Are entrepreneurs born or made? — Bryan

Entrepreneurs are always made.

People don’t come out of the womb knowing how to pitch, to sell, to design. One may make the case that some folks seem to want to be entrepreneurs more than others.  But that may be because they learn, sooner than others, what entrepreneurs do.  In a larger sense . . . no one “is” any profession or skill. That’s a convenient fiction. No one is a writer or is a salesman.  People write and sell.  You can master entrepreneurship by caring enough to acquire and master the skills you need to build businesses.  Get to work

How can you detach yourself from a venture? How to you evaluate a business that you’ve been emotionally attached to? — Keith

Actually, we have a great article about that. You can find it here.  But the short answer is that lots of entrepreneurs start businesses because they have “missions” they are passionate about.

Perhaps they want to bring clean water to villages. Perhaps they want to open the world of computers to senior citizens.  Maybe they want to teach people to dance.

Sometimes their vision of how to achieve that objective is so narrow and so flawed, they have a hard time of making a business of it.  When this happens they start a business and it fails to thrive.

The Market is a great educator.

The visionary entrepreneur has to realize that businesses are ephemeral.  They come and go. Your commitment to your mission can go on as long as you like.

Within that context, any business you create to support your mission is ephemeral.  You can reformulate an existing business in a new way, or close an existing business in order to start a new one based on a different financial model.  For those with very philanthropic objectives, you may even consider creating a social enterprise, cooperative or charity . . . .

Or perhaps you will find that the best way to achieve your mission is not starting an enterprise, but joining an existing one that is doing what you’d like to do.

I think you’ll find, given this perspective, it’s easy to let go of a business. It’s like letting go of business cards you don’t use anymore, or dropping that fax number you no longer need.  If it’s the work you really care about . . . you probably don’t have to give that up just cause a given business proves unfeasible.

Is the reason for focusing on internet based businesses because that’s where the future is or because it’s the type of venture the Cambridge set are likely to be ‘into’ and as such is the best fit for the attendees. — Martin

Well, actually, neither of those reasons are why we focus on the Internet.

Basically, folks who have a business need customers.  Very broadly speaking, there are two ways to get them.

• You can call people and knock on their doors and try to tell them about your product.
• You can put your product where people who are looking for it are likely to find it.

The second option, sometimes called “in-bound marketing” is very cheap and cost effective, and the Internet is the cheapest “in-bound” marketing solution around.  If you do your job right, you can put your product where people who want to buy what you sell can find it.

So . . . we focus on how to put your products and services on the Internet.  In most cases it is the cheapest and fastest way for many of our entrepreneurs to get access to hundreds, thousands or millions of customers.  The Build Your Business Now toolkit that we built to support the course explains how ot create the simple site you need in just a few hours.

Market segment analysis. Instead of searching on Google, are there any specific places to retrieve this type of information? — Katherine

Well, we think you’ll be happier looking on Google (and perhaps other search engines) for information on market segments because getting the data there is fast and easy and you know it is timely.

For most businesses, the easiest to reach market of “ready to buy” customers are those who are looking for your service on Google because they are ready to buy.  If someone goes to Google and types in “Dog Grooming”, chances are its not an academic search.  They actually want a Dog Groomer.  If some customers search for “Sidcup Dog Groomers” others search for “Chislehurst Dog Groomer” and still others search for “Organic Dog Groomers South East”, that’s a person who is almost certainly ready to buy.

You can also look at sites that you think offer competing services and see how Google sees them from a keyword standpoint.  Go to http://www.google.com/sktool/ and http://www.google.com/trends to explore your market segments and related keywords.

Pricing: how much is it worth to them? … I recognize that the price of a product should be set to what a person will pay, not set to what they say they might be willing to pay. There could potentially be a large gap between how different entities value a product or service. Apart from asking prospects, apart from only looking at competitors’ pricing, what other tips would you suggest for setting price? (coming from the perspective of an internet based, B2B SaaS model with a product attempting to resegment an existing market with a niche strategy) – Steve

Pricing is always a matter of trial and error and you’ll almost always leave some money on the table. If you check out the Build Your Business Now Toolkit that was distributed after the class, you’ll see some practical advice and steps for figuring out price.

Basically you have to identify your target markets, see what they are paying for competing solutions, and price yourself in that zone.  If there are no real competing solutions, you have to look at what NOT having your solution costs them.  Using those two “ballparking” procedures will usually get you in your zone pricewise for each market segment . . . and then the issue is making sure each segment sees the right pricing.

Related posts:

1. Practical Q&A With Doug Richard: Mentoring, Recruiting & Seeing Opportunities
2. Starting a Business: The 3 Things I Really Believe
3. Start Here! STARTING & GROWING A SUCCESSFUL BUSINESS

The key thing to understand about marketing operations is that they are supposed to make your company more profitable almost immediately.  If you’ve sent out postcards, engaged in cold calling campaigns, run ads and twittered to no effect, you need to step back from your marketing operations entirely.  You need to get a solid grounding in what good marketing does, why it works, and how to develop the solutions that will best connect your company to your customers.

Market Research: A Short, Sweet, Practical Introduction

Marketing is the process of introducing your product to the people most likely to buy it. The easiest way to find out who is most likely to buy your product is to look at those who have purchased it in the past.  For example, if you run an expensive dog walking service called, Dogs On Parade, and you have three customers, you need to find out what makes those three customers use your service.  The easiest way to get this information is to ask them the next time they place an order. If you have 30 or 300 customers, then you will probably find it easiest to email your customers a link to an online survey that asks the questions you need answered.  You can use a survey tool like SurveyMonkey.com to create survey forms.

