Category Archives: Business Strategy

The posts in this category go into great detail on what other business are doing well and their strategy behind it.

Millions of Users for Everyone!

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Photo Credit: El Marto

Worried about competitors? Don’t be.

There are literally millions of internet users for everyone!

There are Billions of people that go on the internet! That is a big pool of people to have access to.

Source: Internet World Stats

Yes, another social network can exist!
Yes, another hosted email newsletter service can exist!
Yes, another Google can exist!
Yes, another [insert any web company that is already huge] can exist!

Why? The Internet is MASSIVE. Tons of potential customers still exist for you!

To prove my point. I’m going to share a few companies that are all sort of doing the same thing and have millions of users.

The best example is Hosted Email Newsletter companies (all doing easily $1M+ in revenue)
MailChimp
iContact
ConstantContact
CampaignMonitor

Web Based BackUp Solutions (all doing really well for themselves)
Backupify
DropBox
Carbonite

Super Simple Blogging Service (all have loads of users)
Tumblr
Typepad
Blogger
WordPress

Super Simple Web Publishing Service
Weebly
Homestead/Intuit
 Jimdo

Project Management Tools 
37Signals
TeamWorkPM
Pivitol Tracker

Social Networks
Google Plus (~50 Million Users)
Facebook (~700 Million Users)
Twitter (~100 Million Users)

Of course each company is slightly different when you look at on a granular level. But most of the companies can be easily grouped together when you take a look at their core mission.

Here is my point: DON’T BE WORRIED ABOUT COMPETITORS. There are millions of customers that want to use your product even if it similar to some thing else. Just stay focused on finding customers, serving them well, and your internet business will thrive!

PS: Yes, I do think another Facebook can exist 🙂 Let me know what you think in the comments!

The Virgin America Strategy?

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I had the pleasure of flying on a Virgin America (VA) today.

Why did I book it? It was cheaper.

Over the past few months Virgin America (VA) has been significantly cheaper than all other airlines. I believe VA is trying hard to make their airline tickets the cheapest and then making that cost up in other methods. Here is what they are currently doing to make up that cost:

Advertised Experiences

Google will you give you a wifi-enabled Chromebook to use on your flight for free. I’m sure Google paid a hefty penny for this deal. The Virgin America ticket counter agents even allowed Google to make an announcement on their PA system!

$8.00 On Demand Movies at Your Seat

You can order movies on demand on your flight. $8 is just the right price that I would actually pay if I was bored. Anything more than that I would feel guilty about.

Branded Everything – Product Sponsorships

One Water for your drinking pleasure and Method branded soap in the bathroom to keep your hands clean.

Low Prices, Sponsorships, and Up-Sells. Could this be how VA wins?

This reminds me of a story I read in the “Myth of The Robber Barrons” about how Vanderbilt dominated the steamboat industry in the 1830’s. Here is the story:

Moving to New York, Vanderbilt decided to compete against the Hudson River Steamboat Association, whose ten ships probably made it the largest steamboat line in America in 1830. It tried to informally fix prices to guarantee regular profits. Vanderbilt challenged it with two boats (which he called the “People’s Line”) and cut the standard New York to Albany fare from three dollars to one dollar, then to ten cents, and finally to nothing. He figured it cost him $200 per day to operate his boats; if he could fill them with 100 passengers, he could take them free if they would eat and drink two dollars worth of food (Vanderbilt later helped invent the potato chip). Even if his passengers didn’t eat that much, he was putting enormous pressure on his wealthier competitors.

One sentence summary of story: Vanderbilt made his steamboat rides free, up-sold snacks to make up the costs, and this led to his competitors going bankrupt.

I’m a huge fan of this strategy, so sign me up!

I couldn’t help myself so I did a quick brainstorm on what else Virgin could do to make their money back:

1. Partner with Netflix – give the customer the option to either buy the movie for $8 or sign-up for a free trial to Netflix and watch their entire streaming collection. Netflix should pay $30 per sign up and give them a cut of the recurring revenue if the customer stays.

2. Sell another flight right at my seat – Allow me to buy my next flight at my seat and give me a $30 discount if I do it during the flight. A good way to make this up-sell even better is let them know they can cancel anytime and the cost will stay as credit in your VA account.

