3 Secrets of Stealth Market Research
Those willing to tread unconventional paths in search of information can steal a march on the competition. Here are some techniques.
by Christopher M. Knight [December 13, 1999]
Note: NSI has pulled the following services since this article was published. The method is no longer available to marketeers.
The WHOIS database?managed primarily by Network Solutions, Inc. (NSI)?is where all of the domain names for .com/.net/.org are stored. Today, we're going to unveil some of the cool ways you can leverage this tool to your marketing advantage.
The Big WHOIS Secret
Would you like to be able to find a list of the domain names your local competitor is hosting? Here's a nifty procedure that until now was coveted as a secret weapon by the few that knew how to use the advanced WHOIS tool. It's as simple as 1, 2, 3 . . . 4.
Do a WHOIS lookup on your competitor's primary domain name.
Do a WHOIS lookup on their primary DNS server, located at the bottom of the domain record.
Find the hostname of the DNS server. It will usually end in -HST
Do a WHOIS lookup on the hostname of the primary DNS server with the word server before it. Example: WHOIS server [insert hostname]-HST
NSI's WHOIS lookup tool will spill out the first 50 records found. Granted it's not the entire database, but it's 50 hot leads for your sales team to follow up on today.
IP Block Walk-Ups
Walking your competitor's C blocks is also a fun strategy to gather competitive intelligence. As you probably know, a C block contains 255 IP addresses. Your goal is to run the above WHOIS Secret to find a cross section of your competitor's domains, and then do an NSLOOKUPs on the domain names to find the IP equivalents. NSLOOKUP is a tool that will give you the IP address of a domain name or vice versa.
Example: Prodigy.com has an IP address of 207.115.62.74, and it's reasonable to assume that they have full control of the 207.115.62 IP address block.
Once you have compiled a list of every C block of 255 IP addresses that your competitor controls, you can go get an IP walk-up scanning utility, such as Ipswitch, Inc.'s WS_Ping ProPack. This will allow you to scan an IP block range. If your competitor has reverse DNS on and they are doing Websites the old way, where each Website gets its own IP address, you just got a whole party pack of information to get your Web-design/hosting sales team busy this month.
After you have every Website domain name of your competitor that you can collect, have your ISPs marketing admin do individual WHOIS lookups, to get name, address, phone and contact information into a contact list database or spreadsheet.
The Front-Door Secret any of your competitors have online directories of their Web-design or hosting clients. Surf it, do WHOIS lookups on each domain name you find there, and create a marketing database of your competitor's clients.
At any given time, you can be pretty sure that not all Web-design or hosting clients will be 100 percent satisfied with their ISP. That is when they will remember that other ISP (you) who has been sending them snail mail letters and postcard invitations to do business with you. [Read Chris Knight's Drip Marketing for ways to unobtrusively keep your message in front of "prospects" such as the customers of competitors.]
A Thought On Ethics, Integrity & Etiquette Is this ethical? Yes it is. All is fair in love and competition. If you think your competitors are not doing this against you, think again.
I would offer two bits of advice from using the above stealth research strategies:
Don't make your initial contact with your competitors' clients by email. Always make contact via telephone or snail mail first. Only after you have made an initial contact is it okay to email them.
Don't tell everyone you know about this article, and don't brag that you know about this technology, because it'll be used against you.
Market Planning: Getting it Right (Part 1)
For ISPs in particular, a robust, detailed marketing plan isn't a luxury; it's a requirement.
by Kevin Beauchamp [May 21, 1999]
You've spent months honing the numbers in your business plan, tweaking each paragraph so it spells out perfectly everything your company is about. So?when you hand your crown jewel over to that venture capitalist you've been courting for the past few weeks, what are the first two areas of the plan they'll look over? Probably the two areas you've spent the least amount of time on: Management and Marketing.
It's tragic how many good business plans get stuck with a poor management team, or even worse, a poorly written or poorly thought-out marketing plan. Entrepreneurial-minded engineers are great at making things work; writing that new code that streamlines some archaic process and revolutionizes the way everyone works and plays on the Net. But when it comes to marketing the business, let's face it, most of us couldn't market our way out of wet paper bag.
My experience has been that engineers do not typically make good marketing people?and God knows you don't want me trying to configure your DNS server. Your team should include a good marketing person with some technical knowledge of your industry. Someone with the skills to shwow and tell the world who and what your company is all about. Such people are worth their weight in Microsoft stock to your company.
For ISPs especially, the marketing section of your business plan is perhaps the single most important aspect of your business's operations and the one section your VC is going to be most interested in.
I recount a conversation early in our ISP's start-up phase when we were approaching several VCs. One of them asked me in that authoritative, point-blank, you're-under-our-microscope, tone of voice that all VC's have, "What makes your ISP different from all the others?" I said, "Our marketing." He paused a moment, seemingly unprepared for this response and then said, "Good answer." We then dove into a lengthy discussion of the marketing plan and never really expanded on the numbers or operation areas. The operational plan for our ISP was all of two pages while the marketing plan encompassed more than thirty.
Even if you're not interested in pursuing VC funding, the marketing plan is going to be crucial to your ISP's success. So, what is the marketing plan supposed to do for your company? Marketing's ultimate goal is to create an environment that generates and maximizes sales. But for truly market-driven companies, the marketing plan will define your products, your territories, your corporate image, and even your customers. To accomplish all of these, your marketing plan must lay out minimum standards, strategies and contingencies for dealing with a variety of market forces. It is here, however, where most of us get lost.
A good example of folks getting lost without a plan is the advent of free ISPs like NetZero. Nearly all ISPs have been caught off guard by this monstrosity as it gobbles up customers by the thousands each day. Most ISP's haven't a clue as to how to deal with such a competitive threat and instead keep going on as if the free ISP didn't exist. 'There's enough room for everyone' the experts quip, hoping they're right. A good marketing plan (written by a savvy marketing person) would spell out just exactly how to deal with such competitors.
The marketing plan must be dynamic?changing with market forces and new information. The more quickly you change and adapt the plan's various models with the market, the more likely you will be able to survive in a volatile market. Compaq is a recent example of a big company that has been slow to adapt its marketing (and pricing) within a rapidly changing environment. Its bottom line suffered and the CEO was summarily fired. Although Compaq makes what is arguably one of the best PC's on the market, relying on premium pricing and positioning appears to be pass?within the consumer markets, and Compaq's bottom line reflected this.
Your company can have an extremely compelling product or service, but if you can't communicate the benefits and show that some kind of market demand exists for your business's services in light of your competitors' services, like Compaq, you will lose the war. Many businesses have come and gone whose products were tremendous but in the end failed to "compete" with their competitors' superior marketing ability. This is nowhere more pronounced than in the ISP industry, where there is certainly no shortage of competitors.
The marketing plan is not just to show a VC you know how to market and make sales. It is in essence a road map of how you will get from point A to point B?and then to point C?with sales figures used as your waypoints. Your marketing plan will be a hands-on, step-by-step road map of what to do next as you progress and grow your company. Just as you would plan expansion with the operational side of the business, adding infrastructure to support the growing customer base, so you need to plan marketing resources around your growing business, expanding into new media, new targeted markets and experimenting with differing campaigns.
For the ISP, a marketing-focused business plan is not a luxury; it is a requirement. While the industry continues to explode around us, just about anyone can make money running an ISP in a slip-shod fashion. We've all seen our competitors at work and most of us started our ISP businesses because we said, "I can do a better job than that!" What will inevitably separate the men from the boys as consolidation encroaches is professionally prepared business planning with an emphasis on strength marketing.
This multi-part series will explore all of the various contents of a hard-hitting marketing plan, what to include, what is likely a waste of time and some insights on how to beat the stuffings out of your competition. While we will explore all of the various aspects of building your marketing plan, keep one thing in mind: No series nor any article or guide can teach you how to use your instincts and inherent savvy to assault your competition. These talents only reside within those very special individuals who have a gift for marketing. When you find one of these people, hold onto them, because the truly good ones are few and far between.
Market Planning?Getting It Right! (Part 2)
In Part 1, we discussed why your business needs a well- thought-out marketing plan. Now we'll begin digging into nuts and bolts of what your marketing plan should contain and how to use that information to build a roadmap for growth.
by Kevin Beauchamp [June 2, 1999]
Like a house, a solid marketing plan begins with a solid foundation or?in this case, good information. Your planning is only as good as the information you put into it. You will need to do some legwork here and some of this data will not be easily collected. I should say that likely 80 percent of the people?managers and executives?who are reading this series will not implement a formal marketing plan like we are building here. The reason for this is time. Building a solid business and marketing plan takes time, and most will not have the time nor inclination to do what it takes to build this right. Take your time and build it slowly if necessary?but do it. A good business planning document can take six months to a year or more to complete as it evolves with your company and the market. But if you are on the 20 percent side of this equation, in the end you will have a powerful weapon and defense against those who show up in the marketplace unarmed and without a clue as to how to deal with your Internet juggernaut.
Market Definition and Analysis
Before you leap into which media you will be purchasing as part of your marketing, the strategic marketing plan first outlines the overall industry you intend to carry out your marketing within. It defines the battlefield if you will: who the enemies are, what their strengths and weaknesses are; what type of 'terrain' or financial, political, and industrial environments are likely to be encountered; also referred to in general terms as "demographics"; and who and what your targeted goals will be within these demographic areas.
For all intents and purposes, building a marketing campaign is a lot like building a war campaign. There are really few differences. As such, one of the books which I recommend as required reading for anyone about to carry out a serious strategic marketing campaign is Sun Tzu's The Art of War. While this is not a casual read or a "How To" marketing guide, it is a study in war, battle and tactic philosophy which translates directly into marketing strategy. The book's contents are snippets of wisdom from some of China's earliest master generals on which most, if not all, modern warfare is based. The contents are ideas and things about human nature to reflect on and play out in your mind within the marketing milieu. It will bring you some tremendous insights into the hows and whys of strategy for your various marketing campaigns. "Guerilla Marketing" is a term developed, or at least made popular, in the 80's to specifically identify companies engaged in real market warfare?though I confess such tactics have been going on likely since the beginning of time without the label.
"He who excels in conquering his enemies triumphs even before the battle begins." ?Sun Tzu, The Art of War
To begin your battle planning you must create an outline of the entire theater of war, or specifically, your marketplace. The part of your marketing plan seeks to define and verify a consumer demand for your company's services and provide a concise overview of the industry and its background. While this will seem like obvious review, it is nonetheless an important step toward a better understanding your industry.
Write this part of the marketing plan like you'd be writing it for someone who has no knowledge of the industry. True, it can be the most boring part of the market planning process, especially for an operating company. Many times, however, this first step in and of itself will churn up new ideas that never quite made it to the surface of your thoughts before.
The Big Picture
The following outline listing is typical for an ISP's?or any company's?market planning:
Market Definition & Analysis
Industry Analysis
Size
Growth
Structures (like distribution and financial)
Marketing (typical marketing and tactics used)
Customer Profiles
Demographics
Psychographics
Target Markets
Market Segments
Products, Features
Consumer Types
Geographical Location
Seasonal
Competition and Other Influences
Major and Local Players
Products
Organization
Strengths and Weaknesses
Competitive Comparisons Checklist
Competitive Edge
Future Sources of Competition
Other Influences and Risks
Suppliers
Liability
Complimentary Industries
Substitution
Customers
Personnel and Management
Government Regulation
Other Opportunities
Digging Down While many of these outline topics are somewhat self explanatory, we'll explore some inside details as they pertain to an ISP.