Many marketing surveys are pointless beyond belief. They ask demographic questions like age and income, but don’t ask questions about how far someone lives from the store where they bought something, where they found a given product or service, why they bought it, who uses it, and if they liked what they bought. You should ask if they have ever recommended your service to anyone, and if so what words they used. You should ask what websites they visit and what publications they read.  Your objective in asking all these questions is to try and determine what three or for characteristics about your customer make your product or service appeal to them.

For example, surveying a hundred Dogs on Parade customers might lead you to discover that all your customers like their dog walked twice a day, every day.  They found Dogs on Parade because it is a street away from their gym and had big red awning with a dog on it. They wanted a dog walking service that had friendly outgoing people in it.  Price was not a particularly important factor in their choice of service because they spend more on a single meal out than the service costs in a month.

Armed with characteristics that identify your customers, you are ready to “sift the world” to find more people like them and to give them the little bit of information they need in order to contact you about their needs.  For example, to expand Dogs On Parade’s sales through marketing, you might make friends with the folks that own the gym so you can put up some signs and fliers.  You might keep your bright red awning and and add some big red shades with dogs to your street-facing windows.  You’ll make sure every flyer mentions that your service can walk dogs twice a day, every day, year round.  Your price will not compete with the 15 year old dog walker down the street because it doesn’t have to.

With an existing business, marketing is easy.  Existing customers are easy to find and interview.

With a startup up, you have to find your first customers before you can market to them.  Sometimes you have to find them before your product or service is ready to buy.  Never the less, you must still find customers.  You must find people who would buy your product today if it were available. Ideally, you’d like them to place an order even before there’s something to buy.  That seems impossible, doesn’t it.  But people are often willing to commit themselves to purchasing something before it exists, if it delivers exactly what they want.  For example, if someone told you that you could purchase a battery-based four hour power source for your laptop that could be fully charged by an hour in the sun, would you sign up to get more information on when the product was released?  Most folks with a laptop would.  That’s a product that has customers standing in line already.  Your product should be that appealing to its target market before you start your marketing.

Contacting & Closing Customers Cost Effectively Online

Marketing is a sales operation.  One markets in order to create a relationship in which a contact becomes a customer.

If your marketing is very good, you may be able to go all the way from first contact to closed sale without human intervention. For products and services that can be ordered and delivered online, this is the ideal. Amazon does this daily.  People hear about a book, they go online, they find it, they buy it.  Amazon’s marketing has been so exceptional, and their performance so good, that most people feel no need at all for the “personal touch” until something goes wrong.  And even then, most returns can be quickly handled by customers without contact from a customer care representative.  When you are selling houses, it is unlikely that you can close a sale entirely online.  You can, however, fully qualify your prospects so that by the time they are talking to you or your employees, all their questions are answered and they are ready to make the final decision and sign on the bottom line.

To market efficiently and cost effectively online follow the steps outlined below:

• Have an attractive website that provides a good overview of your product or service.  If you do not have a website, you can go to GoDaddy.com, purchase a domain, and set it up to use WordPress. It takes about a day to set up the site just described using WordPress and Godaddy.  If you need training in how to use WordPress, there are several hundred tutorial sites for it on Google.
  • It should very clearly outline the defined in the market research outlined above.
  • Your website should offer a way to buy your product or service immediately, a way to ask for more information, a way to join your newsletter list, and a way to tell others about your site easily.
  • It should also offer some some useful information or tips that your customers will find interesting and worth forwarding.
  • It should, in most cases, allow people to place an order for the product or service immediately. The easiest and most reliable way to take money online is using PayPal.  Learn more about how to use it at www.paypal.com.  WordPress has many plugins that will make it possible to take orders through PayPal. They take minutes to install and configure.
  • You can get clipart to make your site pretty at www.iclipart.com.
  • Keep your website simple and professional.  It should be easy to read and cleanly formatted. Complex and overly artistic websites lose sales.
• Once your website is live, email your customers and let them know it is live.  As an incentive for them to visit the site, you may want to offer discounts, free trials on new services, or something else of value to them.  There is no need to give away products and services at a loss in order to make your site attractive if your website offers information of interest to your customers and to people who should be your customers.
• Create a press release that announces your new business. Make sure that its title has the keywords that your customers will use to search Google for the type of product or service you sell.  For example “Premium Dog Walking Service Launched in Cambridge” or “Solar Battery for Laptop Computers”.
  • Include the search term in the first one hundred words of the press release and again in its summary.
  • Make sure the address of your website and your phone number appear in the release.
  • Post this release on sites like prlog.com, bignews.biz and openpr.com. Note that all these sites will get a well written release listed on news.Google.com as well as hundreds of other sites.  That means that when people search for what you sell it will be easier to find you.
  • Publish one or two similar news releases every week.  Reuse the same keywords and phrases over and over again so that your company will climb to the top of listings for those terms on Google.  You can write a release about new customers you’ve acquired, hassles your customers face, solutions for problems you’ve found for your customers, etc.  This is one of the best marketing investments you can make.
• Add your press releases to your website. That helps insure that your natural Google ranking for the search terms is maximized.
• Use a tool like MailChimp.com to send a newsletter to your customers every week. Use it to cover the information you put in your press releases, and to mention any special offers or new services you have.  You might also point to news headlines your customers will find interesting and useful.
• Get a Twitter account at www.twitter.com.  Add this information to your website. People will follow you on twitter and you can send them tweets about changes to your site, news items of interest, or special offers.  Repeat this process for facebook.com and myspace.com.

