Marketing - Part 1 - Build a better mousetrap...

"Build a better mousetrap, and the world will beat a path to your door." - misquote of a misquote of a comment by Ralph Waldo Emerson

"Build it and they will come" - misquote of a phrase from the movie Film of Dreams, which is about a man who builds a baseball field in an Iowa cornfield.

The above phrases have entered our culture. Sadly, those aren't just misquotes. They're also mistaken.

If you expect the world to beat a path to your door, you'll be waiting a very long time.

The world is not psychic. If your company's potential customers do not know that your company exists, or what it sells, you won't sell anything. You may have the best product in the world, but that won't help you one bit. The world is full of companies with great products that are having their butts kicked by competitors with inferior products, higher prices, but superior marketing strategies. Firms with great marketing and adequate products will almost always beat firms with adequate marketing and superior products.

So don't insist on product perfection. As soon as you have an adequate product, start marketing it right away. If the market thinks your business plan sucks, it's best to find that out before you've invested your time and money gold-plating your lead balloon!

By marketing early, your business plan can be tested and refined. You'll develop a small customer base on whom you can experiment, testing cross-selling and up-selling strategies. The customers and prospects you encounter can provide you with valuable insights that will help you set your prices, hone your marketing messages, and develop product features your customers will value. Whilst you improve your product, these new customers will pay your overheads, marketing and product development costs.

Many start-ups spend too much time perfecting their product, and not enough time marketing it. They say to themselves that if only they were to create something special, their delighted customers would recommend it to friends and colleagues, and success would be assured. Recommendation-based business models make great copy in business magazines when they work. But most of the time they work too slowly, or not at all. So you're better off selling an imperfect product, and reinvesting the profits made in marketing and product development, than hoping the marketing will take care of itself.

Here's a story that really brought this home to me. Serial entrepreneur Dan Sherman wrote an e-book, which he published for free on one of his web sites. What could be more attractive than free? Well, Dan's a savvy man. He decided to charge for the e-book and invest the money raised into advertising. The result? A fifty-fold increase in traffic. The reduction in the percentage of visitors viewing his product (because of the charge) was more than made up by the tidal wave of new visitors finding his site because of the advertising. More people read his e-book, despite it costing more! Well targeted marketing works. And it can pay for itself.

Back in 1999 US company Shanje Inc (then called PairNet) was providing hosting of an unlimited number of web sites for $30 per month. Few people in Britain had come across it. Savvy school boy Andrew Michael decided to take out ads in British Internet magazines marketing his company's inferior and more expensive copy of Shanje's business model. His firm was less established, and back then had inferior technical expertise. His company Fasthosts Internet Ltd continued to spend its profits on full page ads in UK Internet magazines. The firm, set up in a bedroom in 1999, now has a turnover of over $40m, revenues growing by 40%+ pa, and an estimated value of $80 million dollars. Shanje isn't worth anything close to that.

Why did Fasthosts eclipse Shanje? Not technical knowledge. Not Pricing. Not business experience. At least, not then. The key difference, that made all the difference, was Marketing.

Well managed marketing is a net profit generator, not an expense. It pays for itself by increasing sales. The sort of money you personally want to make in business will only come from owning a business that has millions of dollars in sales. You'll get those sales through marketing.

I hope that in this post I've convinced you to market early, and often, and to take marketing seriously.

As you start the business that will make you rich, I suggest you split your time and resources in the following proportions:
20% - idea evaluation and market research
10% - product/service sourcing and creation
5% - legalities
5% - fulfillment
60% - marketing and selling.

For once you have a good business model and an adequate product or service, there is a larger pay-off to be had from marketing and sales than from other area on which you could focus.

Update: 10th May 2006 - Fasthosts has been sold for £61.5m ($114m)