The level of detail you put into your Industry Analysis will depend greatly on the size and scope of the market you're going after. It is generally known that the ISP industry is rapidly growing and will continue to do so for several years. As such, an ISP competing for customers on a national scale with a broad "shotgun" advertising approach can probably include a lot less detail than a small ISP operating in a small, heated market with a several competitors. The point is to include enough detail to create a logical understanding, for investors and for management, of who your customers are and why they want the type of services you offer. It will also define who your competition is and why these customers will buy from you instead of them.
Your Customer Profiles will be an important part of your market definition. Research who your customers are and why. Outline your target markets, where and who they are. General demographic surveys are done by many companies and organizations and are available from government agencies and business development groups, usually at low or no cost . The consumer demographics for the ISP industry are very broad, so a lot of detail is probably not necessary here. Do look for the faster growing segments and try to capitalize on them. While most ISPs take the shotgun approach to targeting their marketing, a savvy market planner will also zero in on a handful of growing segments and reap the rewards. Psychographics is merely a step further into demographics and is an attempt to understand the "why" of demographics; ostensibly to interpret, even forecast, changing demographics. Once you can understand the general mindset of the target consumer, the easier it will be to plan for changes in demographics.
Market Segmenting is important for understanding what features about your services customers find appealing, and which customers use your services for these features. You'll break down your market into geographical locations; separate your products feature by feature; look at consumer types; focus on trade journal studies of the industry; and break down other competitive factors. All of this is to help your team and investors understand the basic building blocks of your industry's services, who you serve, and what needs of your customers you fulfill.
Competition and Other Influences takes the straightforward approach toward analyzing your competition, now and in the future. This section looks at their products under a microscope. I recommend a great deal of detail going into this subsection of your market analysis. Pick their products apart, feature by feature; understand how they provide their services. Look closely at their organization?who their people are, how they are organized; what their strengths and weaknesses are. Never underestimate a competitive strength nor overestimate a competitive weakness.
The Competitive Comparisons Checklist also should have as much detail as possible. Honesty is key here: If your company offers some feature or benefit not offered by the competition, include it. But do not be afraid to include your competition's features and benefits that you don't have. For example, if you don't offer 24/7 support, make sure you list that you don't when your competition does. This is an important self evaluation and deluding yourself by intentionally skipping over valued features will only make your analysis less valuable, perhaps even worthless, as business planning tool.
Understanding your Competitive Edge over your competition is important, but again, don't over-estimate yourself here. Often a business will delude itself into a false sense of security because what they think is valuable is really just another feature offered by the competition. A good example of this delusion is the "we're local" mentality. This is not a competitive edge in and of itself. Great personal service, like going to the customer's home and setting up their computer, which is afforded by being local in the area, probably is however. Even so, this buy local mentality didn't stop AOL from building a subscriber base of 17 million. Learn to define what is really a competitive edge and what is really just another feature. A real competitive edge is 1) something that seriously damages your competition's appeal when compared to yours; and 2) is something your competition may not be able to duplicate easily, if at all.
Other Influences and Risks will give you an understanding of what can go wrong. Again, don't delude yourself. Carefully outline with as much detail as possible the caveats of doing business in the ISP industry. There are many, many risks here. Some are obvious like your carrier suddenly going out of business; while others are more cloaked or coming in the near future, as with: Will your customers someday be using a DSL, cable modem or wireless connection instead of your V.90 dial-up? The questions to answer are: how many will switch, when will they switch, and what are you going to do about it now. While there should be a "Risks" section in the Operations part of your overall business planning, go ahead and outline briefly how you plan to deal with any negative influences and marketing risks here.
Finally, Other Opportunities include things like offering free computers, advertising opportunities, long-distance services, and cross-marketing your customer base into other areas unrelated to communications. This is a wide open category that should be fully explored for opportunities.
In our next installment, we'll look at the Marketing Strategy section and the strategies used by many companies to create the one thing we're all looking for?sales!
Market Planning?Getting It Right! (Part 3)
In Part 2, we covered the steps necessary to build the foundation for your market planning. We're now ready to dig into what many call the heart of the marketing plan?your marketing strategy.
by Kevin Beauchamp [June 15, 1999]
The Marketing Strategy
As with any well-built building, a good foundation or market analysis will allow you to construct solid marketing strategies and strengthen your position in the market. A poorly constructed foundation?built with questionable numbers, erroneous data, and other misinformation?can lead to dysfunctional strategies, a cascade of crumbling ad campaigns and ultimate defeat in the marketplace. A well-constructed war campaign is built on good intelligence reports?it is no less important with developing your marketing intelligence.
Marketing strategies go far beyond which media you will use to advertise your products. In fact, advertising is only a single small element in the overall marketing strategy. A solid marketing strategy looks at everything within your company from a marketing perspective?not just the products and services you sell. For instance, defining how your service people interact with customers is part of your marketing strategy. Below are a few of the basic building blocks of marketing strategies. Regrettably, there isn't enough room here to make a full examination of what can go into a solid marketing strategy, but the details we've included here shoud point you in the right direction in building up your ideas.
Positioning Strategy
There are many ways an ISP can position its services within specific demographics to compete more effectively with non-positioned competitors. Consumer customers and business customers are an example of typical product positioning. When was the last time you were able to buy a T1 from AOL? That's right, you can't. AOL has positioned itself strictly as a consumer-focused service. So how does this help a company like AOL succeed, when it eliminates a very profitable segment of the ISP services industry? Simple, they don't have to waste resources on building and defending market share in areas that are not of a primary focus.
Positioning allows you to focus on certain areas within an industry?certain customers or demographics?and intensify your resources and expertise in these areas. If your ISP is like most, you compete in many areas without a strategic position or focus. Doing business without positioning is the military equivalent of dividing your forces among multiple fronts, weakening your ability to take on your enemy with full force in the marketplace. A way many ISPs overcome this shortfall is to create alliances with?or outright buy?companies that have focused themselves and have become well positioned leaders in specific business and demographic areas.
Before you take on a competitor in an arena where they are well entrenched, take the time to analyze their positioning strategy (if one exists) and look for weaknesses that you may be able to exploit. ISPs, by default, will all position themselves geographically, which generally leads to the "buy local" type marketing campaign. A good strategist will be able to parry such psycographical positioning or at least render such positioning moot using other strategies.
Pricing Strategy
As you'd expect, pricing is a strategy used by many companies to compete with one another. Your pricing strategy should not be based on your costs plus profit but rather on your perceived value to the consumer. Assuming you position your services to high-end consumers with top-notch "Nordstrom" service, a price that commands a 30 percent premium over the industry average is a way to effectively deal with low-end providers. Low-end providers wouldn't dare raise their prices for fear of losing their value-minded customers; but without the price increase, they cannot afford of offer the level of service you can. On the flip side, the low-end provider has cut services to the bone in order to survive with value pricing. Both ISPs will still acquire a good many customers because they don't always compete for the exact same customer.
Use caution when developing your pricing strategy. With low end price points like we have in the ISP services business, differences of $5 to $10 are easily overcome with other marketing strategies. I have always maintained that price cutting is a lazy way to compete. There are much more effective ways to bring in new business without mortally wounding your bottom line.
Sales Strategy Also called the distribution strategy, this can be an extremely important issue for an ISP. Sales and distribution options are much less complex for a small ISP operating within a single city or town than they are for a regional or national ISP; the broader the territory, the more complex the sales strategy equation becomes. A key question is: How do we disseminate our sales literature and message to the consumer? Below is a basic outline of typical sales strategies:
Direct Sales
Persons to person sales (your inside or hired sales force)
Direct mail
Customer referrals Indirect Sales
"Extensive" distribution (putting your sign-up CDs in every mass market retailer you can find or running ads on mass media)
"Selective" distribution (putting your CDs in just Circuit City or other electronics retailers or running ads in specific target media)
"Exclusive" distribution (working only with specific retailers, VAR's, dealers and groups or using very specific media)
Okay, so what has this sales strategy stuff got to do with beating the stuffing out of my competition? Quite a lot actually. Aside from the obvious benefits of having a channel partner, sales strategies can provide an open front on which to attack your competition.
Let's say your competition uses a selective distribution strategy with a large area retail chain that is bringing in 20 new customer a day. It is a common military tactic to disrupt enemy alliances, make those alliances your own, even turn their allies against them. No one wants to be selling an inferior product or service and no one wants to be selling for the losing team. By "selling" this large retailer on your superior services you can effectively weaken, even disrupt, your competition's distribution strategy. This is just one example. Keep in mind that such alliances can be tricky to overcome, especially if you're dealing with the "brother-in-law" factor (a family member is involved in the relationship). There is nothing dishonest or immoral about disrupting your competitors' sales allies. It is a time-honored tactic where the consumer becomes the ultimate winner.
Advertising Strategy
There are as many ways to advertise, as there are customers, so I'm not going to get into a media analysis here. Advertising is the vehicle that gets your message out to your targeted audience and it should be designed to ultimately support your sales and campaign strategies. Once you've designed a marketing campaign, advertising becomes the key to getting out the message that you want consumers to hear or read. You've heard the adage that "Doing business without advertising is like winking at a pretty woman in the dark, you know what you're doing but nobody else does." I will tell you that advertising in the absence of a solidly built campaign strategy is like gambling on long odds with your ad dollars. Your advertising should be targeted not just on specific demographics, but on a specific campaign strategy with a specific message. Advertising without a well thought out strategy using a promotion strategy like "We're the best priced ISP in the area," does target a certain customer with a certain message, but it also opens you up to being blindsided by a savvy competitor who has analyzed your marketing (or lack thereof) and can take advantage of your marketing weaknesses.
Promotion Strategy
People often confuse promotion with advertising. The goals of promotion are to inform, persuade, and remind your potential customers of your services and company. Promotion many times goes hand in hand with advertising, but remember, advertising is only the message delivery vehicle, not the message itself. Your promotion strategy is where the rubber meets the road as it were. It is here where you will bring all of your market research to bear on how to best implement strategic marketing campaigns, which advertising vehicles will best deliver your messages for each campaign?all designed to overshadow and outsell your competitors.
Sales Promotions are a basic part of your promotion strategy, designed to gain immediate attention and close sales. Such sales promotions can include: odd media (Goodyear blimp); premium item giveaways (pens, t-shirts, coffee mugs); samples (free time); coupons; consumer trade shows; live presentations (radio stations doing remotes); free gifts (vacations); and other creative ideas that draw the attention of your potential customers. (On a side note here, many businesses confuse sales people with marketing people. They are not the same animal. Marketing's responsibility is to design competitive services and provide tools for making sales. They are the generals of your army, as it were. Sales people are the folks who build relationships and implement the tools to close sales; they are the front-line infantry of your company.)
Public Relations Strategy
PR can be one of the most important aspects of your overall marketing effort and the one area that is relatively inexpensive to implement if done focused and properly in-house. There are many, many books on developing a good PR strategy. In lieu of doing PR in-house, you should hire a good PR firm for your area. I personally recommend a smaller, talented firm who can give your company the most attention for the least amount of cost. Some things just cost money though, and good PR is one of them if you decide to hire this out. Your PR should be there to support specific campaigns as well as work with your overall marketing. It should consist of major sales announcements, press releases, editorial visits, trade shows, customer list management and newsletters, just to name a few.
