credit cards, vacuum cleaners or consulting services), or shipping your product to customers you have never seen (software, books or mobile phones). Occasionally, as in the case of radio, television or newspaper columnists, it may mean “free” broadcast of your product and very little interaction with customers, if at all. In all these instances without a good number of paying customers, you will find it is hard to run a viable business.

The customer, someone who pays for your goods or services, is what defines your business. So how do you find customers — and having found them, how do you keep them coming back? Will there be times when you want to let go of customers — if so, how do you do it?

Finding customers

“Build it and they will come” may work in the movies, but definitely it is unlikely to work for most businesses. Even if you run a retail store, a barber shop or a restaurant in the most popular mall in town, finding a customer – especially the right, paying customer is non-trivial. And is best not left to chance. If you are not a retail store front but rely on direct or indirect sales folk or other marketing channels to reach your product or service to your customers, it is even more critical that you find the right customers and find them fast.

As an entrepreneur you have to recognise that first and foremost, you are a sales person – regardless of your job role or what it says on your business card. You will be selling to partners, employees, financiers, bankers, suppliers and most importantly to customers.

To find customers, particularly appropriate customers, you begin with understanding what it is you have to offer and who will be best served by it. This determines your target customer segment. For instance, “Mothers of young children will benefit from our childcare service” or “Companies with employees in more than one location will benefit from our Web-based HR tool.”

Now, it is relevant to address “How will I recognise this customer?” In other words, qualifying the appropriate customers within that segment. “Working mothers and mothers with more than one child will find our service particularly useful and be willing to pay for it.” “Companies, with more than 40 employees, offices in multiple cities, revenues greater than Rs 10 crore and profitable will be the most likely buyers.”

Once you have answered these two questions, then it is a matter of locating or reaching out to these qualified, target customers. In the example we have spoken of, we could reach the target segment of working mothers through hospitals or nursing homes, through children’s stores, through their workplaces, or even movie theatres that play children’s movies. And all this is without advertising, which I assume as a start-up, you will not be spending money on.

If you are selling to companies, it is important to go where these companies congregate, be it to a trade show or exhibition, industry associations and consortiums and to partner with companies offering allied services, so that their existing customers become your prospects. The most neglected and important way to find new customers is to ask old customers for referrals! Far too many entrepreneurs fail to do this and leave easy money on the table.

Keeping them

If you thought, finding good, paying customers is hard; keeping them can be harder still. The good news is that “It takes less effort to keep an old customer satisfied than to get a new customer interested,” as Michael LeBoeuf, retired professor of management at the University of New Orleans, says. There are three critical steps for keeping customers. Step one is providing them what they want, not just what you have to sell or offer. Step two is asking them for feedback and actually listening to them – not just to what they say and how they say it but most importantly to what they don’t say. No news is not always good news in keeping customers. Finally, step three is demonstrating through your actions that you have listened to them and improved upon your offering or service.

Letting some of them go

The hardest lesson I have found is that sometimes we have to let customers go. It appears to contradict LeBoeuf’s assertion, made in the previous section, that keeping a customer is easier (and hence better) than finding a new one.

If you don’t let go of the ones that are either not profitable, or not paying you on time and distracting your business with the overhead of running after them, you will find yourself in trouble soon. And these are the easy ones!

Even harder to let go are customers who are profitable, but don’t treat your employees well or with whom you have fundamental issues of values mismatch, the ones that supported you in your early days but are now sucking up all the energy of your company with little or nothing to show for it. And it is critical, that as an entrepreneur you spend time each month and each quarter reviewing and culling your customers.

Yes, you had better have other paying, profitable and prosperous customers to be able to do this – and that brings you full circle to finding new customers, keeping and growing them even as you continue to weed and cull those that are holding you back! So get out there and begin selling!

This article first appeared in the Hindu Businessline in March 2008.