But Will This Really Work?

If you follow the instructions outlined in this article, you will see a very quick and profitable result from your marketing operations. The only way this process will fail is if:

• You have not actually identified and assessed your customers, and thus your market, well.
• You have not professionally implemented your website.  Using Word Press to create a website is about as difficult as sending email.  It takes a few hours to setup if you are the least bit computer friendly.  If you are not, hire a kid from your local University and have them set it up while you watch.
• You do not create press releases and deploy them efficiently.
• You do not keep up this effort for, at minimum, three months.

The whole process will be very inexpensive.  It should cost you well under £120 to follow all the instructions outlined in this article.

Want to learn more inexpensive fast-growth marketing techniques? Check out our upcoming events. We offer new online and face to face courses in these techniques all the time.

Related posts:

1. An Entrepreneur’s Guide to SEO Through Press Releases
2. 12 Free Press Release Sites: Great for SEO & PageRank
3. An Entrepreneur’s Quick Guide to Closing Online Sales

However, delivering products and services for free can be a more than minefield for those without a good grasp of the underlying business fundamentals. The following overview of “Give it Away” business models reviews some of the ways in which free or low-cost products can help build businesses that turn a profit.

Free Samples

The candy samples stores pass out around the holidays are given to customers at no cost. They are certainly not “free” to produce or distribute, but they are the best “advertisement” a candy company has to offer and so make a reasonable marketing expense.

If you make a product or service that people will only choose to buy once they know they like it, you will need to find a way to let them sample the product or service prior to purchase. Food, cosmetics and fragrances are just a few of the goods that are frequently promoted this way. Software is occasionally sold this way as well. When using free samples to promote software products, your trial products must be in a form that demonstrates real value but must not be so useful or so generally available that people never have to buy the full product.

Generally speaking, you should make it as easy as possible to go from trying a free sample to owning the product. If you pass out free candy near the candy store, or make trial products that turn into full products when people enter an entirely unique and unforgeable unlock key, this works well. Distributing free samples of your product can go badly awry if the samples you produce and distribute at great cost do not end up in the hands, or on the computers, of the people who can and will pay for them.

The Bait & Hook

Razors need razor blades and printers need toner. These are examples of items given away for free or cheap because use of the thing will require a subsequent sale.

For this model to work, your product needs to come in multiple components, some of which are delivered at or below cost, others of which are sold subsequently at much higher margins. The total price of all components, which is to say the complete product, must meet customers needs and expectations. The cost of producing and distributing all components of the product must be less than the revenue generated by the sum of all sales which can get tricky with so many moving parts.

Some online services try to follow this model by allowing people to use their product at a limited level at no cost, with additional features available for a fee. This model works when the product meets a customer need and when use of the product continues over time. It can be a quite fatal business model if the free features of the product are so useful that no one ever pays for more features, or if the free trial is so limited people abandon it long before they need more features or capacity.

When this model is applied to open source software it fails if potential customers have difficulty installing and using the “free software”. It also fails if use of the software is so easy to install and use that it requires no for-hire technical support or training.

As you can see, the Bait & Hook business model requires that many things go right in order for it to be profitable.

Ad Supported Media

Ad-laden periodicals distributed to target markets are not “free” in any sense. The publisher of the newspaper has customers who pay to advertise and part of the publisher’s advertising packaging and distribution service is to create the content that goes around the ads and to get the finished publication to the advertisers’ prospective customers. Radio, television and sponsored events follow the ad supported media model.

In this model the business owner must remember that the customer is always the advertiser and the “audience” is the customer’s customer. Entrepreneurs must walk a tight rope between these two poles. Catering to either party at the expense of the other is a sure way to go out of business.

This model works when the audience wants the media or event, and when some significant percentage of that audience wants the products and services the advertiser sells. This model falls apart when the market media appeals to does not buy the advertisers products.

Sometimes both advertisers and publisher think the absolute size of the audience receiving the message is some measure of success. It is not. That is a measure of expense if it is a measure of anything. The measure of success, fron an advertiser’s standpoint, is in a ratio of low ad costs to high product sales. From a publishers/producer’s standpoint, the measure of success is in the ratio of ad revenues over content development and distribution costs.

Test Your Business Model Extensively Before Going “Big” with Anything “Free”

In the previous business model overviews it is clear that “free” never ever means free to the business owner. Business owners are always on the hook to pay for what others are receiving from them at no cost.

If you elect to try and implement a “Give it Away” business model, you must extensively test that business model throughout product development on as many small populations of your target market as possible. You must refine your products and services to maximize the conversion from accepting what’s made available free to paying for something of demonstrated value. Failure to do this is the surest way to make a very expensive mistake.

Related posts:

1. Entrepreneur’s Guide to Creating & Testing Business Models
2. An Entrepreneur’s Guide to SEO Through Press Releases
3. What Businesses Will Be Worrying About Next Year

Some people say that it is not what you know but who you know.  Truth is, it is both. If you are an entrepreneur running a business-to-business enterprise, investing time into social networking sites like Facebook (www.facebook.com) can seem like a waste of time because it probably is.  There’s little point in delivering your message about photocopiers and courier services to folks discussing dating venues and baby bottles. How can your business posts not seem like spam in that context?