PR within your market planning will also build your company image. Don't let the market determine your company image; you must establish your image within your market. I have always been amazed at the companies who unknowingly build public images I wouldn't be caught dead with. "Major Dude's Totally Awesome Internet" service is a parody of irresponsibility in the PR arena that hits a little too close to home for many of the ISP's operating today. I've walked into ISP offices that smelled thick of cigarette smoke; some that looked like they were continually under construction and server rooms visible to the public that looked like a scene from a bad 'B' sci-fi film.
To some extent, PR will also determine your hiring policies for sales and customer service staff. It will determine office cleanliness and anything else about your company that touches the customer directly. If your offices are based in a run-down part of town, good PR will likely have you moving to more professional space. The point is to take control of your image and to not let poor PR controls determine how the public sees your company. Be aware also of the dangers of "spin". An ISP company I did some image work for a few years back advertises a service mark I developed for them which proclaims that they have "worldclass service." At the time they were the best ISP in their area. Now, however, they're one of the worst. If you really don't have top-notch service and you say you do - your company will ultimately look foolish as word spreads.
Customer Service Strategy
The final strategy we'll touch on here is customer service. For some reason everyone thinks they have awesome customer service when in fact they just have typical or even poor customer service. It is easy for owners of ISPs to become delusional about their customer service in part because I believe they continue to grow and gain new customers in a rapidly expanding market. High churn (more than 6 - 8 percent) is a wake-up call to these ISPs. Your market research should reveal what others in your industry are doing to implement solid, customer-friendly service policies. Policies for things like refunds, spam intolerance, bad debts, modem ratios, busies, payment methods, contacting service representatives, etc., all should be part of your customer service strategy.
The third deadly sin of The 14 Deadly sins of Mindspring is: "Make internal procedures easy on us, even if it means negatively affecting or inconveniencing the customer." If you implement a policy or procedure that is such a transgression; you should re-think your policy and makes changes that better suit the customer and not your company.
Next time we'll look at solidifying your market planning into a budget and how this budgeting works into your overall business planning.
Market Planning - Getting It Right! (Part 4)
With marketing?as with military warfare?even the most brilliant strategy will fail unless supported by adequate funding and other numeric foundations.
by Kevin Beauchamp [July 7, 1999]
Marketing Financials
Over the past few weeks we've looked at the major aspects of building a winning marketing plan and how the various aspects of your market planning work together?with research as the foundation, focusing your marketing with positioning and segmenting, and then promotion through strategic innovation. The final installment of this series, Marketing Financials, integrates your market planning into the whole of your business planning, with sales forecasts, and the hard numbers your marketing will generate.
Campaigns
Before we look at the nuts and bolts of your marketing financials we'll explore briefly your campaign and how this will tie into the business planning. Marketing campaigns should be limited, specific exercises; not ongoing, open-ended activities. Your budget is not unlimited, your campaign should not be either. This does not mean that you can't continue with a successful campaign, it means that you should bring the particular campaign to a close at some point and reorganize it to maintain its freshness in the market and within its advertising vehicles.
Outlining your various campaigns in the business planning can be included in the appendix section as supplementary information or as a separate campaign plan. Keeping older campaign models around for reference is a good idea and can help stir ideas later on.
A campaign can be as simple as a quick series of informational ads on the radio for a few days or as complex as incorporating a PR and media blitz with print ads, brochures, and live presentations over the course of several months. Build the campaign prior to its launch; budget and if necessary tweak the campaign during its execution. Nothing is really set in stone here other than your ability to track the results of what worked and what didn't.
Funding the Campaign Quite frankly, all marketshare is purchased. One way or the other, whether you buy customers outright or coax them to your camp with a winning campaign or strategy, you are buying customers. The key, obviously, is to spend as few dollars as possible for each customer and the use the resources of these new customers to build on prior successful campaigns.
Available marketing capital will be the initial basis of building any marketing campaign. Again, falling back to Sun Tzu, you must have money to run a war. Don't expect to gain any serious ground in marketshare without capital. The larger your theater, the longer your supply lines, the more money you will need to implement and maintain your campaigns and to build and keep marketshare. As your marketing resources are expended you need to make sure that you are gaining the most marketshare for the least amount of resources expended. If you find that a campaign is not performing to expectations, it's imperative that you discover the real reasons why (not assumed reasons) and then reorganize the campaign so that you do not make the same mistake(s) again.
While all of this may appear to some to be elementary, you'd be surprised at the number of management and marketing people who will implement a campaign, gain a certain number of new customers for resources expended and then 'assume and accept' that the results were the height of marketing performance. The point is to never be satisfied with your results. You can always do better than before. If a campaign fails to meet expectations, don't unnecessarily abandon it; but find out why it failed and then make adjustments.
Sales Forecasts For each individual campaign, you will want to draw up pro `forma financial statements that forecast with limited detail how many customers you expect to win with the campaign and ultimately what the final customer acquisition cost will be. Many companies do forecasts based on such things as: sales by period; sales by product or service sold; by customer group; and local and overall marketshare for their territories or industry. Your campaign should be focused in all of these areas if possible. It will give you a clearer understanding of which services your customers are more interested in, where and who they are. It is a necessary focusing tool.
If, for instance, customers flock to your dial-up services but seem to all but ignore your hosting offers, you might want to focus almost completely on dial-up and ignore hosting. Focusing your marketing resources on specific areas of your business strengthens your positioning and builds your company's marketshare in those areas. It is always tempting to think, "Well dial-up is doing well enough, let's put more marketing resources into hosting." Analyze first. No amount of marketing will efficiently sell a bad product. Focus on your strengths and tweak your weaknesses until they become strengths, but don't waste a lot of resources on dog products that don't really perform for your company.
If you don't have at least some actual historic numbers to begin your sales forecasts with, you will need to make industry-supported educated guesses for your forecasts. Keep your guesses conservative; no one wants to see pie-in-the-sky numbers that are unrealistic and therefore useless.
So, how many customers will you hope to acquire in your campaign? You should know this. In a theater of battle your objectives are clearly laid out as to what the goals are and how you expect to attain them. Your marketing should be also. Running a campaign without any kind of clear-cut goal is to market under na?et?without an understanding of the dynamics and demographics of your market. Imagine a general going into battle with the enemy without knowing who or where the enemy is. Does he say, "You know, I don't know anything about this territory I'm about to assault; I sure hope there isn't much resistance here." Of course not and neither should you.
Budgeting by Objective
Your campaign's funds should be based the number of customers you hope to acquire, based on realistic industry estimates or on past performance numbers. If you hope to achieve a market penetration of 100 subscribers with a particular campaign over 4 weeks and the typical industry acquisition cost for such a type of campaign is $50 per sub, you should budget $5,000 for the campaign.
Be realistic here with your forecasts. It is a mistake to assume you can acquire 100 new customers in 4 weeks with a $1,000 campaign if the industry average acquisition cost is hovering around $50 per sub. I am not saying it cannot be done, but look at the media and promotion method you are running and see what others in your industry have done with similar campaigns. If all you have for a marketing budget is $1,000, expect 20 new subs for the period. It is a good rule of thumb to use for initial projections.
Many smaller ISP's don't spend $5,000 all year on marketing let alone a in a 4 week period. This is perfectly acceptable if you have a strategy or campaign that reduces your customer acquisition cost to next to nothing. Granted, if you know that a type of promotion coupled with a type of media is less than effective, then by all means don't use it. The point here is to establish a written performance of the campaign and then use these numbers to increase, improve, and tweak a campaign to boost its performance in the future.
Time is another factor to consider when going after marketshare. If you spend only $5,000 a year on promotion and advertising in your marketing, the chances are your company grows fairly slowly. Accelerated promotion spending over a specific period under a specific tested campaign should yield the same results only more quickly. Keep in mind the operative phrase here is "under a specific tested campaign." Blindly throwing ad dollars at an ad vehicle under an untested campaign in hopes of gaining new customers is a waste. The whole reason for building a winning marketing campaign is to acquire the most marketshare in the least amount of time. $5,000 a year might work okay for now. In the future, as the growth for ISP services decreases and the industry matures; that budget will not be able to defend you against an overpowering competitor who has a real budget.
Building on Successes Naturally as your campaigns' returns improve and succeed, you should have more resources to expand them into other markets, product segments or other areas to grow your customer base. Plowing these resources back into the company will generate a geometrically progressive marketing budget. But how much do you allocate for marketing campaigns?
As your initial campaigns take off, you will need to decide from the beginning how much you're willing or able to budget for marketing as a percentage of gross sales or as a flat dollar amount for a given period. I personally prefer the percentage of gross sales per month formula. It automatically grows your marketing budget in a uniform manner and keeps you tied to a reasonable marketing budget based on past successful performance. Your specific business situation will mostly determine your actual amounts or percentages.
When building a pricing model for your services, avoid distinguishing the marketing budget percentage as something that is flexible. If you budget 10 percent of gross sales for marketing each month, you should set that amount aside into a marketing account, just as if you were paying a carrier bill or other cost of goods. Too many companies when they become strapped, axe the marketing budget first. This is the last budget you should be axing because it is the one budget that can likely dig you out of your revenue crunch through the addition of new sales. Frankly, if your ISP company cannot afford to maintain a 10 percent marketing budget you should look at your operations model or other expenses and make some serious adjustments. For many ISPs just committing to the 10 percent marketing plan and buying the advertising, even if your promotion is so-so, will generate all kinds of new sales volume you didn't have before.
Good market planning is the key to a successful ISP business?or any business for that matter. If you plan your marketing properly, taking the time to understand your competitors, your customers, and how your services solve problems and fulfill needs, you cannot help but build an exceptional company.
Grown-Up Marketing
AOL?love 'em or hate 'em, they've always been a marketing-driven organization. It's gotten them where they are, and you can learn from their example. by Doug McDonald Director, Affiliate Programs, The TUCOWS Network courtesy of HowToSell.net [January 28, 2000]
Say what you like, but I have always been a staunch supporter of AOL. Please don't throw anything at me. As a competitor I've cursed their existence at times, but buried deep inside I've always harbored a little piece of envy at their successes. As such, I was in an odd way happy to hear the news of their recent merger. I am not crazy, let me explain.
I remember when AOL was an "also ran" in the emerging online arena. CompuServe was the undisputed leader and seemingly had a stranglehold on the business. Now they are a division of AOL.
Over the years AOL has done many things right. One of them is that they have never let the things they have done wrong get in the way of their ultimate agendas and goals. The announcements of recent weeks are a testament to this perseverance. Through tenacity and an overwhelming desire to succeed, they have.
Funny how that works.
To a very large number of the Internet users, America Online is the Internet. This can be attributed to the outstanding job they have done building their brand. Granted, having the size of marketing budget that they are blessed with has been a key factor. Still, the reality still remains that no amount of money can overcome poor execution, it can only magnify failures. I am glad I did not have a bigger budget to really blow up a couple of the mistakes I have made over the last few years.
It's not just about money
Next time you find yourself wishing you had access to even a small percentage of AOL's marketing war chest, you might want to examine the processes surrounding the effective use of that money. Understanding how it is that they not only decide how to spend those dollars but also the methods employed to accurately determine their individual successes and shortfalls is an important step towards ensuring that the funds will be available again in the future.
Marketing and Sales initiatives that do not track and monitor effectiveness are a failure. Whether they generate incremental revenues or not, without a means to quantify their effectiveness, how can they be justified? How many effective marketing and sales initiatives have been canceled because there was no evidence of their success? How many hundreds or thousands of customers have you not gotten because of this? If you had done your research up front, or if you had been tracking the responses, you would know the answer. More importantly perhaps you would have never implemented the program in the first place.
