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Written by Dave Lavinsky on Friday, August 19, 2011
I recently read the following quote from Apple CEO Steve Jobs:
"You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new."
Job's statement reminds me of a similar statement made by Henry Ford many decades before, which was:
"If I had asked people what they wanted, they would have said faster horses."
Both of these statements imply that there's no value in market research. This couldn't be further from the truth.
However, I think there is a valid point made by each quote when applied to game changing technologies. The automobile was a game changer. As a result, before automobiles were around, the average individual couldn't really fathom what an automobile would be like, let alone state in a survey that they wanted one.
Likewise, before digital audio/MP3 players were invented, it would have been hard for the average consumer to voice their need for such a product.
But importantly, after each of these product categories were launched, market research became critical. Market research determined what new features to add. For cars, it was market research that told manufacturers to increase fuel efficiency, to add better stereo systems, and to increase cargo capacity among others.
For digital audio/MP3 players, it was market research that told manufacturers to increase screen sizes, increase the battery life, and add storage capacity among others.
And, even before these game changing technologies were invented, the right questions WOULD have yielded the right market intelligence.
For horse owners, if you asked, "would you be interested in a faster way to get from your house to your best friend's house a town over?" the answer probably would have been "yes."
For Sony Walkman owners, if you asked, "would you be interested in a smaller player that holds 100 times more songs and lets you access each song more easily?" the answer also probably would have been "yes."
The key is that market research IS critical and highly useful, particularly if you ask the right questions.
Below is my 5-step process for conducting market research to understand the wants and needs of your customers, so you can develop the right new products and services:
Step 1: Choose your audience
You need to make sure you survey the right audience. For example, if you are trying to understand the needs of seniors, you obviously don't survey teenagers. Generally you will survey current customers and prospective customers, and particularly for prospective customers, you need to choose your criteria precisely.
Step 2: Create your survey questions
There are two core types of questions I like to ask. The first type are demographic and psychographic questions. These are questions such as how old you are, what zip code you live in, and what TV shows you watch.
The reason for these questions is that they allow you to filter and/or segment your results. For example, you may find that consumers in one zip code have different needs than consumers in a different zip code.
The second type of questions I ask are needs and wants questions. These are questions designed to identify what customers like about current solutions, what they don't like, and what an ideal solution might look like.
In soliciting this feedback, I use ratings scales, multiple choice questions and open-ended questions (which are questions in which there are no "set" responses and the user has to type in their answer).
Step 3: Do a reality check on your survey questions
Most surveys have two problems that go hand in hand: they ask questions that are un-actionable and they are too long.
With regards to un-actionable questions, read each question to yourself aloud and then imagine how the responses might come back. And then ask yourself if having that response would lead to an action you can take.
Then remove the un-actionable questions, and make sure your survey can be completed in 5 to 10 minutes tops.
Step 4: Decide how to administer your survey
In the "old" days, you could mail surveys, conduct them face-to-face, or conduct them via telephone. Today, conducting surveys online using tools like SurveyMonkey.com are considerably easier, faster, and cheaper. So, nearly always, I recommend administering your survey online (unless of course your target customers are not computer savvy or computer literate).
Step 5: Analyze your results
Analyzing your results is the fun part. Fortunately online tools such as SurveyMonkey.com make analysis quick and easy as they tabulate the results for you.
Importantly, once you review your results, you should start to take action. Because there is validity to Steve Jobs' quote, in that customer needs and wants do change. And if you wait to long to satisfy their current needs, by the time you do, their needs might have changed.
I often quote Jay Abraham's line, "Your customers are geniuses; they know exactly what they want." Because it's true. But as a marketer and entrepreneur, you need to get this genius out of them. You need to ask them the right questions at the right time in order to pull the information you need to better satisfy them and gain competitive advantage.
Written by Dave Lavinsky on Friday, August 12, 2011
A couple of years ago, a colleague of mine told me the following story. Is it true? Maybe. But even it it's not, it illustrates a critical point, and one that will significantly boost your success.
Here it is:
There was once a young man who had just graduated from college with an engineering degree. He did what most of his classmates did and got a job as an engineer. Within the next few years he got married and had his first child. And then another child.
But after working "for the man" for twenty years, he decided to start his own firm; an engineering consulting firm. While at first business was slow, over the years he built up his firm. In fact, 30 years after founding his company, he was generating millions of dollars in annual revenues.
But then, at the age of 72, he died.
And he left the business to his 71 year old wife.
Now his wife had never run a business in her life. In fact, lately, most of her days were spent at the country club golfing and dining with her friends.
But within a year, she doubled the firm's profits.
How did she do it?
Simple. She visited the company a week after her husband passed and sat down with the management team.
And then she told them to do two things:
1. Make me a list of the 5 things that worked the best in the last 12 months
2. Make me a list of the 5 things that worked the least in the last 12 months
The list of things that worked included items like upselling current clients, getting new clients from partnerships they formed, and their program that hired and trained new sales reps.
The list of things that didn't work included radio advertising, sponsoring trade shows, and a new service offering that just didn't catch on.
So the widow made one demand. She said, "Do more of the 5 things that worked, and stop doing the 5 things that didn't work."
The management team listened. And within a year, the company's revenues and profits both doubled.
Yes, it's that simple.
But most of us don't do this. Here's why. Throughout our lives, we've been told to improve our weaknesses and never quit. So, in business, when something doesn't work, our first impression is typically to fix it.
However, that's generally not the best solution. Rather, the best solution is typically to do more of what is already working. Those are the things that are proven to work. So why try to fix an unproven concept, when you already have figured out a winner?
Now, when it comes to marketing, I DO suggest to always tweak and test new ideas. Since creating new promotional vehicles which are profitable can give you competitive advantage. But in most other areas, you should focus more on your winners.
So, take out a pen and paper and:
1. Make a list of the 5 things that worked the best for you in the last 12 months
2. Make a list of the 5 things that worked the least for you in the last 12 months
And then make sure to focus the vast majority of your efforts on doing more of what's worked.
Written by Dave Lavinsky on Thursday, August 11, 2011
Luke Fishback is a smart guy. After graduating college with an engineering degree, he got a job at Lockheed Martin. But within a few years, he had had enough.
Well, Luke realized he was an entrepreneur at heart, and needed to start his own company. In fact, Luke had been an entrepreneur earlier in his life. When he was just 14 years old, he started Luke's Garbage Service, a waste disposal and recycling service for a rural community in Georgia.
So Luke started a company called PlotWatt. The company creates technology that helps people reduce their energy bills by providing customized money-saving recommendations.
But there was one thing Luke was missing: money. Luke needed money to build his team, develop his technology, and start marketing his company.
Fortunately Luke didn't follow the failed path that most entrepreneurs take; which is to try to secure millions of dollars in venture capital right away.
Rather, Luke understood the Funding Pyramid -- the fact that 1) some sources of funding are much easier to get than others, and 2) once you get the easier sources of money and progress your business, it's MUCH easier to raise the harder (and bigger) sources.
So, Luke entered PlotWatt in GE's Ecomagination Challenge competition in early 2011. And he won!
Now while the Ecomagination prize was only $100,000 (not chump change, but not as much as Luke needed), it was just the catalyst he needed.
The $100,000 allowed him to make progress in building his technology and team, and the press from the award elevated his company's profile.
As a result of this, Luke and PlotWatt were quickly able to assemble a $1 million seed round of funding. And now they're off to the races.
Importantly, Luke's story illustrates 5 keys to raising money for your company today:
1. Know that funding is a progression. No matter how cool your company or idea, you're generally not going to receive a $10 million check from the get go. Rather, you will typically raise several "rounds" of capital. You start with smaller amounts, and then as your business makes progress (and your valuation increases), you are eligible for larger rounds of funding.
2. Find the right sources of funding for now. As mentioned above, some forms of funding are much easier to raise than others. And based on your stage of development (e.g., startup vs. established business ready to scale), different forms of funding are more relevant. The key is to go after the right sources. No matter how good your venture is, if you go after the wrong funding sources, you'll fail. Even Google failed when it initially targeted venture capitalists (Google then successfully raised funding from angel investors, and went back to venture capitalists thereafter).