That is why there is LinkedIn.com, a site where business people can talk business to other business people safely.  You really can find a large percentage of the business people you know, and those you want to know, on this website.  Perhaps more important, there are several tools that let you connect to those open to new business proposals and new networking relationships.

Using LinkedIn effectively is easy if you do the following:

1. To create an account, just go to www.linkedin.com.  Provide all the usual data.  Linked in has tools that will mine your email box for friends. If that email box happens to be your business email box, allowing LinkedIn to issue invitations is probably appropriate.  You can pick and choose contacts if you prefer.
2. Once your account is setup, your resume entered, your friends invited, go join some Groups in the business areas that matter most to you. Media, manufacturing, import/export, etc.  Groups are for people that actively want to network through LinkedIn.  Important: Being in a group with someone means you can contact them for free through LinkedIn messages. Because it means you can search for the people you need to know, based on their job title let’s say, and if you find a contact that’s in a group with you . . . you can send him a well written message and far more often than not he will reply. This means you don’t have to pay for InMail messages.
3. You can search for people by company, title, location and other parameters.  This is handy.  If you need to find potential funders for example, try searching for angel investor, private equity, venture capital, private lender, investment manager or hedge fund manager. You’ll get some useful results.
4. Make sure your profile links to your website, and make sure your website has your phone number, email address and Twitter account.
5. Ask questions on the Answers forum if you need help.  Answering questions for others is a great way to create new networking connects and demonstrate special expertise.
6. Post jobs on LinkedIn when you need to hire people.  You’ll be surprised how many well qualified people find you here.  It is also very useful to see applicant profiles, including connections, when folks respond.
7. You can now post ads on LinkedIn, and they offer some useful targeting tools. This may be a great option for straight business-to-business promotion.
8. Within Linkedin Groups, you can post links to news articles and start new discussions.  This is great for your SEO and link building efforts.

One thing that you must remember is that LinkedIn is not Facebook.  So this is not the place to post baby pictures, expose political or religious preferences, or discuss who you are dating.   The negative reactions you receive from such a breach are every bit as bad as you get from “spamming” Facebook with a blatant business message.

LinkedIn is an exceptionally good place to make new business connections and to maintain them for long periods of time.  It is a great place to market your business and promote all your website has to offer.  It really is a fully functional business community, and for business-to-business enterpreneurs it is much better than Facebook.   I look forward to seeing you there.

Related posts:

1. Pay Per Click Advertising on LinkedIn
2. I Have to Show You Cracklytics
3. Keeping Your Company’s Emails Out of Your Customer’s Spam Box

Before You Pitch

Before we drive right into mastering the single most important skill you need to succeed in gaining investment from a pitch meeting, let’s have a two minute review of what you need to have in place before you get one.  Assuming your intent is to raise funds for your business, your business should have either a track record of successful performance measured in cash, customers or market share. Alternatively it can have some kind of intellectual property (probably a patent or a copyright) that you can demonstrate will yield tremendous value in cash, customers or market share in the years to come.  Generally speaking, you lose less control of your business if you already have a cash flow positive business model when you start looking for money.  But that’s not a universal truth.

The Story That Sells

Given that you have the bare minimum it takes to get into a pitch meeting with the hope of getting something out, the next thing you need is a “story that sells” which you will use to capture the minds and hearts of your investors.  Failure to have good story, and by which I mean a story with a hero, a problem, perhaps a villain, a solution and a happy ending, makes successfully pitching your project effectively much harder. There are several reasons for this:

• People are hardwired to listen to stories. From children we’ve all heard them. They are almost always used to introduce new ideas, concepts and solutions. Sometimes they make us laugh. Sometimes they make us cry.  They almost always teach us lessons.  People will listen to a story when they will not listen to a speech, a presentation, an analysis or even a diagnosis.  In fact a story is about the ONLY thing most people will sit through.  They’ll give a story a benefit of the doubt . . .
• Stories are truly hypnotic. Milton Erickson, the most effective documented hypnotist in human history, and arguably one of its best psychotherapists, was famous for using therapeutic stories to change lives in hours or days for people with severe mental illness, most of whom had been in active therapy for years.  Stories speak directly to both the subconscious and conscious mind simultaneously. That makes it possible for us to perceive and accept things we might otherwise be unable to hear.
• Stories frame ideas and experiences. They draw on memes and create new ones.  In George Lakoff’s book, “Don’t Think of an Elephant“, he describes the notions of memes and frames.  A meme is a thought virus.  It is a word or set of words that comes to stand for a huge number of feelings and ideas. For example, terms like “death tax”, “passive resistance”, “American imperialism”, “the British empire”, “the Blitz”, “the boy who cried wolf” and so forth are all memes that carry with them complex ideas and strong emotional responses for many people.  Some “memes” are hardwired into our biology.  For example, someone friendly is called “warm” the world over.  Why? Because when nice people hug us we feel warm.

If you want to communicate anything new or ground breaking to investors, you are wise to find or create a great story that conveys a context and emotional resonance for some or all of the following:

• Who your customer is
• What the value of your product or service is to the customer
• How you know the customer needs your product or service
• What kind of customer needs your product or service
• How your product or service meets their need
• How you discovered all this
• Why you are the best person / company to meet this need
• How you’ve been meeting it successfully already
• How the investor will profit, as you have, by meeting this need, for these customers, with your products and services.

The story you delivery should be interesting, insightful, compelling and emotive. It should include a call to action that makes people decide to do something now rather than wait for some other day to take action.

Where are you going to get this story? Well, chances are you already have it.  It is the story of how you came up with the business you are planning to start or grow, the technology it is built on, the target markets you serve or plan to serve. When will you deliver this story?  Usually it will be right up front . . .