Know where you're starting Just prior to penning this, I was doing some market analysis and projections for a niche product. As a result, statistically I now know what is needed in order to meet and exceed the minimum revenue objectives.
How many customers do you need to comfortably profit from $1,000 in advertising? As a base figure, that becomes your minimum requirement. The profit level that you are comfortable with is for no one else but you to determine, so you alone need to determine it. With this knowledge in hand you can begin to separate the wheat from the chaff but only if you know what your acquisition rate is.
Keep track of where you're going Tracking? There are many explanations and descriptions, but I look at it as the place where art and science meet. Basic tracking is really very easy. It is not always easy to conceal but it is simple to implement. Here are a couple basic methods for the online world.
The Offer Code? Made famous by direct mailers and then later by the television industry it is generally used in a form as simple as; "If you call within the next 10 minutes and mention the special offer code you can get a second for half price." In collecting your new clients you will need to be a little more sophisticated. Instead of specific offer codes I suggest that you use a specific phone number. Instead of pointing all of your sales calls to your primary reception number, establish a series of revolving telephone numbers to apply to new offers. Using your telephone systems tracking capabilities you can then monitor the numbers of calls it generates. Once the program is underway, you can then start comparing your sales figures to your telephone logs and determine your call/sale ratio to better plan staffing for that and future programs.
Registration Codes? For CD offers, specific registration codes can be created and attached to the CDs you hand out. Many people blindly distribute hundreds or even thousands of CDs without knowing how many new customers actually installed them or how customers actually stayed beyond the trial period. If you don't use online signup functionality then setting the homepage of these new users to a onetime refresh page is another easy way to count the installation percentage. The best model however is to sign them up with a specific set of registration codes so that you can track them throughout their time with you and get a better picture of their true use of your services.
These systems do take some time to plan, implement, and monitor, but without something like this in place, how will you know how effective your ideas really are.
When I was young(er) I believed that the grass was always greener on the other side of the fence. Now I know that the grass is really greenest only where it is properly tended to.
Sincerely, Doug McDonald
Avoiding Addled Ad Campaigns
What is the the most common mistake some businesses make when building a direct-mail advertising campaign? This lesson is best taught by the errors of other's ways. by Brock Henderson [September 5, 2001]
I am often asked what types of advertisements work best for an ISP business? But I am never asked which ads are the worst. I'm going to tell you anyway.
The most common mistake businesses make when it comes to advertising is that they don't test it. If you aren't testing your advertising for your ISP business, how do you know if it's doing as well as you'd like? You test your equipment to be sure it's operating at peak performance, right? But you don't test your advertising?
Test your advertising. Test your advertising repeatedly. Test your advertising constantly. Always be testing.
Polling isn't testing
You might think you have the best advertisement ever crafted for an ISP and that nothing should be changed. After all, you painfully toiled over every word. You asked co-workers their opinions. You asked subordinates what they thought. You may have even asked your spouse. The result of your polling completely convinces you that your advertisement is the greatest of all time. Surely, this is the advertisement that will get those phones ringing?
Fine. Let's say your advertisement does produce a few sales. But ask yourself this?did your advertisement do as much as it could to bring business your way? How will you know unless you test the advertisement?
For example, let's look at a very basic offer that some ISPs advertise?one month of free Internet access. Is "One month free" the best way to communicate your offer? Or are there other ways of saying the same thing that could produce better results?
Consider changing your offer from "One month free" to "Two months for the price of one" or "$0 first month." Each phrase is the same offer simply worded differently. Changing the key phrase can make a big difference in how well your advertisement is perceived by your target audience?but you wouldn't know this, unless you tested these different phrases in different advertisements.
Golden rules
There are a few important rules you should follow when testing your ISPs advertising campaigns. The first is simple?never test more than element at a time.
If you change two elements in your advertisement, you have no way of knowing which adjustment improved your results. Even worse?perhaps the first adjusted element of your advertisement could have brought a lot of sales your way, but the second change undid the positive impact of the first. Why risk failing your test? You don't spend money to lose money, do you?
Which brings us to a very common and understandable objection to testing your ISPs advertising?it costs money. Remember, not testing your advertising campaigns will cost you even more money over the long-term. Testing your advertising is like preparing an advertisement for success. You can keep the cost of testing down by:
Testing your advertisements in small batches.
Testing your advertisements in select areas.
Testing your advertisements among select media.
The extra time and money you spend on testing your ISPs advertising messages will produce more sales. Producing more sales means more profit. Testing your advertisements is spending money to make money. Now, that's makes more sense, doesn't it?
Stage test
Let's walk through the stages of testing of a direct mail piece for your ISP. First let's test the statements encompassing your basic offer:
First Month Free
Two Months for the Price of One and
$0 First Month
Note that we have one offer mentioning money?in some communities a stated dollar amount will pull more than either of the other offers. But you don't know if it is true for your service area unless you test it.
Next, identify a small target area as the testing zone of your direct mail advertisement. There's no sense in sending a mailing to everyone?remember, this is a test.
Here is where you break out the calendar. Abstain from doing any direct mail advertising for one month. During this time, keep track of the number of phone calls received (inquiries), and the number of sales generated from your select testing zone. This will provide you with a baseline?a reference point for measuring the results of your direct mail campaigns.
Yes, you could just as easily review sales made during your baseline month, but we're also measuring inquiries. Without a proper benchmark you have no accurate way of knowing how your direct mail campaigns are performing. Sales alone don't tell the entire story. Some advertisements generate a lot of inquiries, but not a lot of sales?you need to know if your direct mail campaign is producing interest or producing revenue. The rest is simple:
During the second month, send the "First Month Free" offer to your target area. Track the number of phone calls received and the number of sales generated.
During the third month, send the "Two Months for the Price of One" offer to your target area. Track the number of phone calls received and the number of sales generated.
Finally, send the "$0 First Month" offer to your target area during the fourth month. Track the number of phone calls received and the number of sales generated.
By now, you should have a simple spreadsheet that shows you which direct mail piece generated the most calls and which generated the most sales. For our purposes, let's assume that the second offer?Two Months for the Price of One?generated the most sales. This is an offer that makes sense to utilize in future mailings.
Now that you have the offer that works, it's time to see if it works for everyone. If your first offer was to a mid-income residential zone, then this time you want to test your offer with upper income residents.
Repeat months two, three, and four to determine if the same offer works as well with one demographic target as another?results may very. If there isn't any difference and "Two Months for the Price of One" produces the best sales from both groups, then you're ready to begin a large-scale direct mail campaign with complete confidence that your advertisement produces sales for your ISP business.
Still testing
Now you can test other elements of your advertising message in different media. To test your advertisement in print media, buy space only in one publication at a time to determine which newspaper or magazine produces the best results. Next, see if color helps land more sales. Or change your graphic, test different sections within the same publication?but always keep track of your results.
Testing your advertising is an on-going process. Don't be complacent. You should always be testing your advertising. Be aggressive and be patient. You are on your way to producing some great advertising and avoiding the biggest advertising mistake that many businesses make.
ISP Acquisition Strategies
Aquisition is a tried and true strategy for growing an ISP?but it's not as easy as it may sound. Here are some tips from the pros.
by Christopher Knight [October 5, 1999]
First, a definition:
ISP Acquisition Department - An individual or a team responsible for identifying promising acquisition targets. Some ISP acquisition departments then proceed to negotiate finished deals, other simply pass on recommendations to the CEO for evaluation.
Today's article dives into strategies used by ISP acquisition departments to achieve win-win deals for their firms in terms of subscriber-base and ISP-asset acquisitions.
Setting reasonable expectations
David Shires has aided in dozens of ISP acquisitions and is one of the folks in charge of acquisitions for Voyager.net, Inc. In a recent conversation, Shires made it clear that the expectations of the owner of the ISP his firm is evaluating are a key to determining whether a good deal can be arranged or not.
Shires pointed out that in many instances, the ISP owner has never sold a business before and needs to be educated as to how the acquisition will or can take place. By bringing the owner up to speed, he is often able to help shape realistic expectations, improving the chances of a successful buy/sell relationship.
Identifying good targets
A good starting point for acquisition is creating a highly detailed profile of what your ideal acquisition would look like. This might include?
Size of the ISP
Its geographic location
Product price points
Growth and churn rate
Asking price
When you actually begin negotiations with a potential acquiree, you'll want to examine financial statements for the year to date and the past 3 to 5 years, plus any other critical success indicators of the ISP.
Tip: If you hand the acquisition target a list of 50 simple questions to help you do your due-diligence work, and it takes them 3 to 4 weeks to provide the data, you can reasonably conclude that the ISP is not overly organized. This may be symptomatic of how they've been running their business.
Bigger is better Large ISPs often make ideal acquisition candidates because?
You're acquiring more subscribers per deal negotiated.
The larger the ISP, the more likely it is that the business will be further evolved, with a better back office and more highly developed customer management.
Their POPs are more likely to 100 percent digital, which saves you the cost of upgrading analog lines.
Less is more
Cliff Bryant of MindSpring Enterprises, Inc. has aided in many of Mindspring's ISP acquisitions. The deals Bryant likes best are ISPs who have Internet access, website design or hosting, possibly own a PC shop, and are just looking to sell off their ISP dialup division, so that they can return to their core business. He's leery of deals where the ISP is selling out lock, stock, and barrel. He believes that firms that are just spinning off their ISP division will care more about their reputation after the sale and will be of greater assistance during the conversion process, compared with the ISP who is cashing out with a clean exit.
Bryant had this advice for ISPs who want to get maximum valuation for their companies: "Run your business like it will be a viable business. Keep your accounting and customer database in great shape, continually improve and position your business as if you were going to run it for ever. If you run your business like you're just waiting to get out, you put yourself in a weak position."
On the same topic Shires said, "If [the ISP Acquisition target] is red and bleeding, sometimes we can't save it . . . so we let them go. We do an incredible amount of pre-acquisition research and walk away from quite a few deals. A bad company at a good price is still a bad deal."
Warning signs
Any of the following situations is a potential red flag for your acquisition process?
The ISP paints a good picture, but when you visit their resellers or talk with their customers, the real stories about how they handle their customers don't measure up.
The geographical reach doesn't map well with your existing POP infrastructure. Providing service to your new subscribers may incur cost more than you expected.
Product price points are substantially different-especially where the acquiree's price is much lower. If its subscribers are paying $5 to $8 less than you charge, chances are high that you will experience a high level of churn as you attempt to convert them to your higher price point.
The ISP owner has a hard time providing historical data, and/or when you ask probing questions, you get conflicting answers on key areas of the business.
When your potential target wants more than market price for his or her subscriber base, and won't budge.
Your acquisition target is pressuring you to move quickly. This can be a sign that they've run out of cash or have skeletons in the closet that they've not told you.
If you and your network aren't ready to scale to meet the labor, network, and, bandwidth, demands that the acquisition will create. It may be better to chill and wait till you are ready.
Finding ISPs to Buy
Networking, networking, networking is the name of the game here. You'll need to mingle with ISPs at every available opportunity to get into the know and flow as to who is on the verge of selling and which ISPs might make perfect targets for your firm.
The many ISP conferences are great opportunities to meet a concentrated group of ISPs. This includes national/regional events, such as Penton's ISPcon, ISP/C's ISP Forum, IIR's The ISP Forum, The ISP Business Forum, The ISP Summit, and various state or local gatherings of ISPs.
