Odnośniki
|
[ Pobierz całość w formacie PDF ]
ask for additional space. Perhaps the problem
isn t that we need more servers, it s that we are
GROWTH 137
giving away too much capacity that our
customers don t need.
Sometimes the solution you need to deliver your
product quickly and grow faster isn t in the
actual delivery, it s in the makeup of the product
itself. Try changing up your product a bit to see
if the problems still exist with different
configurations or options.
You may be reading all of this and think to yourself,
wow, I sure hope to have the type of problem where I
just can t service all this new business fast enough!
And you know what? I hope you do have that problem!
But I also want you to be ready to deliver a solution
when that time comes.
Recommendations:
" Every aspect of your growth takes time in one
form or another. Look for ways to reduce the
time bringing those aspects of your model to
market. Every efficiency you create will speed
the growth of the company, no matter how small
the efficiency appears to be.
" If finding a partner, outsourcing a process, or
changing the process altogether can help get the
product to market faster (without sacrificing
quality) then it s a winner.
138 GO BIG OR GO HOME!
Cost Per Acquisition
If I had to pick one growth factor that I would consider
to be the hardest to master, it would be cost per
acquisition or CPA.
If you ve never heard the term, here s my layman s
explanation CPA is the cost directly associated with
acquiring a customer. If you spend $2 in marketing
capital to earn $3 in sales, your CPA is $2.
That said I ve heard a hundred different definitions of
this term, from the cost to acquire a visitor to a website
to the entire cost to deliver the product (including
production and shipping). Frankly, it doesn t matter
which definition you live by, as long as you understand
how these metrics can drastically change your business.
The incredible inflating CPA
The reason CPA is so influential in your business is
because over time if your CPA goes up and not down,
you re headed for trouble.
GROWTH 139
Here s how our CPA could potentially go up over time,
causing a real problem for us:
When we first launch our video blogging service, we
attract a great number of technophiles and video geeks
who love to use the service and tell their friends about
it. This word-of-mouth initially keeps our marketing
costs low, so for every $100 in revenue we are only
spending $20 in marketing costs. Not bad.
But when we try to grow the service and attack larger
markets that are less familiar with our application, we
find that we no longer have the benefit of cheap word-
of-mouth advertising and need to start spending heavily
on banner ads and magazine ads.
These items are far more expensive but we need them
in order to find a larger audience than what our word-
of-mouth marketing can bring in the door. So for every
$100 in revenue we end up spending $110 in marketing
costs. That s bad.
Down with CPA!
Obviously if we can t contain our cost per acquisition
over the long term we are going to grow ourselves right
out of business. We need to look for ways in which we
can drive our CPA down over time by changing our
approach for acquiring customers.
140 GO BIG OR GO HOME!
Let s assume that our launch went the same way and we
got a strong following of early adopters to the system.
But in this case we focused our marketing efforts on
allowing our existing users to broadcast the news of
their video submissions to as many friends as possible.
Effectively we are using our existing customer base to
attract more customers. We are amplifying our word-
of-mouth efforts.
This approach to growth, as opposed to spending
incremental dollars on banner ads and magazine ads
will allow us to lower our CPA over time. Assuming
we can achieve the same rate of growth, this is the type
of effort that we want to strive for in developing this
growth factor.
Anything you can do to drive your CPA down over
time is going to be extremely helpful. Startup
companies often never realize their true CPA in their
early years because they haven t had to reach out
beyond their core group of early adopters who often
find the company themselves, versus needing to be
influenced by additional marketing spend.
Creating a model that can force this cost downward will
allow you to be more profitable, and also free up
additional marketing cash to expand your marketing
efforts. Even if your actual cost stays exactly the same
(you still spend $30 for every $100 of revenue) you are
now reaching a bigger audience through a greater
marketing spend, and you re on the right track.
GROWTH 141
Recommendations:
" Project your marketing spend two to three years
beyond your initial launch. What factors
contribute to the spend going up or down?
Those are the CPA growth factors that you need
to spend time influencing.
" The laws of the universe seem to always want to
drive your CPA up. Look for deliberate
strategies (like using your existing customers to
attract more customers) that will force your
CPA downward over time.
142 GO BIG OR GO HOME!
Market Leverage
Market leverage means that as the service grows the
value of your service increases along with it while
(hopefully) decreasing the value of a competing service.
In the case of our video blogging service we may find
that our customers want to upload their videos to the
service with the biggest potential viewing audience.
Conversely the viewing audience wants to go to the site
that has the greatest number of videos available to
watch, and presumably the best selection. The notion
here is that in a marketplace economy the biggest
market is intrinsically the most valuable market.
eBay: The Masters of Market Leverage
The best way for me to illustrate the value of
Market Leverage in action is to show you what I call
the eBay Effect. As you are probably well aware,
eBay is the world s largest online auction
marketplace. They have created a simple Web-
based system to allow everyone in the world to sell
the crap out of their closet to someone else who
apparently wants it. And they make a lot of money
doing it.
But what is more intriguing about eBay is the
economic effect of their growth. Let s say you
GROWTH 143
wanted to sell an electric guitar that s been sitting
in your closet for the last ten years (yes, your Def
Leppard dreams are finally over). Your primary
interest is in getting this thing sold.
You hop online and find a dozen different
marketplaces like eBay where you can list your
guitar for sale. But what you are most concerned
about is actually selling the item. It costs just
about as much to list the item anywhere you go, so
you are looking for the website that has the greatest
number of buyers. That would be eBay.
On the flip side there is a buyer out there that is
looking for an electric guitar (he is about to start
pursuing his own Def Leppard dreams). He is
interested in finding the website that has the
greatest amount of selection, which will presumably
yield the lowest price. That would also be eBay.
Over time, as more buyers and more sellers
gravitate toward eBay, the website itself becomes
increasingly more valuable based upon the fact that
it is snowballing into the biggest and best option for
both buyers and sellers. I call that kind of snowball
effect the eBay Effect.
www.ebay.com
Realizing that being the biggest market will allow us to
create market leverage against our competitors, we will
want a strategy in place that puts lots of influence on
this growth factor.
[ Pobierz całość w formacie PDF ]
zanotowane.pldoc.pisz.plpdf.pisz.plblacksoulman.xlx.pl
|