3. Cultivate relationships early. Even though you won't get the $10 million venture capital check today (if you haven't raised money before), you CAN start forming relationships with venture capitalists who can write you a $10 million check tomorrow. According to Fred Wilson of Union Square Ventures, "The perfect entrepreneur/VC relationship is one where each has established respect and trust with the other well before an investment transaction is broached."
4. Create your business plan now and keep it up-to-date. Your business is always changing. And as it changes, different forms of funding become available, and you'll come across different types of lenders and investors. Importantly, when you meet a lender or investor, you must be able to give them your business plan in a timely manner. So finish your plan now, and keep it up-to-date, so you can send it off at a moment's notice.
5. Always be a marketer. In raising money, the best company doesn't always win (in fact it often doesn't win). Rather, the best marketers win. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money. In Luke and PlotWatt's case, their marketing efforts were aided by the PR they received from winning GE's Ecomagination Challenge. In many other cases, it's the entrepreneur marketing themselves via networking, sending emails, making telephone calls, getting and leveraging Advisors, etc.
Six months ago, Luke Fishback was bootstrapping PlotWatt. The company was making progress, but funding was holding back its potential. Today, the company has a million dollars in the bank and is poised for phenomenal growth. Funding can do that for you; so go out and get it.
Would more funding allow you to significantly grow your company?
Then you need to figure out which sources of funding you can raise today. The key to this is understanding and accessing the Funding Pyramid.
Watch this video to see the Funding Pyramid in action.
Written by Dave Lavinsky on Sunday, August 7, 2011
Once they launch their companies, most entrepreneurs fall into a very dangerous trap. What happens is that they get very myopic; they get so close to their businesses that they fail to see the bigger picture.
So, they run their businesses on a day-to-day basis, constantly fighting fires and striving to squeak out a little more profit each year than they did the year before.
Conversely, the most successful entrepreneurs ask two key questions that others don't.
The first question they ask is "What is the end game?" Then they ask sub- questions such as: Is my goal to run this company until I die? Do I want to eventually sell my company? Or do I want pass it down to family members?
It turns out that the most successful entrepreneurs are the ones who build their companies with the eventual goal of selling them. Why? Because this is where the big bucks are. In fact, research shows that 80% of pentamillionaires (those with a net worth of $5 million or more) are entrepreneurs who started and sold their companies.
Think about it this way: the work required to start and grow a company from $0 to perhaps $10 million is MUCH more valuable than the work required to grow a company from $10 million to $100 million.
With regards to the latter, there's no shortage of corporate executives who have the skill sets to grow existing brands and companies. But there are few people out there (the ultra successful entrepreneurs) who have the ability to build a company from scratch to the point that a larger corporation wants to buy it.
The second key question that the most successful entrepreneurs ask is "How do I build VALUE that multiple acquirers would want?"
Building value is different than simply running a business. When you simply run a business, typically your goals are to keep the lights on and earn a profit. When seeking to build value, you set different goals.
For example, Shutterfly recently announced that it was acquiring Tiny Prints for $333 MILLION. In making this acquisition, what did Shutterfly value? Well, it valued Tiny Prints' revenues, customer base, marketing skills, intellectual property and operational processes among other things.
Importantly, Shutterfly did NOT value Tiny Prints' profitability. In fact, Tiny Prints' EBITDA (earnings before interest, taxes, depreciation and amortization) was a miniscule 2-3% of its revenues.
So, in addition to thinking about your end game, create a list of the factors that multiple potential acquirers would want to see in your company. Maybe it's significant revenues. Maybe it's a high profit margin. Maybe it's unique products or intellectual property. Etc.
And importantly, once you have this list, make sure you integrate it into your daily, weekly, monthly, quarterly and annual action plans. And rather than looking back each quarter and simply thinking about how much revenues and/or profits you generated, consider how much VALUE you built and how much you progressed toward reaching your end goal.