• The first thing you say in a pitch meeting is your name, the name of your business, and the value you provide your customer.
  • “My name is Doug Richard. I’m founder of School for Startups. I help people start and run more profitable businesses.”
• Almost immediately thereafter, your story should begin.
  • “In 2008 I made a bet with someone that I could teach almost anyone how to start a business in a single day.  Having started many enterprises, and mentored dozens who had started hundreds more, and having invested in so many both good and bad, I was pretty sure I had starting a solid business down to a science.  I had developed a series of tools that made it possible to tell good businesses from bad ones from the outset, and I had set of techniques I used routinely to bootstrap businesses with very little cash. My bet got called, and I subsequently taught a grueling course in how to start a business to a few hundred new entrepreneurs.  I enjoyed the course very much, so did the students, and I realized this was not only great fun, but the heart of a great social enterprise.  We trained 8000+ entrepreneurs since then, and hundreds more every month.  We have a satisfaction rate well over 95%. We work with partners like O2, the Royal Institution of Great Britain, the University of Essex, the British Library and the University of London.  The UK is in the midst of a financial crisis that’s made even the mightiest businesses stumble.  But history has shown that in the seeds of this financial disaster new innovative enterprises will spring up to create solutions that work in what amounts to a new economy.  I and my team want to be part of revolution in wealth creation . . . and I’m hoping you do too.”

Your story is the lead in to all the dry figures about how many people we will teach, who we’ll work with as sponsors, where we’ll find paying students, and how our business will scale.  Until people have bought into the story, and bought into their place, our place, in it all the facts and figures in the world won’t convince them to go forward.  Vision is what sells investment. The facts, figures and supporting documents are necessary evils we entrepreneurs provide and investors endure as a necessary cost of due diligence.

What if Your Story Never Works?

If your story never works, you’ve got a bad story or one that’s badly delivered.  You should modify it and your delivery until it is so compelling people actually ask you to tell it at parties. Developing a great story takes practice, intelligence, insight and determination.  If you are really unhandy at telling stories you’ll probably have to hire a partner great at them.  I haven’t seen very many effective sales professionals that weren’t also amazing story tellers.  It is one of the most important skills they have to have.

If your story usually works, but it doesn’t work in a given pitch meeting, sit back and enjoy meeting interesting people for their own sake.  Because the truth is, not every investor will find every entrepreneur has a vision they find interesting. You might as well, at this point, find out what they do find interesting.  You never know when you’ll have a new enteprise to pitch, or will run into another entrepeneur who has the ideal project for them.

If you want to learn how to Find, Pitch and Sell your projects to investors, attend one of my upcoming courses in the “The Art of Securing Investment“. You’ll find upcoming courses, and online events, like our Free Entrepreneur Surgery this Monday, listed at www.schoolforstartups.co.uk.  You can also follow us on Twitter @s4startups. That’s the easiest way to keep up with what’s on at School for Startups.

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2. The Insanity of Angel Investors
3. An Entrepreneur’s Quick Guide to First Investors: Family & Friends

I have counseled and supported many thousands of entrepreneurs over the years, and something that never ceases to amaze me is how many initially enter the market with the intent of competing on price. Since I have an extensive background in sales and marketing, and since I’ve managed more than my fare share of sales teams, the idea of maximizing the number of low margin sales a business makes just seems completely insane.  Startups rarely have the returns to scale or the marketing and sales efficiency to do large volumes of business profitably at a low price.

I believe this problem is caused by a fundamental misunderstanding about how prices are set, a lack of insight into why people buy what they buy, and no formal education on what other meaningful qualities products can compete on.  This article reviews some fundamentals that every entrepreneur needs to know.

The Process of Perfect Pricing

Prices are insanely slippery numbers.  They are defined by what one person will pay another for a given product or service.  They are not defined by what a product cost to produce or what profit margin a producer would like to have.

For example, all the ingredients in a litre bottle of Coca Cola, the bottle itself, and all the branding painted on it, costs less than 10 pence. The Coca Cola company feels no need at all to price its products at a few pence per bottle. Sometimes this truth is explained away by pointing out how much the company spends on advertisements, maintaining its brand, etc.  But the truth is that if customers decided they were only going to pay 15 pence a bottle, Coca Cola would change its branding and all other elements of its business model to keep profits high while meeting that requirement or they would stop producing the product.

The price people are willing to pay for a product or service can be derived from many factors. Which factors people use to make their decision will vary from person to person and from day to day. A man trapped in the rain on the way to a business meeting will spend quite a bit for an umbrella.  Someone who buys airplane tickets online will almost always want to spend less than someone who buys tickets from a travel agent.

Factors people may take into account when figuring out how much they will pay for something include:

•    The cost of the problem a product or service solves
•    The revenue owning or using a product or service can generate
•    The status derived from owning or using a product or service
•    The improved perception of self derived from owning or using a product or service
•    The cost of the crisis a product or service prevents
•    The price of substitute products and services
•    The price people pay for related products and services
•    The location where the product or service is being provided
•    Who will be using the product or service
•    Customer service provided post sale
•    Pre-sales support leading to a better solution for the customer.

Sales and marketing professionals can choose to target customers based on any of these characteristics. They can target their marketing materials and their marketing efforts on customers who do relatively little in the way of comparison shopping. In many cases this will require the business to adjust the products and services they offer to address the needs of these less “price sensitive” customers.