What are some other ways VA can make money? Let me know in the comments, I’d love to hear them!

Optimizing for the Right User

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A good friend of mine (who is an amazing entrepreneur) called me last night and was excited to tell me that he got a huge burst in traffic and acquired 10,000 new users in the last 2 months for his website. The reason for the burst was he was investing in social media advertising, running contests, SEO, referrals, etc.

This is really great! Acquiring 10,000 new users is a major accomplishment, especially in such a short time period. Also – free users can help you build and test your product. It also helps you validate the market.

BUT, here is the problem:
I asked him what is his goal was. It was to acquire paying customers for his product. In my opinion most of these 10,000 new users will never ever convert to paid customers. The problem with focusing on free users out of the gate is this is the wrong type of customer – you know, the customers that never pay you.

Once you have a product try charging as soon as possible. Have a very generous free plan but also have a paid plan. You don’t really have customers until you have someone paying you. This will also help you optimize your web business towards bringing more money in the door.

Are we just getting better at getting free customers?

I’ve run into this issue as well. For my side product, Digioh – we have several hundred users that we acquired through Google Adwords on specific keywords. We got really excited for about a week until we realized that we still only have a handful a paying customers. We asked ourselves: Are we just getting better acquiring free customers because we want to get better at building a business where people pay for our services.

Since we have a premium paid plan in place, we are focusing on ways to optimize our site to get people to pay us. This includes changing our landing pages, re-writing our ad copy, and really understanding what features customers will pay for.

Your Customer is Always Right

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I’ve heard the phrase “Your Customers is Always Right” over and over again. I thought I understood what that phrase meant. You know… give the customer what they want, but it wasn’t until last week that I actually conceptualized it. This is my short story on my realization.

At Flying Cart we decided to launch features based on repeat customer support questions. If we keep getting the same questions we aren’t doing our job well, we need to make our product work the way our customers think it’s going to work.

Make Your Product Work How Your Customers Think It Should Work {tweet}

Here are two changes we made:

1. If the customer upgrades while on their free trial – they remain on the free trial. Before, customers would get charged the full price when they upgraded.

2. Only authorize the customers credit card for $0. Previously we were authorizing the credit card for the full amount of the package ($9.99/mo) – this led a $9.99 authorize being displayed on the customers credit card and in most cases it looked like a charge (not an authorization). This led to tons of customer phone calls and emails asking why they were charged.

It Is All About What They Want, Not What You Want

The way to make sure that the customer always wins is to find the win-win scenario.  I resisted the change because it seemed like lost revenue, but I needed to test that.  In fact, since launching this feature we have seen an increase in upgrades and a reduction in customer support emails – everyone wins!  If I hadn’t have been willing to test what customers were telling me, I would have be missing out on upgrades, and they wouldn’t be as happy.

Here is why I think we have seen an increase in upgrades. Our sweet sales copy:
“Upgrade Today for Free and enjoy all the features now! – You won’t be charged your new rate for another 3 weeks!”

Do you have a great story about “The Customer is Always Right”. Please, let me know in the comments – I’d love to include it in an updated version of this post (full credit will be given).

3-5 years

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Starting at the day you first come up with your business idea to the day you start making real money will probably take 3-5 years.

Getting your team together, understanding where customers live, and building your customers dream product takes time. Since you know this you shouldn’t immediately pivot (change your idea) because you’re not making money. Make sure you have at least reached out to 50 potential customers before making any assessments on wether your business idea is a good one or not.

Pivoting is not reasonable unless you have disproven your initial assumptions. {tweet}

Only Pivot If It Brings You More Customers

I’m all for pivoting when you learn that your customers are willing to buy X and you are currently selling Y. However, since open source frameworks make it so easy to completely scrap your web product and start from scratch every 3 months I see a lot of people “pivoting” with a brand new idea quickly.

The problem with working on new ideas is you will never become an expert in your market. You will only learn how to dominate a market after years of market research and product development for a specific type of customer.