Written by Dave Lavinsky on Wednesday, July 27, 2011
When launching their business, or launching a new product or service, many entrepreneurs dream big. They picture tons and tons of customers buying their products or services, and sailing off into the sunset. Now, the dream of massive success is great. But the strategy is generally flawed.
Here's why: these entrepreneurs typically believe that every man, woman and child will want to buy their product or service. So, when asked "who's your customer?" they say "everyone."
There are two problems with this answer. The first is that marketing to "everyone" is really hard and expensive. Sure, occasionally you have companies like Facebook and Groupon that enjoy organic growth via viral word of mouth. But this is rare. For the rest of us, marketing to "everyone" costs millions of dollars.
The second problem is that when you try to serve too many customers, often times you don't do a great job serving any single customer. That's why there is the following great saying: "When you try to be everything to everyone, you end up being nothing to anyone."
Even behemoth Walmart is not everything to everyone; there are many folks who have never stepped foot in a Walmart. And clearly the retailer doesn't target the upscale market. What Walmart does well is picking one large customer segment (customers who want low prices and high value) and serving them very well.
So, the solution is to target a smaller audience and serve it really well.
In doing so, a few things will happen. First, you will be able to more effectively market to the needs of your smaller market and gain revenues and profits. Second, even without specific marketing, you will undoubtedly serve some customers outside of your target market (e.g., while not their core audience, upscale customers do occasionally shop at Walmart). And third, via brand extensions, you can always target additional customer segments later.
So, more specifically, here is my 3-step plan to achieve more success with any new company or product/service by focusing on fewer customers.
1. Pick a more narrow market. Make sure to really define your target market. Understand that it is better (and easier) to achieve a 20% share of a smaller, more defined market, than a 0.1% share of a huge market.
2. Leverage the 80/20 rule. The 80/20 rule states that 20% of your customers will result in 80% of your sales. Figure out who these 20% of customers are. And then focus on attracting them.
3. Create an avatar based on the 20%, and speak to that avatar. An avatar in this case is a person who embodies the characteristics of your ideal 20% of customers.
Once you have identified this avatar, market your company as if you were speaking one-on-one to the avatar. By doing so, you will better speak to the needs of your customers.
Let me give you an example. Growthink's customer avatar is a man named Rick. He's a 41 year old entrepreneur who is looking to grow his company. He has a wife and two young kids and enjoys running and cycling.
So, when I write this blog post or do advertising, I have Rick's needs, thoughts and desires in mind. And as a result, I am better able to attract and serve him.
Now, you might be thinking, Rick really only represents one customer of ours. Because it would be pretty rare for another customer to embody the exact same attributes as Rick (e.g., 41 years old, likes cycling, etc.).
But that's ok. The message I give to Rick, also resonates pretty well with Mary, a 58 year old entrepreneur with two college-aged kids, and Tony, the 22 year-old single entrepreneur as well. Etc.
But, my message to Rick does not resonate with non-entrepreneurs (who could buy and benefits from several of our products and services, but who are not worth targeting from an ROI and focus perspective).
When you market to a faceless group of target customers, it's hard to really speak to their needs. By creating an avatar and giving your customers a face, you can serve them better. You can think about what's bothering them, and what their hoping for. And then you can give them solutions.
In summary, you need to start by thinking small to achieve your big dreams. Start by defining and better serving a smaller group of customers. And parlay that into more customers and market segments. By doing so, you will achieve greater success!
Written by Dave Lavinsky on Friday, July 22, 2011
The following is a pretty common scenario among investors...
The entrepreneur comes in and shows them their product and/or service. The investor is somewhat impressed and asks the entrepreneur why they need money.
The entrepreneur responds, "I need the money to hire salespeople. I have a great product/service, and if I could only afford to hire 5 salespeople, my sales would skyrocket."
While intuitively this makes sense (i.e., hire salespeople and sales will go way up), the smart investor will want to minimize their risk. Mainly, they'd want to see that the entrepreneur has already hired one salesperson and achieved positive results. This would imply that adding more salespeople would significantly improve sales.