For example, the price of a tow truck to pick up a car may be just £20.  But a service that guarantees they will rescue a stranded daughter in the middle of the night on a dark road may be worth £80. If your objective is to sell tow truck services,  you should obviously consider modifying your business model to provide the more profitable solution.  After all, many people purchase towing service plans but few use them even once a year.  In fact, this is a demonstration that sometimes the number of people willing to pay more for a service is much higher than those willing to pay less.

Good pricing requires good market research. You must look for and find people who are ideal customers for your product.  You must come to understand them well and you must give them what they need.  When you can do that, you won’t need to compete on price.  You’ll be able to compete on everything else.

Update: Watch Doug’s exclusive video “Prices Are Discovered“.

Looking for More Help?

School for Startups offers support and practical instruction for UK entrepreneurs through online events and face to face courses.  For more information, please visit www.schoolforstartups.co.uk or follow us on twitter at @s4startups.

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2. An Entrepreneur’s Guide to Marketing Well At Little Expense
3. The Price of Money (At Least You Can Eat Catfish)

George Lakoff, a Berkeley cognitive linguist with a particular interest in politics, has made a fairly remarkable discovery.  People buy their identities.  This is true in two senses, people purchase products, services, policies and politicians that are consistent with their view of themselves and the world they live in, and they build the identities people see and create the environment around them by making economic and political decisions.  Lakoff uses the term “frames” to describe these meaningful pictures we have of ourselves and the world. Frames are metaphorical, emotionally charged, moving images.  They are populated with people and objects and they represent interlocking and interdependent stories that govern human behavior.

For example, in a Hospital frame, there are doctors, nurses and people which have very clearly defined levels of authority. These people also have assigned “duties” that are strictly enforced.  The patient must need help, the nurse must provide care, the doctor must solve problems and make decisions.  Within a hospital there are various location-based scenarios. There’s the surgery, the psych ward, the labor and delivery room, all of which call upon people to behave in very specific ways.

Entrepreneurs can call upon frames to communicate with their customers.  For example, if you run a computer repair shop, you might run ads featuring a repairman dressed as a doctor with a laptop sitting on an examining table.  That single image would communicate several aspects of your business very quickly.  People bring you sick machines and you fix them. If you delivered repair services on site you might have to change your image to show your Emergency Medical Technician sitting in an ambulance treating the broken machine.

In order to use frames effectively, you need to know your target market very well. You need to understand the frames your customers want to live in.

If you produce sports cars, your customers’ frames probably don’t include toddlers. They probably do include attractive men and women, perhaps wearing sunglasses, wind ripping through hair, long open roads and dramatic sunsets.  Because when people buy a sports car, that’s likely to be the picture they see in their head. From a marketing standpoint, your job is merely to put your car in the picture. Put a kid in the picture and suddenly people will be quite confused.

A sports car is an easy product to frame because people have been selling them or years. Billions have been spent deriving that context. But when you are selling more nebulous things like business courses, courier services or child care centers the “frames” become a little more complex.  In your courses, do you “lecture to students” or “share insights with peers”.  Is your courier service delivering things early in the morning or delivering them around the clock around the world?  Is your child care center filled with fairy princesses and pixie kings, or with tomorrow’s leaders looking to get a head start on their future achievements.  To use frames well you must know how your customers want those questions answered.

There is a common misconception that businesses “create” their frames.  One of Lakoff’s most important insights is effective communicators slide their products, services and political policies into widely known existing frames.  Creating a new frame requires the work of many businesses over many years as a rule.

So how do you go about finding a frame for your products?

• Evaluate your customers. and identify exactly what need your product meets within that market. You must know exactly what solution you deliver to customers in order to find your frame. A sports car delivers the ability to drive away to romance. A Volvo family car delivers safety in an accident.
• Identify the moment when someone decides to purchase your product. A man might be in the car dealership trying to choose between practical cars and sports cars.
• See those moments as part of a larger story that incorporates those people and your product, wherein those folks look like heroes (or lovers, or saviors, or good parents or whatever other archetype they’d like to be). The man is looking at economy cars. He glances at his girlfriend and there is a fleeting moment of fantasy as he sees them both riding through the sunset to a weekend retreat. The next moment he’s signing the agreement for the convertible.  Alternatively, a man might be in the car dealership looking with longing at sports cars. Those days are long gone . . . when suddenly his little girl peaks her head around a headlight, and the next thing you know he’s happily buying the Volvo. After all, there are some great days ahead.

That story you create through this process is your frame. It will become a part of every ad you write, every letter you send, every face to face pitch you make.  For all intents and purposes, it is your product or service.  When people buy your product or service, they are buying this vision of the world and their assigned position in it.

If this ‘story telling’ methodology seems like a strange way to market your products and services, take a moment to think about ten of your favorite products and services, and you’ll see you have a “story” to go with each one.  FEDEX when it absolutely has to be there overnight.  Coca Cola, its the real thing.  Volkswagen. Small is Good.

Those products are successful, those brands are successful, because those stories are true and those product make them true.

You may believe that your customers actually make purchase decisions based on facts and figures, statistics and customer ratings, but the fact is that people don’t start looking at that data until they are in the last stages of the decision-making process.  They use details to help them differentiate between their final selections.  If your product or service is “out of frame” you don’t make the first cut and no one cares what your stats are.

A final note.  You will know when your products and services are not fitting in your customers frames when you spend a great deal of time explaining what it is your product or service does.