If you give your business 3-5 years here is what you will uncover:
1. How your customers think
2. What your customers actually need
3. Where your customers live
4. How to reach your customers
5. How to charge your customers the amount they are willing to pay

Motivation Is All You Have

Changing your idea in 3 month cycles will completely drain you, your team, and will completely kill any vision you had. Having a vision for a business is a precious thing. They only come every few decades.. and that is if you’re lucky. Don’t ever lose your vision. Once you have it hold on to it as long as you can. Don’t let anyone convince you to do anything else not even investors, friends, or family members. A vision helps you stay motivated and motivation is all you have when you are starting a business.

The Best Businesses Teach

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I had the opportunity to write a sweet guest blog post on the amazing Kissmetrics blog. I go into detail on how to build a trustworthy brand over the internet by teaching your customers. This blog post is very detailed going over examples of how top internet brands teach and tactics they use to grow their customer base. Check out the post here.

Short Term Vision

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Short term vision is extremely important to me. I’m one of those people that gets distracted and discouraged quickly. The only thing that keeps me focused is if I know I have  paying customers waiting for me. The longer the customer list I create the better I get at staying focused on actually building out my product. It is a constant reminder that people are waiting to use my product and give me money.

Short term vision helps me decide what features I should spend time on. For example last week we were deciding whether we should add sorting functionality. We decided to add this after our launch. We have customers that need our core functionality today.

Short Term Vision helps me pay me server fees. I need 15 paying customers to break even on my server costs.

I have big plans on what our long term vision is but I can’t afford to think about it.

Short term vision helps you launch your product, quit your day job, find your first paying customers, and establish the foundation for your business… so you can one day execute your long term vision!

Do Groupon Like a Marketing Pro

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Groupon can do wonders for your business if you do it right. Here is how you can do a daily deal special like a marketing pro and see some profit in the long run.

Step 1: Do you need to do a Groupon?

If you already have a ton of customers and can’t handle anymore. Don’t do a Groupon. Do a Groupon if you need more customers.

Step 2: Remind yourself why you are doing this

You are doing this to get repeat new customers. Repeat new customers will help you grow your business. The way you get repeat customers is by providing a great product and amazing service.

Step 3: Ask All Your Employees

Ask yourself and the people you work with if they are ready to handle a ton of new customers. Give them a warning that the next few weeks will require a little extra work from their end and you appreciate it. This is important because you don’t want your employees to treat the customer like crap and have your online reviews go down. See the graphic below:

Step 4: Cap the Amount You Sell

Only allow a certain amount of Groupons to be sold. The Daily Deal sales guy will try to make you do an unlimited amount but that is what he is trained to do. Cap the amount you can handle. My suggestion is figure out the number of new customers you can handle in a 14 day period and double that.

If you make your cap amount to be unlimited, you and your team will be overwhelmed and won’t be able to provide great service devaluing your business reputation. Worst of all this will drive business away in the long run.

If Groupon pushes you to sell more than you should go to another daily deal competitor like LivingSocial, JuiceInThecity, or the hundreds of other competitors.

Step 5: Train Your Employees to Upsell and Be Nice

A. Treat daily deal members really nicely. They are customers you NEED to come in again.
B. At the end of your service with the customer. Ask if they have had a positive experience and to do you a personal favor and review your service on Google Maps, Yelp, or Foursquare.

* Almost all new restaurants I checkout are through Yelp and Google Maps. You can really get a ton of positive reviews with a Daily Deal burst and this can help you find new customers in the long term.

C. Remind the customer that you are a small business just getting things off the ground, so if they have any friends or family that would be interested in your service you would be happy to offer them a 10% discount.

I also encourage sending a personal “Thank You” email at night with a direct link to your business on Yelp and Google Maps.

Step 6: Stay Organized and Force Repetition with Email Addresses

Add all the email addresses from the daily deal into a email newsletter service like mailchimp or iContact. Send out monthly updates with a coupon (something small like $1 off or free 15 minute consultation). Remind the customer that you still exist and greatly value their business. One service I’ve seen people use and like is MobManager to help keep their daily deal customers organized.

50% of your users will unsubscribe from your newsletters, be okay with that and keep plugging away.

Step 7: Enjoy Your New Repeat Customers

Congrats on the new business you deserved it!