So, the investor would ask, "have you hired one salesperson yet?" To which most entrepreneurs would unfortunately respond "no."
Now, one entrepreneur who I recently helped answered "yes" to this question. He did recently hire a salesperson. But unfortunately, the salesperson hasn't performed very well.
So, he asked me what to do.
The following is my response, and importantly, a framework for you to assess most situations that don't go as planned.
1. Do you think the poor results could stem from your Strategy?
If the strategy is flawed, the salesperson will not be able to succeed. In this case, strategic questions to ask would include:
* How are you getting leads?
* Who specifically is the salesperson calling on?
* What value proposition are they conveying?
* What format (e.g., verbal vs. print), are they using to communicate with prospects?
2. Do you think the poor results could stem from your Process?
If the process is flawed, the salesperson will not be able to succeed. In this case, questions to ask would include:
* What processes does the salesperson use (e.g., start with lead qualification, then discovery, then proposal, etc.)?
* Do they go through the same process every time?
* Where is the process breaking down?
* What training have they been given?
* What tools are they using (e.g., scripts)?
3. Do you think the poor results could stem from your Leadership?
Leadership refers to how you are motivating the salesperson. In this case, questions to ask would include:
* Are you motivating the salesperson with bonuses or commissions?
* Are you offering them other monetary and/or non-monetary incentives?
* What else could you be doing to motivate and incentivize the salesperson to achieve the success you desire?
4. Do you think the poor results could stem from your Human Resource Management?
You might have done everything above (strategy, process, leadership) well, but if you have the wrong person for the job, he/she won't succeed. As such, you should ask:
* Is this salesperson the best person for the job?
* Did you adequately screen this candidate?
* Do they have a real track record of success?
The framework above has you look at the 4 aspects of tasks that don't work as planned: 1) the strategy, 2) the process, 3) your leadership and 4) the people. Importantly, using this framework will guide you towards solving the issue. More work may be required though. In this example, you may have to go on sales calls with the salesperson yourself to see what's going on. Or you may have to hire a sales trainer or consultant to help figure out the solution.
The good news though, is that fixing this problem can be highly lucrative.
As an entrepreneur, you quickly learn that the first time you try many things, they don't work nearly as well as you would have hoped. The key is modifying and tweaking your strategies and processes until they do work. And once you've done that, you've created competitive advantage that you can use to successfully grow your business.
So, leverage and apply this framework to the things that don't work in your business. And soon they will.
Written by Dave Lavinsky on Monday, July 18, 2011
Authors James Kouzes and Barry Posner recently wrote a great book entitled "The Leadership Challenge." In it, they told the story of U.S. Army Major General John H. Stanford.
Despite flunking sixth grade, Stanford got into college on a ROTC scholarship. After college he survived multiple tours of duty in Korea and Vietnam. He later rose to prominence in the military and then in the public sector, eventually becoming the superintendent of the Seattle Public Schools where he took public education to a new level.
In the book, Stanford is quoted as saying the following:
"The secret to success [in life] is to stay in love. Staying in love gives you the fire to ignite other people, to see inside other people, to have greater desire to get things done than other people. A person who is not in love doesn't really feel the kind of excitement that helps them to get ahead and to lead others and to achieve. I don't know any other fire, any other thing in life that is more exhilarating and is more positive a feeling than love is."
So there it is: the secret to success is to stay in love.
Makes perfect sense.
So let me take this a step further and identify things that you should be doing to stay in love with your business so you can be more successful.
1. Choose businesses and product/service lines wisely. For those of you who are choosing a new business to start, or choosing a new product or service line to launch, all other things being equal, choose the one that you're most passionate about...the one you really love. Launching anything is really hard work, and if you love it, like Stanford says, you'll have the extra fire to help you succeed.
Most people choose businesses and product/service lines purely from a revenue or profit potential. If you choose based on what you love, you can get your customers to love it too...as they say, the money will follow.
2. Delegate your "likes" and "dislikes." To stay in love, you need to be working on the aspects of your business that you love doing, not what you "like" doing, and certainly not what you "dislike" doing. For instance, if you are dealing with customer service issues, and you hate doing it, then stop. You're probably doing a bad job at it, and it's killing your energy which disallows you from performing great on the tasks you do love.
I know it's often hard to do this, because in entrepreneurial organizations we need to wear many hats. But if you fall out of love, the consequences will be dire.
Make a list (right now, this post will still be here when you're done), of 3 things you love to do, and 3 things you don't. And then make a real effort to stop doing the things you don't love doing (don't just blow them off; find someone else to do them).
3. Hire people you like. Yes, we all want to have the best employee for every position, but how about if that person is really annoying. We've all had an annoying co-worker or employee at one time or another, and these people become cancerous to organizations. You want to be able to come to work each day and be excited to see your team. The moment you lose that excitement, your love of the business will fade, as will your employees' love...as will your success.
4. Talk to others about your business. As the saying goes, the grass is always greener on the other side. What I'm talking about here is that often as an entrepreneur, you'll think a lot of others have it easier. Maybe you'll think that this other entrepreneur in a different business has it much easier. Or that that this corporate honcho has it made.
The reality is that everyone thinks everyone else's life is easier, and your life as an entrepreneur is probably pretty good. So go out and speak to other people about their jobs and companies. You'll hear a lot of folks complaining about their hours, their customers, their bosses, their employees, etc. That'll make you understand that you do have it better than you think, and will help you stay in love with your business.
Bottom line is this: Stanford is spot on when saying that the key to success is to stay in love. Love is such a powerful emotion. It gives us immeasurable energy, and allows us to fight well after when the average person would have given up. These are key traits of a successful entrepreneur.
I'm sure there are other ways, besides the four I gave above, to stay in love with your business. If you have any, please post them below to help out the other entrepreneurs in our community.
Written by Dave Lavinsky on Wednesday, July 13, 2011
Would you like a tool to attract more leads, convert more leads into paying customers, and better satisfy your customers?
Well, there's a market research tool that accomplishes just that and it's called Customer Segmentation.
Customer Segmentation is the process of separating your customers into sub-groups based upon similarities. As a simple example, a clothing store might segment its customers into two groups: men and women.
There are two core benefits to customer segmentation. The first is that it allows you to better service customer needs. Clearly, when you know that precise make-up and needs of your customer segments, you can better satisfy them. For example, a gym might offer exercise classes specifically for women and others specifically for men, each of which target and solve that gender's core workout needs.
The second benefit of customer segmentation is that it allows you to better communicate the benefits and of your offerings and thus increase conversion rates. For example, a car cleaner that offers special detailing services to sports car owners would better attract those customers than competitors offering generic car detailing services.
So how do you go about segmenting your customer base? The key is to collect data from your customers in order to better define them. One type of data is customer purchase data. Specifically, you should create lists of customers who have purchased certain products or services from you.
The second data you should collect, particularly if you are a startup or are launching a new product or service, is survey data. Using a tool like SurveyMonkey, you can survey your current and prospective customers to identify their wants, needs and current purchasing habits.
Importantly, in both your surveys and customer data, you want to collect and analyze both demographic and psychographic information. Demographic information includes variables such as the age, gender, zip code, and income levels of your customers.
On the other hand, psychographic information defines the wants and needs of your customers. It includes variables such as opinions, beliefs, values and interests. For example, while two customers might share similar demographics (maybe they live on the same street, are the same age and gender, and have approximately the same income, etc.), they may vary wildly from a psychographic standpoint (e.g., maybe one is extremely health conscious, the other extremely environmentally conscious, etc.)
Once you collect all the data, you are ready for the most important part of the customer segmentation process, analyzing the information. The official term for this analysis is "cluster analysis."
The result of your cluster analysis will be several clusters or groups of customers that share distinct demographic and/or psychographic characteristics. And then once you identify these groups, you can better market to and them.
For example, at Growthink, we use a basic segmentation model with two segments: startups (pre-revenue) and established (post-revenue) entrepreneurs. This simple segmentation helps us better understand and serve the needs of these two distinct groups.