When you “pitch” a product or service, it should take less than 30 seconds to explain what your business offers even if your product or service is something that has never existed before. For example, “The iPod is like a walkman, but it has 30 gigabytes of your favorite music and videos”, “the iPhone is like an iPod, only you can make phone calls on it”, “the Android is the Google iPhone.”

The first step in selling any product is putting it “in frame”, and the first step in doing that is understanding what fundamental need it meets for your customers.

Related posts:

1. Entrepreneurs Guide to Understanding Why We Buy What We Buy. Understanding Consumers.
2. Marketing’s Critical Dual Role: Acquiring Customers & Keeping Customers
3. An Entrepreneur’s Guide to Marketing Well At Little Expense

From a time and money standpoint, the cost of acquiring new customers is very high, yet few startups and small businesses invest much thought or care into keeping those customers once they have been acquired. The failure to make this investment is one reason many startups and small businesses fail to thrive.

A customer who has purchased one of your products in the past has proven they have money and they have proven they are willing to give it to you. Given the opportunity, they are more likely than most to purchase more from you in the future.

The cost of “re-acquiring” a customer you have lost contact with may be as high, or higher, than the cost of acquiring a new customer. While some customers may have just forgotten you, others may have been left with some slightly negative impression of your business. They may lead them to turn to one of your competitors in the future.

The cost of enraging a customer, through poor performance during and after a sale, is extremely high. Some studies show an unhappy customer will tell an average of nine people how much they loathe your business. These days, an unhappy customer who takes to the Internet can cost a business thousands of sales. An unhappy customer is a dangerous “anti-ad” for your business.

There are many ways to maintain a good relationship with a customer after a sale. Not all of these methods are appropriate for all customers in all industries. Working with your customers you can identify which options they like best and which meet your economic requirements as well.

Send customers information on the product or service they purchased shortly after a sale. Make sure they know all the benefits of their investment, and that they understand how to get support when things don’t work as advertised. When you buy a printer, it is nice to find a URL for a video that shows you how to install paper and an ink cartridge. Its also nice to have a link for any drivers you may need to download.

Send customers information about related products or services in the months after a sale. This information may be “added value” in the form of discounts on things they need to go with their first purchase, or additional resources that are likely to be of value to customers in their market segment. Parents who buy an expensive stroller may be interested in new seat covers and padded bumpers six months later. If they can get them at a substantial discount, so much the better.

Send them information on products and services from your strategic partners when they are likely to be of great value. People who buy expensive sports cars may need car covers and enhanced car security systems.

Send them information on moderated user support forums and fan forums they can turn to as they use the product or service you’ve provided. People who buy Star Wars memorabilia are likely to find a link to a well moderated and active Star Wars fan site maintained by your business of great interest.

If you sell products through distributors and resellers, things become more complex, because although your product was purchased by someone, they are not yet your customer. They are the reseller’s customer. To make them your customer, there must be a path they can follow from your product to your business.

When appropriate, imprint a URL directly on your product.
Use mail-in and online warranty forms, maintenance agreements, and enhanced service agreement to initiate direct customer contact.

Include product packaging that offers free or deeply discounted prices on a related product. You may make no margin on the first sale, but you’re probably spending less than you normally do to acquire a new customer that purchases from you instead of your distributor.

Connecting directly with your customers enhances your position with your distribution and resale partners. You can use the data you collect to drive traffic to their storefronts when it makes financial sense for you to do so.

Provide Multiple Methods of Contact

Customers vary in how they want to be approached by those they have purchased from in the past.

For some customers, email works well, although it is increasingly difficult to ensure that email you send to your customers will be delivered. Some customers will not use an opt-out link at the bottom of a newsletter to terminate a newsletter subscription. Instead they simply identify your email as spam. When this happens enough times, your sending email address, and sometimes your IP address and URL, is used to route all the emails you send directly to the spam folder on most email networks.
Bulk mail of advertisements to customers is rarely justified unless it is subsidized by an investment from industry partners.

Telephone contact is appropriate to follow up with customers who have made a major purpose with which they may not be satisfied. Scripting the calls so it is clear these calls are designed to ensure customer satisfaction and not to sell something is critical. Timing calls so they don’t annoy customers is also absolutely necessary. You may want to add a question about when you should follow up with a given customer to the order form they or a sales rep fill out during the purchase process.

Twitter and SMS texting are acceptable for commercial communication to many customers at the moment. Customers seem to like that they can remove themselves from a Twitter feed at any time. They will allow the occasional SMS text message for a commercial purpose as long as it is possible to text a “stop code” to stop messages when desired.

In a perfect world, customers take the initiative in maintaining contact with your business after a sale. A good, well moderated, friendly website or support forum can make this a reality for many businesses. As long as customers find real value in visiting your site, they will keep coming back.

Smart startups and small businesses must ensure customer satisfaction and customer retention is a priority because pound for pound, it the best marketing investment they can make. Catching customers over and over again only to let them go will cost you your business. Your most successful competitors will not be making that mistake.

Related posts:

1. An Entrepreneur’s Guide to Marketing Well At Little Expense
2. Keeping Your Company’s Emails Out of Your Customer’s Spam Box
3. Marketing is All About Frames, So Put Your Products In the Picture

The plush surroundings of the executive suite at UCL’s Engineering Front Building was the perfect place for an intimate chat about the latest changes in social media, PR, blogging, video and developments in SEO. This event was also a pilot for a series of regular S4Stv events our team are currently busy planning away.

Among the variety of budding entrepreneurs brimming with clever business ideas were charities, travel innovators, business trainers, videographers, renewable energy processors and clothing makers.