Are there any steps that I missed or things that could greatly help a positive outcome for businesses doing a Daily Deal special? Please, let me know in the comments.

Subscriptions vs. Advertising – “Reddit Gold” Success

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reddit gold

Exactly one year ago Reddit launched a subscription revenue stream called “Reddit Gold”. You can pay $3.99/mo for extra features and a special trophy next to your username.

Some Background

Reddit is a thriving community site where users can vote up (and vote down) news articles, images, and videos. The homepage consists of the top links found around the web that is changing constantly based on users votes.

Reddit was struggling a year ago

They were one of the biggest sites on the internet (top 500) and they weren’t able to keep their site up – they needed cash for servers and engineering talent badly!

Reddit Gold was Born

Instead of blasting their users with take-over advertisements they charged their community money (a la Reddit Gold) for extra perks on the site! This turned out to be a major success by bringing in much needed cash.

Here is a great quote from one of the Reddit team members:

Today we know that the reddit gold program turned out to be a huge success. We used the cash infusion to buy a raft of new servers, which (by great, dumb luck) came online just in time for the Digg implosion. The new capacity allowed us to ride this tidal wave instead of getting crushed by it. – Raldi

Checkout their explanation of why you should subscribe to Reddit Gold:

What do I get for joining?
We plan to continually add features over time. Right now we’re offering:

  • A trophy on your userpage
  • The ability to turn off sidebar ads, sponsored links, both, or neither
  • The option of seeing twice as many comments at once without having to click “load more comments”
  • New comment highlighting: see what’s been posted since the last time you visited a thread
  • Friends with Benefits™ — you can add notes to your friends to help you keep track of them all
  • Access to a super-secret members-only community that may or may not exist
  • A thank-you note

Notice how it’s nothing fancy just a few extra feature additions.

Proof: Don’t Be Afraid to Charge

If your users love your site, a very small fraction of them will pay you and it might turn out to be much more significant than your advertising revenue.

What do you think of this move? Do you know of any community based sites that should launch a subscription option? Please let me know in the comments below.

Learn from Google+. Copy First, Innovate Second

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Instead of reinventing social networking from the ground up, Google+ just copied the best qualities of all the other popular social networks, which is why it’s so amazing and gaining traction so quickly.

Here are some things that I’ve noticed they copied:

Facebook’s Layout

Everyone is used to Facebook’s layout. So why not lower the learning barrier by making the user interface the same?

Facebook’s Likes

Google noticed that users really loved Facebook’s “Like” feature. Leaving a comment is a lot of work but allowing people to easily give you feedback with a click of a button incentivizes more status updates. Google copied the “Like” with a “+1” which functions identically.

Twitter’s Retweeting and Tumblr’s Reblogging 

Who doesn’t love a reblog or a retweet? Google made it super simple to share your friends status messages with your followers.

Twitter Followers 

It’s pretty cool when you can get an inside look at what your favorite American Idol is having for breakfast. Google makes following a possibility (something you can’t do on Faceb00k). This allows a one-to-many relationship and opens up the amount of connections you can have.

Quora’s Notifications

All top social networks (Quora, LinkedIn, Facebook) do whatever it takes to show you notifications. Google went to the extreme on this. You get updates at the top bar of all Google properties (Google.com, Google Reader, Gmail, etc) if you are signed in, and they also email you updates.

Color’s Nearby Tab

Google knew that early on peoples newsfeed would be pretty empty since most people would have less than 10 connections when starting out. So they adopted Color’s idea, which is to show you what people near you are posting. This allows you to feel an instant sense of community and engages you right away.

I’m not bashing Google here by any means. I love Google+ and I think they made a smart move by just going with what already works. Once they reach their 25M+ users next week, like PC Magazine predicts, then they can innovate like crazy and change the world.

Update: Awesome comment on Hacker News to this post:

I want to point out that so many companies get the “copy first” part right, but never get around to the “innovate later” part. Copy first is becomming a mantra. Facebook was a copy of The Face Book, in fact. The reason facebook is what it is is that they did get around to innovating later. The reason there’s no competition for the iPod is that the competition never got around to innovating (or in MSFT’s case, got around to it way too late.) – econgeeker