For our clients, we've identified all types of unique customer segments. For example, one client had a customer group that was willing to pay more for their service as long as they were not bothered with details (we called them the "Don't Touch Me's"). Conversely, as is the case with many businesses, we found a segment that is completely price conscious and will always shop for the lowest price (you generally don't want to serve these customers).
One final benefit of segmentation analysis is in identifying unique partnerships and advertising venues. For example, if you identified that a large segment of your customer base was very health conscious, you could partner with local gyms and health food stores and/or advertising in health related journals. Most likely, your competition would not be doing this, and would miss out on this opportunity.
In summary, customer segmentation analysis will give you a competitive advantage by allowing you to attract more leads, convert more leads into paying customers, and better satisfy your customers.
Start by assessing any customer data you have, and supplementing that with surveys including product/service usage and needs data along with demographic and psychographic questions.
Next, conduct a cluster analysis on the data (I found cluster analysis software online, but you're probably better off finding a freelance market research professional who can conduct the analysis for you).
Finally, after identifying your segments, cater to them. Cater your marketing messages and offerings to them. And you'll start seeing your revenues and profits soar.
Written by Dave Lavinsky on Monday, July 11, 2011
I returned late last night from a trip to Los Angeles.
To give a little background...I first moved to Los Angeles in 1997 to go to business school at UCLA. Two years later I started Growthink, whose headquarters remain in Los Angeles. And then in 2004, I moved back to New York and started Growthink's NY office.
I try to go back to Los Angeles every few months to spend time with our team there. This time I took my wife with me and we made a 5-day trip out of it (thanks to my parents who watched my kids and the puppy).
So, we were very excited to go back to Los Angeles, and specifically to go to all our favorite places we used to frequent during the years we lived there.
Now, as you can imagine, things have changed since we left in 2004. While many businesses remain, others have died.
So here are my thoughts on why some of the retail businesses we visited survived and have staying power (and why one didn't). Make sure you think about this in your business (whether retail or not) to make sure you succeed long-term.
Restaurants: one night we went to Moonshadows restaurant in Malibu. Interestingly, since my wife went to Pepperdine University in Malibu, we knew this restaurant has been in business for 20+ years.
So why has this restaurant been successful? Well it seems that it is continually reinventing itself. You would NEVER guess that Moonshadows has been around so long. The owners clearly reinvest in the physical attributes of the restaurant; the fixtures, tables, couches, etc. were all updated. Also, the owners had created a very cool scene at the restaurant -- it is a very hip place that was packed with people having a great time.
Bagel store: I was very happy to see that my local Noah's Bagels store was still in business. Now Noah's is a West Coast chain with 100 locations, so I'd expect it to be more sophisticated and successful than a local, single location store.
And clearly it is. The store is successful since it is constantly innovating. It offered several new products: cookie poppers, thin crust bagels, and new bagel sandwiches. It also offered special deals at special times. For instance, after 2PM (when I'm sure business is usually really slow), it offers a free cup of coffee with any bagel sandwich.
Dry Cleaner: On this trip to Los Angeles, I tried a new idea. Rather than dry clean my clothes in New York, only to get them wrinkled on the flight, I decided to get my clothes dry cleaned in Los Angeles.
Rather then spend a fortune letting the hotel take care of the dry cleaning, I went to my old local dry cleaner called the Cleaning Baron.
Was I surprised that the Cleaning Baron was still in business after all these years? Not really. Even though its prices are definitely higher than its competitors, its service is superior.
To begin, I was able to drop my clothes off at 7:30PM the night I arrived (most other dry cleaners were closed by that time), and pick them up at 7AM the next morning. When I arrived at the store a few minutes early (I was up early due to the time zone difference), I was pleasantly surprised to see the store had opened by 6:50am (imagine that, a store opening even before its stated hours). I walked in to warm smile and welcome and was quickly handed my perfectly dry cleaned clothes.
Bakery/Café: One major letdown during my trip was my long walk to Mani's Bakery, a great café and bakery I used to frequent. On Saturday, I was with my wife who was shopping in Santa Monica. Shopping is not really my thing, so I told her I was going to walk to Mani's Bakery.
