Category: Markets

Your Challenge in Established Markets

In new and expanding markets, it’s often enough to just show up. You don’t need a strategy because market demand exceeds supply. Customers are more concerned about access and availability than anything else.

But in more competitive environments, like established markets, it’s difficult to grow by being a run-of-the-mill entrant. Now the shoe is on the other foot. Customers have lots of options and are much more selective. If your offer is similar to competitors in this market:

  • You’ll likely have weak or inconsistent sales.
  • There’s pressure to compete on price.
  • Leaders become cemented in their position and difficult to un-seat.
  • Small differences become important as customers look for reasons to buy from you rather than competitors (distance, personality, appearance).

The problem is that most markets are established and many of the new ones don’t last.

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The Current

I had some beers with a few other entrepreneurs last week. One of them split with his business partner four months ago. He re-partnered with another person from the industry and started over. In four months, they’re just under $20,000 a month in revenue.

“It’s a bit crazy,” he told me, “I remember working for years and trying all sorts of things, first with my e-commerce business and then the last company. This new business is easy. Things just flow. Every sales conversation is positive. It’s like everything in the business is aligned.”

“What’s the difference?” I asked him.

“Selling people what they want,” he said, “I was always looking for a wave of demand. Interest. A trend. This feels like that wave.”

Your execution can be tight, your strategy sound, your culture connected. But none of those has near the same impact on the business as your relationship to the market.

You can’t swim faster than the current.

Lessons Mark

“There were three things I would have done differently,” Jake told me as we were driving to the trail on a recent backpacking trip. “First, I would have moved most of my staff offshore; US employees are too expensive. Second, I would have niched down. Third, I wouldn’t have leased out that expensive space. Am I wrong? What do you think?”

We were discussing the business situation of another friend of ours, Ehsan, who we were meeting at the trailhead.

Three years ago, Ehsan had purchased a digital marketing agency. He’d hired additional staff and signed a ten-year lease for a new office space downtown at the rate of $20,000 a month. He’d put $250,000 into escrow as part of an agreement with the bank to back the landlord’s investment remodeling it into a fancy office space.

Initially, the business was growing and he was making a tidy profit. But the last year he’d been hammered with setbacks:

  • A key manager abruptly left. In the aftermath, Ehsan discovered that the manager was harming the business- ultimately costing him one of his best clients.
  • The bank didn’t want to release his money in escrow after the build-out was completed and put him in a cash-flow crunch.
  • And the software market that formed the bulk of his revenue vanished with the collapse of Silicon Valley Bank.

“I don’t know,” I told Jake as I thought about Ehsan’s situation. “I agree with your points, but for an agency of his size, his strategy might be different than for a smaller agency. Ehsan pursues larger deals. His clients might expect fancy office space and a US staff. That might tell them that his company is a low-risk, established, agency for them to purchase from. Additionally, Ehsan is excellent at building systems and teams that are all in the same physical space. And while his company isn’t tightly positioned to one market, he does have a heavy focus on serving software companies.”

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The Magic Key

“There are less than ten companies that serve the association market. Everyone knows who they are and they all have fifteen to thirty years of focused experience. We’re relatively new entrants. What would we have to do differently for a customer to choose us over one of the incumbents?”

This was the question I posed to two grizzled technology consultants that work in the market.

“Back in the nineties when we built and sold our software company we had the same problem,” one of them advised me. “I think you’re right. Differentiation is the magic key. For us, we were lucky enough to be building on a technology stack that enabled us to better adapt to the market… But it was a tough problem.” He paused and looked at his partner, “Jim, do you think we could have built that software today?”

The other consultant smiled and said, “Probably not. Too competitive.”

In my time in business, I’ve never seen any digital market that didn’t have stiff competition. If there’s an opportunity worth pursuing, someone started years ahead of you.

However, that doesn’t mean there aren’t opportunities. One of the working theories that I’m playing with is that success pushes businesses towards generalization.

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Beyond Brute Force

In seventh grade, I won a popularity contest (I’m still celebrating.) My junior high had students complete a short survey concerning who they trusted and felt comfortable talking too. The result was that I was one of two students selected to go through a program called, “Natural Helpers.” The idea of the program was to train students to recognize serious problems and report them to adults whenever they occurred. We were trained to be half counselor, half snitch.

I lead with this just to illustrate that it’s always been easy for me to make friends.

However, even with this friendly orientation, when I think about business development and trying to fill a CRM with 500 contacts to keep in touch with… well it seems like a little slice of hell. I abhor the rote work of continually reaching out to contacts and I dread inauthentic interactions or small talk.

This is the problem that I’ve been trying to solve as I work on building out our referral focused marketing strategy:

How can we get people to know, like, and trust our brand without me having to build five hundred relationships?

The answer that I’ve come to is to seek tactics to elevate our visibility within the networks of communities.

Two strategies that I’m exploring are leadership and reputation.

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Positioning Misses

Later today, I’ll talk with a potential client that was referred to us. In my fifteen years in business, I’ve received few referrals. This is despite having great relationships with clients and working with them for years.

The reason that we received few referrals was because we were positioned based on specialized technical expertise. