You would have noticed, I have not spoken about advertising as part of product management launch or sustenance. That is because I believe that broad level brand level advertising is a big waste of money. Especially when you are a startup or a small company or a company launching a new product.
It is always better to utilise the funds that you have to keep improving the product based on incremental customer feedback. My agenda would be to operate on a shoe string budget and let your marketing and sales fund your business
This situation could however be different, if you have Venture Capital funding and the agenda is to create awareness even if you lose money on every transaction. Some products which follow the so called “network effect” could definitely make use of this kind of product launch.
Which brings me to todays rant for growing your business in a niche, using different types of channels/partnerships or media to reach out to your customers based on your acceptable cost of acquisition.
Yesterday we identified that if you can sell 10 deals at a gross margin of $10000 per sale you make $100000/- as the first time GM on every first deal with a customer in the first 12 months.
The next piece of arithmetic – after all, all business is arithmetic – you need to be aware of is – to get 10 deals in the first 12 months how many prospects will you need to reach and how many times to be able to get 10 of them to do business with you for the first time.
Which brings us to the next concept of what Dean Jackson calls “invisible” or “visible” prospects. Like the picture above if you know in which forest you will get the tree, the forest is visible, the specific tree has to be found. If you have chosen banks as your prospects to whom you would like to sell your product or service, then they are semi visible. You can identify the banks but within that, the exact person is a little difficult to ascertain. On the other hand if you are selling eggs in a locality, then you know the 2000 houses in the locality (visible prospects), you need to just reach out to them.
On the other hand anyone could be a customer for paintings (invisible) and finding them from within a large population could be very tough.
For visible and semi-visible prospects I would suggest finding partners who are selling to those same customers already and figure out a way to share the margins with them. The number of partners you can and should build will be a function of the number you get from your Life Time value calculations.
One word of caution – partners take a long time to actually start giving you business – so you should see how you can get them business first,.so as part of what Robert Cialdini calls the principle of reciprocity, they feel obliged to start giving you business.
Tomorrow we will look at what other mechanisms you could look at for getting both visible and invisible prospects.
Till next time…