I figured Mani's would still be open and thriving since it offered great organic food and pastries (and an amazing chocolate-dipped chocolate chip cookie). Unfortunately, when I got there, I learned Mani's had gone out of business.
Why? A new organic café/bakery, called Urth Caffé had opened up a block away (Urth Caffé has two other locations in Los Angeles, so it's not really "new", but that location is).
And clearly, Mani's had not been able to differentiate and/or reinvent itself to survive in the face of its new competition.
So, to reiterate, the stores with staying power shared the following 3 attributes:
1. Reinvesting in the business to stay relevant
2. Constantly creating and testing new products and offerings to better serve its customers (oh, I saw this too when visiting the smoothie company Jamba Juice which was now also offering frozen yogurt and pizza).
3. Offering amazing customer service, which will never go out of vogue and will keep customers coming back for years.
So, think about what you are doing in your business to make sure that your customers will not only come back tomorrow, but years from now too.
Written by Dave Lavinsky on Wednesday, July 6, 2011
I read way too many business plans with overly optimistic projections. I'm talking plans showing the entrepreneurs generating tens if not hundreds of millions of dollars in revenues in just a few years.
Unfortunately, such explosive growth rarely materializes. And the angel investors and venture capitalists I speak with are often really turned off by these projections.
But, many entrepreneurs will argue that such explosive growth is in fact possible. Just look at Groupon or Facebook. Clearly these two companies are exceptions to the rule, and both have grown dramatically in terms of customers, revenues and footprint in just a few years.
However, interestingly, each company has followed the same 3-step blueprint. And this same blueprint holds true even for slower growing companies, so I want to share it with you now.
Rule #1: Start Small
Both Facebook and Groupon started small.
Let's start with Facebook. When it originally launched, Facebook was only available to students at Harvard. Then, it was only available to students at Ivy League schools. Then, it was only available to college students. And then it opened up to everyone.
In fact, there was a time when I had employees who were graduates of Harvard and were using Facebook, and I wasn't able to use it myself.
Groupon, on the other hand, used the more traditional geographic expansion plan. The company started in Chicago where it is based. It then expanded to serving New York City, Boston, Washington DC, Los Angeles, and San Francisco.
Next it launched in cities including Atlanta, Denver, Dallas, San Diego, Phoenix and Seattle. And by the end of 2009, Groupon was still in only about 20 cities (today Groupon serves over 200 cities).
In both the Facebook and Groupon cases, the companies started small. They launched their offering to a relatively small group of customers. They got customer feedback and they improved their offerings.
Rule 2: Grow By Design
Once Facebook and Groupon improved their offerings, they didn't start going after every possible customer. Rather, both had a controlled game plan. As mentioned above, Groupon expanded into a few more cities. And Facebook expanded into the Ivy League.
Some key reasons for this controlled growth:
A. It allows you to further refine your offering and cater, as appropriate, to new needs exhibited in the new markets.
B. Operationally, it allows you to create better systems so that you can support the current customer base and larger customer base you hope to attract in the future. Likewise, it gives you time to hire and train the staff you'll need to satisfy your customers.
Rule 3: Make the Product/Service Great
Seth Godin hammered this point home in his great book Purple Cow. The point of the book is that you need to create a remarkable business. And that when your business is remarkable, you don't have to rely on multi-million dollar ad budgets to promote your product; the market will do that for you. For example, as you might imagine, seeing a purple cow would be a remarkable sight that you'd tell all your friends about.
So, the key is to offer remarkable products and/or services. Both Facebook and Groupon created and offer remarkable services. They solve a unique need in a highly elegant way. Groupon gives customers savings that previously were unavailable, and Facebook allows for social interaction that was previously unavailable.
Becoming the next Groupon or Facebook is a mammoth and extremely challenging task. But launching companies that experience significant growth and success is much less challenging and very doable. It can be achieved by each of you reading this today. So follow the 3 steps outlined above, and build a remarkable business.