Kikabink News

When my husband and I started our first business back in 1997 we had aspirations of getting millions of dollars in venture capital and starting a free Internet service provider (ISP). We were so excited by our idea – and remember, this was during the dot-com boom – that we quit our jobs and took out a loan to start our company.

We were young, enthusiastic… and highly deluded.

But as we spent the first few weeks pouring over our business plan and financial projections, I began to feel increasingly uneasy. We were speculating about sales in a business we didn’t even know would work!

Of course, that’s what most dotcoms did at that time… but it didn’t sit right with me. Somehow, I felt that spending weeks on pie-in-the-sky projections was not just misguided, but a colossal waste of time.

And then our dreams were shattered. I still remember it to this day. We had just finished the latest presentation to the investors who were considering funding our business. We had shown them a demo of our advertising-based-free-ISP idea and given them a copy of our 100 page or so business plan.

I think they asked us to go away and come up with further numbers but I read the subtext somewhat differently. It was quite clear: “your numbers don’t stack up and we’re not confident you have a real business here. We’re not giving you our money.”

Now, the sad truth is that many investors and venture capital firms that invested in dotcoms during the late 1990s never let such misgivings stop them from funding similar businesses. (One day I’ll tell you about the company I know that got $12 million in capital… never made any sales… and let all that money slip through its corporate fingers…)

After all, many VCs’ sole aim was to make money by selling their stake at an initial public offering (IPO), and the performance of IPOs at the time indicated that such an approach was quite lucrative (even if it wasn’t sustainable)!

In any case, the financiers we talked to seemed to be reluctant to invest in our idea at the time, which left us in a rather difficult situation. It was a harsh reality check: we had no jobs, no money, debt up to our eyeballs, and NO business.

It was, however, a reality check we needed. One which got us on the right track.

Funnily enough this ‘right track’ also got us into trouble. But I’m increasingly coming to the view that it’s the kind of trouble that most, if not all, successful startups almost ALWAYS go through…

I’ll reveal what that trouble was - and what the major take-out is for YOU - tomorrow. But for now, here’s today’s ‘lesson’:

Spending all your time on financial projections without knowing WHAT you can sell and IF you can sell it… is an exercise in self-delusion, as well as being a massive waste of time and opportunity.

I’m a big fan of planning… but after a certain point, planning and projecting into the future is just guesswork. The best kind of planning is based on reality and the faster you can experience reality, the more accurate and helpful your planning will be.

More on the trouble we got ourselves into tomorrow…

Here’s a quick quiz. Which would you choose?

1. A restaurant in a popular tourist area… or a restaurant in a busy restaurant precinct frequented by locals?
2. A second-hand car from a new dealership that’s opened up in a large city… or a third-generation dealership in a small, country town?

Chances are, you chose the busy restaurant frequented by locals, and the third-generation dealership in the small, country town.

Why? Because the restaurant and the car dealership both depend on repeat business from locals. Which means they can’t afford to sacrifice the quality of what they offer or dupe their customers.

A restaurant in a tourist area can, to some extent, afford to charge higher prices for lower quality food because it doesn’t rely on anyone coming back a second time. It knows there’ll be an ongoing stream of tourists to keep it in business.

The local restaurant, on the other hand, relies on repeat business and must continue to impress its clientele or it won’t get people coming back.

The new car dealership in the big city is more likely to get away with its sales staff using hard-sell tactics and selling a few lemons. This is because it doesn’t view each customer as a repeat customer and because, being a large city, the sales people don’t face a high risk of meeting someone in the street who they’ve ripped off.

The small town dealership, however, will only stay in business if it maintains a good reputation in the local community. Moreover, the sales people are likely to often come across their customers in the street. Not fun if you’ve dudded someone.

Now, I am NOT saying that all restaurants in tourist areas or all big city car dealerships are no good. I am just saying that businesses that are solely reliant on repeat business from locals have a higher incentive to meet higher standards.

What does this have to with Internet marketing?

Well the Internet is increasingly becoming a LOCAL community. The emergence of highly interactive social networking sites, review sites and blogs, combined with forums, the search engines and the other features of the Internet has transformed the Net from an environment in which marketers could largely stay hidden and isolated - and could get away with ‘hit and run marketing’ into one in which:

1. People are able to reach a LOT of other people with relative ease, which means that customers are able to talk about YOU to numerous others via forums, blogs, Twitter and other means.
2. People are using the Internet to seek informed advice. The popularity of sites which allow reviews by customers, experts, peers and even affiliates is a testament to people’s desire to get advice before they buy. This means your product is increasingly likely to be reviewed, even if just within a thread on a forum.
3. The search engines and search tools provided by other sites are making it easier than ever and increasingly likely that people will find out about you and your products and services.
4. Once you’ve made an impression online… that impression has a good chance of lingering… and lingering… and lingering…

Whether this really does signal the end of hit and run marketing… I don’t know. After all, the original snake oil salesmen travelled from small town to small town, and we all know how easy it is for con-artists to hit the Internet under one guise, then disappear and reappear under another guise.

But I do believe that marketers who, while not aiming to do anything unlawful, have been willing to compromise on quality and service because of their confidence in an endless stream of new customers, need to think again.

Those new customers now have the ability to EASILY read reviews and discussions about the marketer’s products, and to personally speak with old customers. And such marketers are also more likely to meet their customers on the ‘virtual’ street of the Internet.

Therefore, more than ever, they must raise their standards if they are to survive and thrive in the global AND local environment that is the Internet.

When it comes to getting traffic to your site, there are pros and cons associated with every traffic generation method.

There are also costs. Some are obvious, such as the monetary cost of paying to run an ad in a newsletter or on a search engine. Some are not so obvious, such as the time and possibly monetary cost of harnessing search engine optimization or viral marketing.

As discussed in yesterday’s feature article, it’s important to be aware of all the relevant costs and make choices accordingly. Otherwise you could end up paying much, much more for something than you first expected.

In particular, there is often a large, yet not-so-obvious cost, associated with relying on seemingly free traffic generation methods such as search engine optimization (SEO) and article marketing. Many Internet marketers are attracted to these methods because they don’t necessarily involve any hard costs (unless you hire people to help you). But, apart from the time taken to do them – for example, the time taken to optimize your website, write articles, seek back-links, etc – there is another significant cost.

It’s the opportunity cost associated with not knowing how appealing your product or service offer is, or how effective your conversion tactics are.

There is often a lag between when you begin SEO and article marketing and when you start generating significant traffic. That being so, days, weeks, months – even years – could go by while you wait for enough traffic to be able to assess how appealing is your offer and effective are your conversion tactics.

Given that you didn’t pay anything while you waited, you might be content with that. But what if, after all those days, weeks or months go by, you discover that no-one wants to buy your product, or that your current conversion mechanism is an abject failure?

Not only did you waste time on doing SEO or article marketing… but you missed the opportunity to spend time on alternative offers or conversion tactics that WOULD have generated results.

So what’s the alternative? It’s to aim for FAST rather than FREE. It’s to pony up some money to invest in advertising – such as (but not just) pay-per-click advertising with the objective of TESTING your product or service, your offer, and your conversion mechanism (e.g. landing page).

Sure, this may cost a few hundred or even a few thousand dollars. That may sound scary… but if it ends up SAVING you weeks, months (or more) of wasted time and ignorance about what does and doesn’t work… it’s actually very cost-effective.

None of this is to say that you should neglect SEO, article marketing or other (seemingly) free traffic generation methods, or that you should just focus on paid advertising to test what does and does not work. It should be noted that there ARE ways to generate substantial search engine traffic in a relatively short amount of time WITHOUT paying for advertising… In this case, it may be possible to generate traffic FAST and (somewhat) FREE.

The point is, however, to fully assess the costs AND opportunities involved in each traffic generation method available to you BEFORE choosing one or the other.

Recently, we’ve heard a lot about the economy. How banks have gone bust, people are buying less, tech companies are laying off people, how we’re in (or headed for) recession, and so on.

If you’re like me, you can see the opportunity in all this. I firmly believe that this is a time when the pretenders will fall away, and only the strongest will survive and thrive.

But what about another kind of economy that really does doom Internet marketers? In fact, it’s the kind of economy that dooms us in good times and in bad.

It’s the ‘false economy’ i.e. the circumstance where you aim to save in one area… without realizing that what you save actually COSTS YOU MUCH MORE overall.

A great example of this is someone who drives across town to find the cheapest gas station… but ends up paying MORE in fuel costs (not to mention time) based on driving the car to find the cheapest gas station!

Unfortunately, I see the same phenomenon among small businesses and, in particular, Internet marketers. Actually, I’ve been guilty of it myself.

There seems to be, for example, a common tendency to try to avoid anything - whether it’s information, software or traffic generation methods - that costs money.

Now, there’s NOTHING wrong with looking for low-cost or free ways to do things, but the question is: is there a false economy in doing so?

Will the time you spend trying to cobble together your own website really be time well spent? If it takes you 6 weeks of struggle as you try to learn how to put together a website… is that really cheaper than enrolling in a web design course and learning how to do it properly? Or than paying someone to design and develop the website for you?

Even if you ARE an accomplished web designer… is your time better spent designing all your websites, or doing something else that has much more value (such as marketing)?

Or if you insist on using only free traffic generation methods such as search engine optimization (SEO) or article marketing… are these really free?

Or is there a price to be paid in terms of the TIME you must spend on SEO and article marketing to generate meaningful results?

And could you have learned what does or does not work much FASTER and ultimately more cheaply had you invested a few hundred dollars in pay-per-click advertising?

In some cases, the choice to take the ‘free’ option may entirely sound. But, as the saying goes, nothing in life is free. There is always a price to pay, whether it’s in terms of time, money or both.

On that basis, I would urge you to consider the obvious and not-so obvious costs of everything you do… and decide, on that basis, which is actually a false economy… and which will genuinely be cost-effective overall.

Yesterday I received a rather strange email. It was from someone who’d seen a comment I’d made on Jeff Walker’s Product Launch Formula blog a couple of years ago. The sender mentioned that he’d seen my comment and asked me to tell him the amount of sales we’d made from our product launch at the time.

Although I’d written that comment – and launched the product in question – in 2006 (I think), the product launch went well and I still recall the results we achieved. Moreover, since it was a simple question my first instinct was to reply with the answer. (There’s a psychological/marketing lesson in this… be sure to read my comment at the end of this article.)

But then it occurred to me that… I don’t even know this person! Here they are – a complete stranger – sending me an email asking me to tell them about my company’s financial results.

Now the story might be different if I went around crowing about how much money we made from the launch in question and someone was asking me to clarify or confirm my claims. (Although, even then, I might want to know WHO I was giving this information to!). But in this case I didn’t do anything of the sort.

I don’t know about you, but I was raised to believe that it was RUDE to ask people how much they earned.

Obviously, those in the Internet marketing and money-making niches have no problem telling all and sundry about how much money they supposedly make. In fact, they do so specifically to help sell their products. Such marketers are, in my opinion, fair game for questions asking for clarification – or proof of – their claims.

But since when was it okay to send people you don’t even know (and who do NOT make sales or earnings claims) how much money they make? Isn’t that just plain rude? Or has the Internet - or Internet marketing - created an environment where good manners no longer matters?

Okay, here’s the psychological/marketing lesson: if you ask someone a question, their first instinct is to think of the answer. Their second instinct is to tell you the answer. Hmmm… how can you use this in your marketing?