How your online business can survive a global recession | October 16, 2008
Traditional business is simple. You create a product or service you think customers will want, and then spend money to drive people towards that product or service. If you’re lucky, some of those people will want to user your product or service and you’ll make money. This can be through direct charges or, in the case of content creation, selling this attention on to other companies.
During times of economic slowdowns, marketing budgets are usually the first things to be cut. However in doing so you reduce the number of people who’s attention you capture, reducing your potential market, and the whole things turns into a downward spiral. This is why most marketing pundits recommend that you increase your marketing budget during time of crisis, in order to shore up potential customer numbers.
Despite this obvious logic, there is a lack of liquidity in the market and budgets are going to be cut whether we like it or not. So product owners need to think of better, more effective ways of spending their money and maximising their return on investment.
The ironic thing about the preceding couple of paragraphs is that I’ve not actually mentioned the quality or suitability of the product or service, only the fact that marketing spend can drive attention. Yet we all know that it’s harder and more costly to acquire new customers than it is to satisfy existing ones. So rather than driving more traffic and hoping that some of those people will stick, we need to improve the core offering itself.
What does that mean? Well, first off, most websites are incredibly inefficient and converting customers, and can you blame them? Up until now it’s all been about volume rather than efficiency. As such sites are littered with usability problems that literally block your clients from spending money with you. In fact only this afternoon I abandoned a website for its competition because the site was so painful to use. You wouldn’t lay barriers in front of your customers in the real world, yet this is what we’re currently doing every day online. So the first step to slowdown success is to spend time removing these barriers and reducing your drop-out rates. This can be done quickly and for a fraction of what it would have cost to recruit those customers in the first place.
Next, we need to use our understanding of consumer psychology to promote our products more effectively. So rather than just laying out all our wares on the ground and hoping that somebody will wander past and buy something, we need to think about the purchasing process and make it more enticing for our users. This is the stuff that any marketing graduate will have learnt in their first year at school, yet for some reason it rarely seems to make it onto the web. This is largely because marketing departments don’t really get the web and either ignore it completely or shout at the top of their voices. However the web is full of discerning consumers who want to escape from overt marketing, so this stuff needs to be done subtly and with aplomb.
Lastly, we fundamentally need to rethink what we’re selling. Rather than coming up with a great new product and services and then hoping we find a market to sell it to, we need to learn about the needs of our customers and provide tools they actually want. So you need to go right back to basics and start talking to your customers to see what they need. Doing some smart research can show you’re where you’re currently falling down as well as opening up whole other opportunities you never even knew existed, simply by asking questions like “what do you wish this product did that you currently can’t do”. So surveys, customer interviews, and ethnographic studies can be a powerful tool in your business armoury.
One canny pundit once quipped, “people aren’t queuing up to buy your crappy product”, yet we keep trying to sell mediocre goods by upping the marketing spend. Instead, why not do what numerous other companies do and spend your money making your products better. By focussing your attention on building value in your products and providing an outstanding consumer experience you’ll create products that literally market themselves. Or to put it another way, it costs a lot less to market a good product than it does to market a crappy one.
So in order to weather this current economic downturn and come out ahead, we need to start thinking more strategically and less tactically, more about long term vision than short term success. Otherwise we’ll end up with a slash and burn mentality to driving online success. Instead, we need to build better products, we need remove the barriers to adoption, and we need to promote them more effectively. Doing any one of these things will significantly improve your conversion rates, but doing all three will see you weather the current storm and come out ahead. What are you waiting for?
Posted at October 16, 2008 7:43 AM