3 Secrets of Stealth Market Research
Those willing to tread unconventional paths in search of information can steal a march on the competition. Here are some techniques.
by Christopher M. Knight [December 13, 1999]
Note: NSI has pulled the following services since this article was published. The method is no longer available to marketeers.
The WHOIS database?managed primarily by Network Solutions, Inc. (NSI)?is where all of the domain names for .com/.net/.org are stored. Today, we're going to unveil some of the cool ways you can leverage this tool to your marketing advantage.
The Big WHOIS Secret
Would you like to be able to find a list of the domain names your local competitor is hosting? Here's a nifty procedure that until now was coveted as a secret weapon by the few that knew how to use the advanced WHOIS tool. It's as simple as 1, 2, 3 . . . 4.
Do a WHOIS lookup on your competitor's primary domain name.
Do a WHOIS lookup on their primary DNS server, located at the bottom of the domain record.
Find the hostname of the DNS server. It will usually end in -HST
Do a WHOIS lookup on the hostname of the primary DNS server with the word server before it. Example: WHOIS server [insert hostname]-HST
NSI's WHOIS lookup tool will spill out the first 50 records found. Granted it's not the entire database, but it's 50 hot leads for your sales team to follow up on today.
IP Block Walk-Ups
Walking your competitor's C blocks is also a fun strategy to gather competitive intelligence. As you probably know, a C block contains 255 IP addresses. Your goal is to run the above WHOIS Secret to find a cross section of your competitor's domains, and then do an NSLOOKUPs on the domain names to find the IP equivalents. NSLOOKUP is a tool that will give you the IP address of a domain name or vice versa.
Example: Prodigy.com has an IP address of 207.115.62.74, and it's reasonable to assume that they have full control of the 207.115.62 IP address block.
Once you have compiled a list of every C block of 255 IP addresses that your competitor controls, you can go get an IP walk-up scanning utility, such as Ipswitch, Inc.'s WS_Ping ProPack. This will allow you to scan an IP block range. If your competitor has reverse DNS on and they are doing Websites the old way, where each Website gets its own IP address, you just got a whole party pack of information to get your Web-design/hosting sales team busy this month.
After you have every Website domain name of your competitor that you can collect, have your ISPs marketing admin do individual WHOIS lookups, to get name, address, phone and contact information into a contact list database or spreadsheet.
The Front-Door Secret any of your competitors have online directories of their Web-design or hosting clients. Surf it, do WHOIS lookups on each domain name you find there, and create a marketing database of your competitor's clients.
At any given time, you can be pretty sure that not all Web-design or hosting clients will be 100 percent satisfied with their ISP. That is when they will remember that other ISP (you) who has been sending them snail mail letters and postcard invitations to do business with you. [Read Chris Knight's Drip Marketing for ways to unobtrusively keep your message in front of "prospects" such as the customers of competitors.]
A Thought On Ethics, Integrity & Etiquette Is this ethical? Yes it is. All is fair in love and competition. If you think your competitors are not doing this against you, think again.
I would offer two bits of advice from using the above stealth research strategies:
Don't make your initial contact with your competitors' clients by email. Always make contact via telephone or snail mail first. Only after you have made an initial contact is it okay to email them.
Don't tell everyone you know about this article, and don't brag that you know about this technology, because it'll be used against you.
Market Planning: Getting it Right (Part 1)
For ISPs in particular, a robust, detailed marketing plan isn't a luxury; it's a requirement.
by Kevin Beauchamp [May 21, 1999]
You've spent months honing the numbers in your business plan, tweaking each paragraph so it spells out perfectly everything your company is about. So?when you hand your crown jewel over to that venture capitalist you've been courting for the past few weeks, what are the first two areas of the plan they'll look over? Probably the two areas you've spent the least amount of time on: Management and Marketing.
It's tragic how many good business plans get stuck with a poor management team, or even worse, a poorly written or poorly thought-out marketing plan. Entrepreneurial-minded engineers are great at making things work; writing that new code that streamlines some archaic process and revolutionizes the way everyone works and plays on the Net. But when it comes to marketing the business, let's face it, most of us couldn't market our way out of wet paper bag.
My experience has been that engineers do not typically make good marketing people?and God knows you don't want me trying to configure your DNS server. Your team should include a good marketing person with some technical knowledge of your industry. Someone with the skills to shwow and tell the world who and what your company is all about. Such people are worth their weight in Microsoft stock to your company.
For ISPs especially, the marketing section of your business plan is perhaps the single most important aspect of your business's operations and the one section your VC is going to be most interested in.
I recount a conversation early in our ISP's start-up phase when we were approaching several VCs. One of them asked me in that authoritative, point-blank, you're-under-our-microscope, tone of voice that all VC's have, "What makes your ISP different from all the others?" I said, "Our marketing." He paused a moment, seemingly unprepared for this response and then said, "Good answer." We then dove into a lengthy discussion of the marketing plan and never really expanded on the numbers or operation areas. The operational plan for our ISP was all of two pages while the marketing plan encompassed more than thirty.
Even if you're not interested in pursuing VC funding, the marketing plan is going to be crucial to your ISP's success. So, what is the marketing plan supposed to do for your company? Marketing's ultimate goal is to create an environment that generates and maximizes sales. But for truly market-driven companies, the marketing plan will define your products, your territories, your corporate image, and even your customers. To accomplish all of these, your marketing plan must lay out minimum standards, strategies and contingencies for dealing with a variety of market forces. It is here, however, where most of us get lost.
A good example of folks getting lost without a plan is the advent of free ISPs like NetZero. Nearly all ISPs have been caught off guard by this monstrosity as it gobbles up customers by the thousands each day. Most ISP's haven't a clue as to how to deal with such a competitive threat and instead keep going on as if the free ISP didn't exist. 'There's enough room for everyone' the experts quip, hoping they're right. A good marketing plan (written by a savvy marketing person) would spell out just exactly how to deal with such competitors.
The marketing plan must be dynamic?changing with market forces and new information. The more quickly you change and adapt the plan's various models with the market, the more likely you will be able to survive in a volatile market. Compaq is a recent example of a big company that has been slow to adapt its marketing (and pricing) within a rapidly changing environment. Its bottom line suffered and the CEO was summarily fired. Although Compaq makes what is arguably one of the best PC's on the market, relying on premium pricing and positioning appears to be pass?within the consumer markets, and Compaq's bottom line reflected this.
Your company can have an extremely compelling product or service, but if you can't communicate the benefits and show that some kind of market demand exists for your business's services in light of your competitors' services, like Compaq, you will lose the war. Many businesses have come and gone whose products were tremendous but in the end failed to "compete" with their competitors' superior marketing ability. This is nowhere more pronounced than in the ISP industry, where there is certainly no shortage of competitors.
The marketing plan is not just to show a VC you know how to market and make sales. It is in essence a road map of how you will get from point A to point B?and then to point C?with sales figures used as your waypoints. Your marketing plan will be a hands-on, step-by-step road map of what to do next as you progress and grow your company. Just as you would plan expansion with the operational side of the business, adding infrastructure to support the growing customer base, so you need to plan marketing resources around your growing business, expanding into new media, new targeted markets and experimenting with differing campaigns.
For the ISP, a marketing-focused business plan is not a luxury; it is a requirement. While the industry continues to explode around us, just about anyone can make money running an ISP in a slip-shod fashion. We've all seen our competitors at work and most of us started our ISP businesses because we said, "I can do a better job than that!" What will inevitably separate the men from the boys as consolidation encroaches is professionally prepared business planning with an emphasis on strength marketing.
This multi-part series will explore all of the various contents of a hard-hitting marketing plan, what to include, what is likely a waste of time and some insights on how to beat the stuffings out of your competition. While we will explore all of the various aspects of building your marketing plan, keep one thing in mind: No series nor any article or guide can teach you how to use your instincts and inherent savvy to assault your competition. These talents only reside within those very special individuals who have a gift for marketing. When you find one of these people, hold onto them, because the truly good ones are few and far between.
Market Planning?Getting It Right! (Part 2)
In Part 1, we discussed why your business needs a well- thought-out marketing plan. Now we'll begin digging into nuts and bolts of what your marketing plan should contain and how to use that information to build a roadmap for growth.
by Kevin Beauchamp [June 2, 1999]
Like a house, a solid marketing plan begins with a solid foundation or?in this case, good information. Your planning is only as good as the information you put into it. You will need to do some legwork here and some of this data will not be easily collected. I should say that likely 80 percent of the people?managers and executives?who are reading this series will not implement a formal marketing plan like we are building here. The reason for this is time. Building a solid business and marketing plan takes time, and most will not have the time nor inclination to do what it takes to build this right. Take your time and build it slowly if necessary?but do it. A good business planning document can take six months to a year or more to complete as it evolves with your company and the market. But if you are on the 20 percent side of this equation, in the end you will have a powerful weapon and defense against those who show up in the marketplace unarmed and without a clue as to how to deal with your Internet juggernaut.
Market Definition and Analysis
Before you leap into which media you will be purchasing as part of your marketing, the strategic marketing plan first outlines the overall industry you intend to carry out your marketing within. It defines the battlefield if you will: who the enemies are, what their strengths and weaknesses are; what type of 'terrain' or financial, political, and industrial environments are likely to be encountered; also referred to in general terms as "demographics"; and who and what your targeted goals will be within these demographic areas.
For all intents and purposes, building a marketing campaign is a lot like building a war campaign. There are really few differences. As such, one of the books which I recommend as required reading for anyone about to carry out a serious strategic marketing campaign is Sun Tzu's The Art of War. While this is not a casual read or a "How To" marketing guide, it is a study in war, battle and tactic philosophy which translates directly into marketing strategy. The book's contents are snippets of wisdom from some of China's earliest master generals on which most, if not all, modern warfare is based. The contents are ideas and things about human nature to reflect on and play out in your mind within the marketing milieu. It will bring you some tremendous insights into the hows and whys of strategy for your various marketing campaigns. "Guerilla Marketing" is a term developed, or at least made popular, in the 80's to specifically identify companies engaged in real market warfare?though I confess such tactics have been going on likely since the beginning of time without the label.
"He who excels in conquering his enemies triumphs even before the battle begins." ?Sun Tzu, The Art of War
To begin your battle planning you must create an outline of the entire theater of war, or specifically, your marketplace. The part of your marketing plan seeks to define and verify a consumer demand for your company's services and provide a concise overview of the industry and its background. While this will seem like obvious review, it is nonetheless an important step toward a better understanding your industry.
Write this part of the marketing plan like you'd be writing it for someone who has no knowledge of the industry. True, it can be the most boring part of the market planning process, especially for an operating company. Many times, however, this first step in and of itself will churn up new ideas that never quite made it to the surface of your thoughts before.
The Big Picture
The following outline listing is typical for an ISP's?or any company's?market planning:
Market Definition & Analysis
Industry Analysis
Size
Growth
Structures (like distribution and financial)
Marketing (typical marketing and tactics used)
Customer Profiles
Demographics
Psychographics
Target Markets
Market Segments
Products, Features
Consumer Types
Geographical Location
Seasonal
Competition and Other Influences
Major and Local Players
Products
Organization
Strengths and Weaknesses
Competitive Comparisons Checklist
Competitive Edge
Future Sources of Competition
Other Influences and Risks
Suppliers
Liability
Complimentary Industries
Substitution
Customers
Personnel and Management
Government Regulation
Other Opportunities
Digging Down While many of these outline topics are somewhat self explanatory, we'll explore some inside details as they pertain to an ISP.