First up to introduce his company was Chester Mojay-Sinclare. Chester’s business, Alive and Giving is a comparison site for charities. Its aim is to empower people to donate knowledgeably and overcome one of the more modern phenomenons known as ‘chugging’ or charity mugging. By giving us more knowledge about how various charities compare, Chester believes we will be more inclined to donate and go on to help these causes. Chester raised some interesting discussion points with Doug, including how charities can get exposure on the web, and what incentives they can provide.

With holiday season just a couple of months away, one entrepreneur all set to capitalise on travel is Sally Broom. Sally has been promoting her unique creation aimed at holiday goers called Tripbod. The site lets anyone who is planning a trip, to hire locals as guides, full of useful and unique knowledge about their destination. The rates of hire are highly affordable compared to a typical travel broker and through the guides, travellers can get to explore parts of a country they never would otherwise be exposed to. Sally gave a perfect pitch for our S4Stv audience and her discussion with Doug highlighted numerous tips on how to access her audience and drive people to the site.

Rounding up the live event, were two UCL engineering innovators. The first Dr. Charlie Dunnill, explained how his company, H2-NRG has developed a way of storing renewable energy in the form of H2. Dunnill believes the prototype has applications in domestic power such as heating, but is also keen to explore how his idea could be further developed to apply to large scale energy storage and deployment.

The second UCL innovator was Dr. Brad Backus, of Audio3 who has designed and manufactured a clever device that capitalises on new regulations that apply to those exposed to loud sounds at work. The device called soundBADGE gives users a visual indicator of the duration and intensity of sounds accumulated throughout the day. It’s used by factory workers, people who work in clubs and bars as well as performing musicians, to protect their hearing in these types of environments.

Doug was especially on form during the evening S4Stv broadcast, wearing a specially created cardigan from Amanda Ruiz of Peruvian Knitwear, who commented that her sales have increased since becoming a regular attendee at S4S events. Attendees commented that the afternoon delivered lots of useful tips and insights into low cost marketing routes with plenty of take home messages for the day.

You can see these all of these entrepreneur’s pitches and their discussions with Doug on our S4Stv stream being uploaded to our site very shortly.

We hope to see you at our next event and of course online with S4Stv. To discuss this event and message fellow entrepreneurs, register here and head to our forums.

Related posts:

1. Zero Budget Marketing for Startups: Sold out and Buzzing
2. Welcome to S4Stv!
3. An Entrepreneur’s Guide to Marketing Well At Little Expense

LOW COST FAST GROWTH MARKETING

DATE: THURSDAY 25TH FEBRUARY 2010

LOCATION: UNIVERSITY COLLEGE LONDON, UCL ADVANCES, ENGINEERING FRONT BUILDING

Doug Richard, serial entrepreneur and original BBC2 Dragon, moves ahead with his ambitious plan to fast-track fledging entrepreneurs and business owners onto the road of success. Due to popular demand Doug and the School for Startups team are holding their much esteemed “Low Cost Fast Growth Marketing” for growing businesses master-class in London this February, located at the outstanding University College London. School for Startups is the UK’s premier provider of business training and tuition. The seminars are designed to be fully interactive, incorporating ‘live’ on the day delegate case studies, video examples, lectures, interactive discussions and Q&A; sessions. Doug’s goal is to teach participants the questions they need to ask themselves and equip them to find the right answers. Doug is a humorously entertaining host and will leave you feeling inspired and refuelled!

Event Details

In this seminar serial entrepreneur and investor Doug Richard digs deep into advanced online marketing tactics: the essential lessons that every entrepreneur needs to understand. Finding fast growth, effective and affordable channels to reach customers is critical to any business; but especially so for growing businesses during a recession.

Doug demonstrates how the Internet has levelled the playing-field between your business and your largest competitors and why there has never before been an opportunity like that which exists for today’s businesses.

At Low Cost Fast Growth Marketing you will learn:

• Using Thought Leadership to drive Social Media
• PR in the 21st Century
• Blogs, Conversations and Gossip: Key Tools for 2010
• No Cost Video
• How SEO is changing and what to do about it

Event Information

* Registrations Starts: 14:00hrs
* Event Starts: 15:00hrs
* In conjunction with University College London

Who should attend?

• Owners & managers of growing businesses
• Marketing and media professionals
• Business, Marketing and MA students

What’s included?

• 5 hours of business tuition with one of the UK’s leading entrepreneurs
• Access to online resources and materials, including membership of VentureNavigator (see details below)
• 12 month’s free subscription to Doug’s monthly newsletter
• Accreditation as a Graduate of School for Startups (web-badge)

TICKET INFORMATION

* Online bookings policy – We only accept online bookings with a credit or debit card. Unfortunately we do not issue invoices for future payment or allow attendees to pay on the day. Anyone who has not paid for their ticket in full before the event will not be granted access.
* Refunds and changes to ticket details policy – Unfortunately we cannot offer refunds or change the name on the booking once tickets have been booked.

For more information see our full Terms and Conditions

MONEY-BACK GUARANTEE

We are confident that you will be completely satisfied by this event. If you are not completely satisfied with the event, we will issue a 100% refund, no questions asked. Requests for refunds must be made via email within 24hrs of the event taking place.

Related posts:

1. Low Cost Fast Growth Marketing Roundup
2. Start Here! STARTING & GROWING A SUCCESSFUL BUSINESS
3. Zero Budget Marketing for Startups: Sold out and Buzzing