Marketing without Risk

The websites that generated all the original hype about internet marketing like Amazon.com and LastMinute.com had one major factor in common - huge marketing budgets to establish a consumer franchise. Many investors had serious doubts whether the companies would ever turn a profit. Now they have succeeded, we can learn from their experience.

The justification for the size of the initial investment was 'first mover advantage', the need to occupy the market sector before a competitor.  An alternative strategy was pursued by Friends Reunited who found themselves with a successful business almost by accident - but they had the advantage that there was no well established traditional competition either.

All three companies used the internet to launch businesses that would not have been possible without the new technology. I applaud their success. Marketing theorists have long claimed that market leaders are inherently more profitable than lesser competitors. But, is it true?

I believe the internet has radically changed the opportunities for small companies. So long as you do not want to build a global business in 5 years, you can grow more profitably without risk.  By reducing the cost of finding new customers, and serving them to their satisfaction, the internet provides an opportunity to fracture 'standardised' markets into multiple niches. So long as you define that niche carefully and don't step out of it without proper preparation, the small business can be leaders in their particular field with all the cost benefits that implies.

Most small businesses have very little access to capital and, if they are going to grow, must do so from their internally generated resources. Equally most business have a multitude of competitors offering very similar products or services.

Each business is unique in its customer base and in the people administering it. That then must be the starting point for marketing. Keep your existing customers happy to generate repeat business and referrals.  If you do that, then you have an immediate understanding of what new similar customers want and the basis for proving your product claims to them. Since so few businesses actually concentrate on this in practice, it is always possible to find someone else's dissatisfied customer. And searches on the internet prove someone is at least interested in a new supplier - otherwise they would not be searching.

Your protection against your competitors depends on their level of satisfaction with you. If your customer hears a fantastic offer from your competitor but is happy with you as a supplier, he will normally ask you first for a similar deal. That enables you to monitor competition through the eyes of your customers.

So long as you win more new customers than you lose old ones, your business will grow. Your profitability will be affected by the relative proportion of new to repeat business because Marketing Gurus say it typically costs about 6 times more to win a new customer than to gain repeat business from one who already knows you.

So concentrate on pleasing your existing customers. When you want new ones, ask me to help!

Stephen Orr