The level of detail you put into your Industry Analysis will depend greatly on the size and scope of the market you're going after. It is generally known that the ISP industry is rapidly growing and will continue to do so for several years. As such, an ISP competing for customers on a national scale with a broad "shotgun" advertising approach can probably include a lot less detail than a small ISP operating in a small, heated market with a several competitors. The point is to include enough detail to create a logical understanding, for investors and for management, of who your customers are and why they want the type of services you offer. It will also define who your competition is and why these customers will buy from you instead of them.
Your Customer Profiles will be an important part of your market definition. Research who your customers are and why. Outline your target markets, where and who they are. General demographic surveys are done by many companies and organizations and are available from government agencies and business development groups, usually at low or no cost . The consumer demographics for the ISP industry are very broad, so a lot of detail is probably not necessary here. Do look for the faster growing segments and try to capitalize on them. While most ISPs take the shotgun approach to targeting their marketing, a savvy market planner will also zero in on a handful of growing segments and reap the rewards. Psychographics is merely a step further into demographics and is an attempt to understand the "why" of demographics; ostensibly to interpret, even forecast, changing demographics. Once you can understand the general mindset of the target consumer, the easier it will be to plan for changes in demographics.
Market Segmenting is important for understanding what features about your services customers find appealing, and which customers use your services for these features. You'll break down your market into geographical locations; separate your products feature by feature; look at consumer types; focus on trade journal studies of the industry; and break down other competitive factors. All of this is to help your team and investors understand the basic building blocks of your industry's services, who you serve, and what needs of your customers you fulfill.
Competition and Other Influences takes the straightforward approach toward analyzing your competition, now and in the future. This section looks at their products under a microscope. I recommend a great deal of detail going into this subsection of your market analysis. Pick their products apart, feature by feature; understand how they provide their services. Look closely at their organization?who their people are, how they are organized; what their strengths and weaknesses are. Never underestimate a competitive strength nor overestimate a competitive weakness.
The Competitive Comparisons Checklist also should have as much detail as possible. Honesty is key here: If your company offers some feature or benefit not offered by the competition, include it. But do not be afraid to include your competition's features and benefits that you don't have. For example, if you don't offer 24/7 support, make sure you list that you don't when your competition does. This is an important self evaluation and deluding yourself by intentionally skipping over valued features will only make your analysis less valuable, perhaps even worthless, as business planning tool.
Understanding your Competitive Edge over your competition is important, but again, don't over-estimate yourself here. Often a business will delude itself into a false sense of security because what they think is valuable is really just another feature offered by the competition. A good example of this delusion is the "we're local" mentality. This is not a competitive edge in and of itself. Great personal service, like going to the customer's home and setting up their computer, which is afforded by being local in the area, probably is however. Even so, this buy local mentality didn't stop AOL from building a subscriber base of 17 million. Learn to define what is really a competitive edge and what is really just another feature. A real competitive edge is 1) something that seriously damages your competition's appeal when compared to yours; and 2) is something your competition may not be able to duplicate easily, if at all.
Other Influences and Risks will give you an understanding of what can go wrong. Again, don't delude yourself. Carefully outline with as much detail as possible the caveats of doing business in the ISP industry. There are many, many risks here. Some are obvious like your carrier suddenly going out of business; while others are more cloaked or coming in the near future, as with: Will your customers someday be using a DSL, cable modem or wireless connection instead of your V.90 dial-up? The questions to answer are: how many will switch, when will they switch, and what are you going to do about it now. While there should be a "Risks" section in the Operations part of your overall business planning, go ahead and outline briefly how you plan to deal with any negative influences and marketing risks here.
Finally, Other Opportunities include things like offering free computers, advertising opportunities, long-distance services, and cross-marketing your customer base into other areas unrelated to communications. This is a wide open category that should be fully explored for opportunities.
In our next installment, we'll look at the Marketing Strategy section and the strategies used by many companies to create the one thing we're all looking for?sales!
Market Planning?Getting It Right! (Part 3)
In Part 2, we covered the steps necessary to build the foundation for your market planning. We're now ready to dig into what many call the heart of the marketing plan?your marketing strategy.
by Kevin Beauchamp [June 15, 1999]
The Marketing Strategy
As with any well-built building, a good foundation or market analysis will allow you to construct solid marketing strategies and strengthen your position in the market. A poorly constructed foundation?built with questionable numbers, erroneous data, and other misinformation?can lead to dysfunctional strategies, a cascade of crumbling ad campaigns and ultimate defeat in the marketplace. A well-constructed war campaign is built on good intelligence reports?it is no less important with developing your marketing intelligence.
Marketing strategies go far beyond which media you will use to advertise your products. In fact, advertising is only a single small element in the overall marketing strategy. A solid marketing strategy looks at everything within your company from a marketing perspective?not just the products and services you sell. For instance, defining how your service people interact with customers is part of your marketing strategy. Below are a few of the basic building blocks of marketing strategies. Regrettably, there isn't enough room here to make a full examination of what can go into a solid marketing strategy, but the details we've included here shoud point you in the right direction in building up your ideas.
Positioning Strategy
There are many ways an ISP can position its services within specific demographics to compete more effectively with non-positioned competitors. Consumer customers and business customers are an example of typical product positioning. When was the last time you were able to buy a T1 from AOL? That's right, you can't. AOL has positioned itself strictly as a consumer-focused service. So how does this help a company like AOL succeed, when it eliminates a very profitable segment of the ISP services industry? Simple, they don't have to waste resources on building and defending market share in areas that are not of a primary focus.
Positioning allows you to focus on certain areas within an industry?certain customers or demographics?and intensify your resources and expertise in these areas. If your ISP is like most, you compete in many areas without a strategic position or focus. Doing business without positioning is the military equivalent of dividing your forces among multiple fronts, weakening your ability to take on your enemy with full force in the marketplace. A way many ISPs overcome this shortfall is to create alliances with?or outright buy?companies that have focused themselves and have become well positioned leaders in specific business and demographic areas.
Before you take on a competitor in an arena where they are well entrenched, take the time to analyze their positioning strategy (if one exists) and look for weaknesses that you may be able to exploit. ISPs, by default, will all position themselves geographically, which generally leads to the "buy local" type marketing campaign. A good strategist will be able to parry such psycographical positioning or at least render such positioning moot using other strategies.
Pricing Strategy
As you'd expect, pricing is a strategy used by many companies to compete with one another. Your pricing strategy should not be based on your costs plus profit but rather on your perceived value to the consumer. Assuming you position your services to high-end consumers with top-notch "Nordstrom" service, a price that commands a 30 percent premium over the industry average is a way to effectively deal with low-end providers. Low-end providers wouldn't dare raise their prices for fear of losing their value-minded customers; but without the price increase, they cannot afford of offer the level of service you can. On the flip side, the low-end provider has cut services to the bone in order to survive with value pricing. Both ISPs will still acquire a good many customers because they don't always compete for the exact same customer.
Use caution when developing your pricing strategy. With low end price points like we have in the ISP services business, differences of $5 to $10 are easily overcome with other marketing strategies. I have always maintained that price cutting is a lazy way to compete. There are much more effective ways to bring in new business without mortally wounding your bottom line.
Sales Strategy Also called the distribution strategy, this can be an extremely important issue for an ISP. Sales and distribution options are much less complex for a small ISP operating within a single city or town than they are for a regional or national ISP; the broader the territory, the more complex the sales strategy equation becomes. A key question is: How do we disseminate our sales literature and message to the consumer? Below is a basic outline of typical sales strategies:
Direct Sales
Persons to person sales (your inside or hired sales force)
Direct mail
Customer referrals Indirect Sales
"Extensive" distribution (putting your sign-up CDs in every mass market retailer you can find or running ads on mass media)
"Selective" distribution (putting your CDs in just Circuit City or other electronics retailers or running ads in specific target media)
"Exclusive" distribution (working only with specific retailers, VAR's, dealers and groups or using very specific media)
Okay, so what has this sales strategy stuff got to do with beating the stuffing out of my competition? Quite a lot actually. Aside from the obvious benefits of having a channel partner, sales strategies can provide an open front on which to attack your competition.
Let's say your competition uses a selective distribution strategy with a large area retail chain that is bringing in 20 new customer a day. It is a common military tactic to disrupt enemy alliances, make those alliances your own, even turn their allies against them. No one wants to be selling an inferior product or service and no one wants to be selling for the losing team. By "selling" this large retailer on your superior services you can effectively weaken, even disrupt, your competition's distribution strategy. This is just one example. Keep in mind that such alliances can be tricky to overcome, especially if you're dealing with the "brother-in-law" factor (a family member is involved in the relationship). There is nothing dishonest or immoral about disrupting your competitors' sales allies. It is a time-honored tactic where the consumer becomes the ultimate winner.
Advertising Strategy
There are as many ways to advertise, as there are customers, so I'm not going to get into a media analysis here. Advertising is the vehicle that gets your message out to your targeted audience and it should be designed to ultimately support your sales and campaign strategies. Once you've designed a marketing campaign, advertising becomes the key to getting out the message that you want consumers to hear or read. You've heard the adage that "Doing business without advertising is like winking at a pretty woman in the dark, you know what you're doing but nobody else does." I will tell you that advertising in the absence of a solidly built campaign strategy is like gambling on long odds with your ad dollars. Your advertising should be targeted not just on specific demographics, but on a specific campaign strategy with a specific message. Advertising without a well thought out strategy using a promotion strategy like "We're the best priced ISP in the area," does target a certain customer with a certain message, but it also opens you up to being blindsided by a savvy competitor who has analyzed your marketing (or lack thereof) and can take advantage of your marketing weaknesses.
Promotion Strategy
People often confuse promotion with advertising. The goals of promotion are to inform, persuade, and remind your potential customers of your services and company. Promotion many times goes hand in hand with advertising, but remember, advertising is only the message delivery vehicle, not the message itself. Your promotion strategy is where the rubber meets the road as it were. It is here where you will bring all of your market research to bear on how to best implement strategic marketing campaigns, which advertising vehicles will best deliver your messages for each campaign?all designed to overshadow and outsell your competitors.
Sales Promotions are a basic part of your promotion strategy, designed to gain immediate attention and close sales. Such sales promotions can include: odd media (Goodyear blimp); premium item giveaways (pens, t-shirts, coffee mugs); samples (free time); coupons; consumer trade shows; live presentations (radio stations doing remotes); free gifts (vacations); and other creative ideas that draw the attention of your potential customers. (On a side note here, many businesses confuse sales people with marketing people. They are not the same animal. Marketing's responsibility is to design competitive services and provide tools for making sales. They are the generals of your army, as it were. Sales people are the folks who build relationships and implement the tools to close sales; they are the front-line infantry of your company.)
Public Relations Strategy
PR can be one of the most important aspects of your overall marketing effort and the one area that is relatively inexpensive to implement if done focused and properly in-house. There are many, many books on developing a good PR strategy. In lieu of doing PR in-house, you should hire a good PR firm for your area. I personally recommend a smaller, talented firm who can give your company the most attention for the least amount of cost. Some things just cost money though, and good PR is one of them if you decide to hire this out. Your PR should be there to support specific campaigns as well as work with your overall marketing. It should consist of major sales announcements, press releases, editorial visits, trade shows, customer list management and newsletters, just to name a few.
PR within your market planning will also build your company image. Don't let the market determine your company image; you must establish your image within your market. I have always been amazed at the companies who unknowingly build public images I wouldn't be caught dead with. "Major Dude's Totally Awesome Internet" service is a parody of irresponsibility in the PR arena that hits a little too close to home for many of the ISP's operating today. I've walked into ISP offices that smelled thick of cigarette smoke; some that looked like they were continually under construction and server rooms visible to the public that looked like a scene from a bad 'B' sci-fi film.
To some extent, PR will also determine your hiring policies for sales and customer service staff. It will determine office cleanliness and anything else about your company that touches the customer directly. If your offices are based in a run-down part of town, good PR will likely have you moving to more professional space. The point is to take control of your image and to not let poor PR controls determine how the public sees your company. Be aware also of the dangers of "spin". An ISP company I did some image work for a few years back advertises a service mark I developed for them which proclaims that they have "worldclass service." At the time they were the best ISP in their area. Now, however, they're one of the worst. If you really don't have top-notch service and you say you do - your company will ultimately look foolish as word spreads.
Customer Service Strategy
The final strategy we'll touch on here is customer service. For some reason everyone thinks they have awesome customer service when in fact they just have typical or even poor customer service. It is easy for owners of ISPs to become delusional about their customer service in part because I believe they continue to grow and gain new customers in a rapidly expanding market. High churn (more than 6 - 8 percent) is a wake-up call to these ISPs. Your market research should reveal what others in your industry are doing to implement solid, customer-friendly service policies. Policies for things like refunds, spam intolerance, bad debts, modem ratios, busies, payment methods, contacting service representatives, etc., all should be part of your customer service strategy.
The third deadly sin of The 14 Deadly sins of Mindspring is: "Make internal procedures easy on us, even if it means negatively affecting or inconveniencing the customer." If you implement a policy or procedure that is such a transgression; you should re-think your policy and makes changes that better suit the customer and not your company.
Next time we'll look at solidifying your market planning into a budget and how this budgeting works into your overall business planning.
Market Planning - Getting It Right! (Part 4)
With marketing?as with military warfare?even the most brilliant strategy will fail unless supported by adequate funding and other numeric foundations.
by Kevin Beauchamp [July 7, 1999]
Marketing Financials
Over the past few weeks we've looked at the major aspects of building a winning marketing plan and how the various aspects of your market planning work together?with research as the foundation, focusing your marketing with positioning and segmenting, and then promotion through strategic innovation. The final installment of this series, Marketing Financials, integrates your market planning into the whole of your business planning, with sales forecasts, and the hard numbers your marketing will generate.
Campaigns
Before we look at the nuts and bolts of your marketing financials we'll explore briefly your campaign and how this will tie into the business planning. Marketing campaigns should be limited, specific exercises; not ongoing, open-ended activities. Your budget is not unlimited, your campaign should not be either. This does not mean that you can't continue with a successful campaign, it means that you should bring the particular campaign to a close at some point and reorganize it to maintain its freshness in the market and within its advertising vehicles.
Outlining your various campaigns in the business planning can be included in the appendix section as supplementary information or as a separate campaign plan. Keeping older campaign models around for reference is a good idea and can help stir ideas later on.
A campaign can be as simple as a quick series of informational ads on the radio for a few days or as complex as incorporating a PR and media blitz with print ads, brochures, and live presentations over the course of several months. Build the campaign prior to its launch; budget and if necessary tweak the campaign during its execution. Nothing is really set in stone here other than your ability to track the results of what worked and what didn't.
Funding the Campaign Quite frankly, all marketshare is purchased. One way or the other, whether you buy customers outright or coax them to your camp with a winning campaign or strategy, you are buying customers. The key, obviously, is to spend as few dollars as possible for each customer and the use the resources of these new customers to build on prior successful campaigns.
Available marketing capital will be the initial basis of building any marketing campaign. Again, falling back to Sun Tzu, you must have money to run a war. Don't expect to gain any serious ground in marketshare without capital. The larger your theater, the longer your supply lines, the more money you will need to implement and maintain your campaigns and to build and keep marketshare. As your marketing resources are expended you need to make sure that you are gaining the most marketshare for the least amount of resources expended. If you find that a campaign is not performing to expectations, it's imperative that you discover the real reasons why (not assumed reasons) and then reorganize the campaign so that you do not make the same mistake(s) again.
While all of this may appear to some to be elementary, you'd be surprised at the number of management and marketing people who will implement a campaign, gain a certain number of new customers for resources expended and then 'assume and accept' that the results were the height of marketing performance. The point is to never be satisfied with your results. You can always do better than before. If a campaign fails to meet expectations, don't unnecessarily abandon it; but find out why it failed and then make adjustments.
Sales Forecasts For each individual campaign, you will want to draw up pro `forma financial statements that forecast with limited detail how many customers you expect to win with the campaign and ultimately what the final customer acquisition cost will be. Many companies do forecasts based on such things as: sales by period; sales by product or service sold; by customer group; and local and overall marketshare for their territories or industry. Your campaign should be focused in all of these areas if possible. It will give you a clearer understanding of which services your customers are more interested in, where and who they are. It is a necessary focusing tool.
If, for instance, customers flock to your dial-up services but seem to all but ignore your hosting offers, you might want to focus almost completely on dial-up and ignore hosting. Focusing your marketing resources on specific areas of your business strengthens your positioning and builds your company's marketshare in those areas. It is always tempting to think, "Well dial-up is doing well enough, let's put more marketing resources into hosting." Analyze first. No amount of marketing will efficiently sell a bad product. Focus on your strengths and tweak your weaknesses until they become strengths, but don't waste a lot of resources on dog products that don't really perform for your company.
If you don't have at least some actual historic numbers to begin your sales forecasts with, you will need to make industry-supported educated guesses for your forecasts. Keep your guesses conservative; no one wants to see pie-in-the-sky numbers that are unrealistic and therefore useless.
So, how many customers will you hope to acquire in your campaign? You should know this. In a theater of battle your objectives are clearly laid out as to what the goals are and how you expect to attain them. Your marketing should be also. Running a campaign without any kind of clear-cut goal is to market under na?et?without an understanding of the dynamics and demographics of your market. Imagine a general going into battle with the enemy without knowing who or where the enemy is. Does he say, "You know, I don't know anything about this territory I'm about to assault; I sure hope there isn't much resistance here." Of course not and neither should you.
Budgeting by Objective
Your campaign's funds should be based the number of customers you hope to acquire, based on realistic industry estimates or on past performance numbers. If you hope to achieve a market penetration of 100 subscribers with a particular campaign over 4 weeks and the typical industry acquisition cost for such a type of campaign is $50 per sub, you should budget $5,000 for the campaign.
Be realistic here with your forecasts. It is a mistake to assume you can acquire 100 new customers in 4 weeks with a $1,000 campaign if the industry average acquisition cost is hovering around $50 per sub. I am not saying it cannot be done, but look at the media and promotion method you are running and see what others in your industry have done with similar campaigns. If all you have for a marketing budget is $1,000, expect 20 new subs for the period. It is a good rule of thumb to use for initial projections.
Many smaller ISP's don't spend $5,000 all year on marketing let alone a in a 4 week period. This is perfectly acceptable if you have a strategy or campaign that reduces your customer acquisition cost to next to nothing. Granted, if you know that a type of promotion coupled with a type of media is less than effective, then by all means don't use it. The point here is to establish a written performance of the campaign and then use these numbers to increase, improve, and tweak a campaign to boost its performance in the future.
Time is another factor to consider when going after marketshare. If you spend only $5,000 a year on promotion and advertising in your marketing, the chances are your company grows fairly slowly. Accelerated promotion spending over a specific period under a specific tested campaign should yield the same results only more quickly. Keep in mind the operative phrase here is "under a specific tested campaign." Blindly throwing ad dollars at an ad vehicle under an untested campaign in hopes of gaining new customers is a waste. The whole reason for building a winning marketing campaign is to acquire the most marketshare in the least amount of time. $5,000 a year might work okay for now. In the future, as the growth for ISP services decreases and the industry matures; that budget will not be able to defend you against an overpowering competitor who has a real budget.
Building on Successes Naturally as your campaigns' returns improve and succeed, you should have more resources to expand them into other markets, product segments or other areas to grow your customer base. Plowing these resources back into the company will generate a geometrically progressive marketing budget. But how much do you allocate for marketing campaigns?
As your initial campaigns take off, you will need to decide from the beginning how much you're willing or able to budget for marketing as a percentage of gross sales or as a flat dollar amount for a given period. I personally prefer the percentage of gross sales per month formula. It automatically grows your marketing budget in a uniform manner and keeps you tied to a reasonable marketing budget based on past successful performance. Your specific business situation will mostly determine your actual amounts or percentages.
When building a pricing model for your services, avoid distinguishing the marketing budget percentage as something that is flexible. If you budget 10 percent of gross sales for marketing each month, you should set that amount aside into a marketing account, just as if you were paying a carrier bill or other cost of goods. Too many companies when they become strapped, axe the marketing budget first. This is the last budget you should be axing because it is the one budget that can likely dig you out of your revenue crunch through the addition of new sales. Frankly, if your ISP company cannot afford to maintain a 10 percent marketing budget you should look at your operations model or other expenses and make some serious adjustments. For many ISPs just committing to the 10 percent marketing plan and buying the advertising, even if your promotion is so-so, will generate all kinds of new sales volume you didn't have before.
Good market planning is the key to a successful ISP business?or any business for that matter. If you plan your marketing properly, taking the time to understand your competitors, your customers, and how your services solve problems and fulfill needs, you cannot help but build an exceptional company.
Grown-Up Marketing
AOL?love 'em or hate 'em, they've always been a marketing-driven organization. It's gotten them where they are, and you can learn from their example. by Doug McDonald Director, Affiliate Programs, The TUCOWS Network courtesy of HowToSell.net [January 28, 2000]
Say what you like, but I have always been a staunch supporter of AOL. Please don't throw anything at me. As a competitor I've cursed their existence at times, but buried deep inside I've always harbored a little piece of envy at their successes. As such, I was in an odd way happy to hear the news of their recent merger. I am not crazy, let me explain.
I remember when AOL was an "also ran" in the emerging online arena. CompuServe was the undisputed leader and seemingly had a stranglehold on the business. Now they are a division of AOL.
Over the years AOL has done many things right. One of them is that they have never let the things they have done wrong get in the way of their ultimate agendas and goals. The announcements of recent weeks are a testament to this perseverance. Through tenacity and an overwhelming desire to succeed, they have.
Funny how that works.
To a very large number of the Internet users, America Online is the Internet. This can be attributed to the outstanding job they have done building their brand. Granted, having the size of marketing budget that they are blessed with has been a key factor. Still, the reality still remains that no amount of money can overcome poor execution, it can only magnify failures. I am glad I did not have a bigger budget to really blow up a couple of the mistakes I have made over the last few years.
It's not just about money
Next time you find yourself wishing you had access to even a small percentage of AOL's marketing war chest, you might want to examine the processes surrounding the effective use of that money. Understanding how it is that they not only decide how to spend those dollars but also the methods employed to accurately determine their individual successes and shortfalls is an important step towards ensuring that the funds will be available again in the future.
Marketing and Sales initiatives that do not track and monitor effectiveness are a failure. Whether they generate incremental revenues or not, without a means to quantify their effectiveness, how can they be justified? How many effective marketing and sales initiatives have been canceled because there was no evidence of their success? How many hundreds or thousands of customers have you not gotten because of this? If you had done your research up front, or if you had been tracking the responses, you would know the answer. More importantly perhaps you would have never implemented the program in the first place.
Know where you're starting Just prior to penning this, I was doing some market analysis and projections for a niche product. As a result, statistically I now know what is needed in order to meet and exceed the minimum revenue objectives.
How many customers do you need to comfortably profit from $1,000 in advertising? As a base figure, that becomes your minimum requirement. The profit level that you are comfortable with is for no one else but you to determine, so you alone need to determine it. With this knowledge in hand you can begin to separate the wheat from the chaff but only if you know what your acquisition rate is.
Keep track of where you're going Tracking? There are many explanations and descriptions, but I look at it as the place where art and science meet. Basic tracking is really very easy. It is not always easy to conceal but it is simple to implement. Here are a couple basic methods for the online world.
The Offer Code? Made famous by direct mailers and then later by the television industry it is generally used in a form as simple as; "If you call within the next 10 minutes and mention the special offer code you can get a second for half price." In collecting your new clients you will need to be a little more sophisticated. Instead of specific offer codes I suggest that you use a specific phone number. Instead of pointing all of your sales calls to your primary reception number, establish a series of revolving telephone numbers to apply to new offers. Using your telephone systems tracking capabilities you can then monitor the numbers of calls it generates. Once the program is underway, you can then start comparing your sales figures to your telephone logs and determine your call/sale ratio to better plan staffing for that and future programs.
Registration Codes? For CD offers, specific registration codes can be created and attached to the CDs you hand out. Many people blindly distribute hundreds or even thousands of CDs without knowing how many new customers actually installed them or how customers actually stayed beyond the trial period. If you don't use online signup functionality then setting the homepage of these new users to a onetime refresh page is another easy way to count the installation percentage. The best model however is to sign them up with a specific set of registration codes so that you can track them throughout their time with you and get a better picture of their true use of your services.
These systems do take some time to plan, implement, and monitor, but without something like this in place, how will you know how effective your ideas really are.
When I was young(er) I believed that the grass was always greener on the other side of the fence. Now I know that the grass is really greenest only where it is properly tended to.
Sincerely, Doug McDonald
Avoiding Addled Ad Campaigns
What is the the most common mistake some businesses make when building a direct-mail advertising campaign? This lesson is best taught by the errors of other's ways. by Brock Henderson [September 5, 2001]
I am often asked what types of advertisements work best for an ISP business? But I am never asked which ads are the worst. I'm going to tell you anyway.
The most common mistake businesses make when it comes to advertising is that they don't test it. If you aren't testing your advertising for your ISP business, how do you know if it's doing as well as you'd like? You test your equipment to be sure it's operating at peak performance, right? But you don't test your advertising?
Test your advertising. Test your advertising repeatedly. Test your advertising constantly. Always be testing.
Polling isn't testing
You might think you have the best advertisement ever crafted for an ISP and that nothing should be changed. After all, you painfully toiled over every word. You asked co-workers their opinions. You asked subordinates what they thought. You may have even asked your spouse. The result of your polling completely convinces you that your advertisement is the greatest of all time. Surely, this is the advertisement that will get those phones ringing?
Fine. Let's say your advertisement does produce a few sales. But ask yourself this?did your advertisement do as much as it could to bring business your way? How will you know unless you test the advertisement?
For example, let's look at a very basic offer that some ISPs advertise?one month of free Internet access. Is "One month free" the best way to communicate your offer? Or are there other ways of saying the same thing that could produce better results?
Consider changing your offer from "One month free" to "Two months for the price of one" or "$0 first month." Each phrase is the same offer simply worded differently. Changing the key phrase can make a big difference in how well your advertisement is perceived by your target audience?but you wouldn't know this, unless you tested these different phrases in different advertisements.
Golden rules
There are a few important rules you should follow when testing your ISPs advertising campaigns. The first is simple?never test more than element at a time.
If you change two elements in your advertisement, you have no way of knowing which adjustment improved your results. Even worse?perhaps the first adjusted element of your advertisement could have brought a lot of sales your way, but the second change undid the positive impact of the first. Why risk failing your test? You don't spend money to lose money, do you?
Which brings us to a very common and understandable objection to testing your ISPs advertising?it costs money. Remember, not testing your advertising campaigns will cost you even more money over the long-term. Testing your advertising is like preparing an advertisement for success. You can keep the cost of testing down by:
Testing your advertisements in small batches.
Testing your advertisements in select areas.
Testing your advertisements among select media.
The extra time and money you spend on testing your ISPs advertising messages will produce more sales. Producing more sales means more profit. Testing your advertisements is spending money to make money. Now, that's makes more sense, doesn't it?
Stage test
Let's walk through the stages of testing of a direct mail piece for your ISP. First let's test the statements encompassing your basic offer:
First Month Free
Two Months for the Price of One and
$0 First Month
Note that we have one offer mentioning money?in some communities a stated dollar amount will pull more than either of the other offers. But you don't know if it is true for your service area unless you test it.
Next, identify a small target area as the testing zone of your direct mail advertisement. There's no sense in sending a mailing to everyone?remember, this is a test.
Here is where you break out the calendar. Abstain from doing any direct mail advertising for one month. During this time, keep track of the number of phone calls received (inquiries), and the number of sales generated from your select testing zone. This will provide you with a baseline?a reference point for measuring the results of your direct mail campaigns.
Yes, you could just as easily review sales made during your baseline month, but we're also measuring inquiries. Without a proper benchmark you have no accurate way of knowing how your direct mail campaigns are performing. Sales alone don't tell the entire story. Some advertisements generate a lot of inquiries, but not a lot of sales?you need to know if your direct mail campaign is producing interest or producing revenue. The rest is simple:
During the second month, send the "First Month Free" offer to your target area. Track the number of phone calls received and the number of sales generated.
During the third month, send the "Two Months for the Price of One" offer to your target area. Track the number of phone calls received and the number of sales generated.
Finally, send the "$0 First Month" offer to your target area during the fourth month. Track the number of phone calls received and the number of sales generated.
By now, you should have a simple spreadsheet that shows you which direct mail piece generated the most calls and which generated the most sales. For our purposes, let's assume that the second offer?Two Months for the Price of One?generated the most sales. This is an offer that makes sense to utilize in future mailings.
Now that you have the offer that works, it's time to see if it works for everyone. If your first offer was to a mid-income residential zone, then this time you want to test your offer with upper income residents.
Repeat months two, three, and four to determine if the same offer works as well with one demographic target as another?results may very. If there isn't any difference and "Two Months for the Price of One" produces the best sales from both groups, then you're ready to begin a large-scale direct mail campaign with complete confidence that your advertisement produces sales for your ISP business.
Still testing
Now you can test other elements of your advertising message in different media. To test your advertisement in print media, buy space only in one publication at a time to determine which newspaper or magazine produces the best results. Next, see if color helps land more sales. Or change your graphic, test different sections within the same publication?but always keep track of your results.
Testing your advertising is an on-going process. Don't be complacent. You should always be testing your advertising. Be aggressive and be patient. You are on your way to producing some great advertising and avoiding the biggest advertising mistake that many businesses make.
ISP Acquisition Strategies
Aquisition is a tried and true strategy for growing an ISP?but it's not as easy as it may sound. Here are some tips from the pros.
by Christopher Knight [October 5, 1999]
First, a definition:
ISP Acquisition Department - An individual or a team responsible for identifying promising acquisition targets. Some ISP acquisition departments then proceed to negotiate finished deals, other simply pass on recommendations to the CEO for evaluation.
Today's article dives into strategies used by ISP acquisition departments to achieve win-win deals for their firms in terms of subscriber-base and ISP-asset acquisitions.
Setting reasonable expectations
David Shires has aided in dozens of ISP acquisitions and is one of the folks in charge of acquisitions for Voyager.net, Inc. In a recent conversation, Shires made it clear that the expectations of the owner of the ISP his firm is evaluating are a key to determining whether a good deal can be arranged or not.
Shires pointed out that in many instances, the ISP owner has never sold a business before and needs to be educated as to how the acquisition will or can take place. By bringing the owner up to speed, he is often able to help shape realistic expectations, improving the chances of a successful buy/sell relationship.
Identifying good targets
A good starting point for acquisition is creating a highly detailed profile of what your ideal acquisition would look like. This might include?
Size of the ISP
Its geographic location
Product price points
Growth and churn rate
Asking price
When you actually begin negotiations with a potential acquiree, you'll want to examine financial statements for the year to date and the past 3 to 5 years, plus any other critical success indicators of the ISP.
Tip: If you hand the acquisition target a list of 50 simple questions to help you do your due-diligence work, and it takes them 3 to 4 weeks to provide the data, you can reasonably conclude that the ISP is not overly organized. This may be symptomatic of how they've been running their business.
Bigger is better Large ISPs often make ideal acquisition candidates because?
You're acquiring more subscribers per deal negotiated.
The larger the ISP, the more likely it is that the business will be further evolved, with a better back office and more highly developed customer management.
Their POPs are more likely to 100 percent digital, which saves you the cost of upgrading analog lines.
Less is more
Cliff Bryant of MindSpring Enterprises, Inc. has aided in many of Mindspring's ISP acquisitions. The deals Bryant likes best are ISPs who have Internet access, website design or hosting, possibly own a PC shop, and are just looking to sell off their ISP dialup division, so that they can return to their core business. He's leery of deals where the ISP is selling out lock, stock, and barrel. He believes that firms that are just spinning off their ISP division will care more about their reputation after the sale and will be of greater assistance during the conversion process, compared with the ISP who is cashing out with a clean exit.
Bryant had this advice for ISPs who want to get maximum valuation for their companies: "Run your business like it will be a viable business. Keep your accounting and customer database in great shape, continually improve and position your business as if you were going to run it for ever. If you run your business like you're just waiting to get out, you put yourself in a weak position."
On the same topic Shires said, "If [the ISP Acquisition target] is red and bleeding, sometimes we can't save it . . . so we let them go. We do an incredible amount of pre-acquisition research and walk away from quite a few deals. A bad company at a good price is still a bad deal."
Warning signs
Any of the following situations is a potential red flag for your acquisition process?
The ISP paints a good picture, but when you visit their resellers or talk with their customers, the real stories about how they handle their customers don't measure up.
The geographical reach doesn't map well with your existing POP infrastructure. Providing service to your new subscribers may incur cost more than you expected.
Product price points are substantially different-especially where the acquiree's price is much lower. If its subscribers are paying $5 to $8 less than you charge, chances are high that you will experience a high level of churn as you attempt to convert them to your higher price point.
The ISP owner has a hard time providing historical data, and/or when you ask probing questions, you get conflicting answers on key areas of the business.
When your potential target wants more than market price for his or her subscriber base, and won't budge.
Your acquisition target is pressuring you to move quickly. This can be a sign that they've run out of cash or have skeletons in the closet that they've not told you.
If you and your network aren't ready to scale to meet the labor, network, and, bandwidth, demands that the acquisition will create. It may be better to chill and wait till you are ready.
Finding ISPs to Buy
Networking, networking, networking is the name of the game here. You'll need to mingle with ISPs at every available opportunity to get into the know and flow as to who is on the verge of selling and which ISPs might make perfect targets for your firm.
The many ISP conferences are great opportunities to meet a concentrated group of ISPs. This includes national/regional events, such as Penton's ISPcon, ISP/C's ISP Forum, IIR's The ISP Forum, The ISP Business Forum, The ISP Summit, and various state or local gatherings of ISPs.
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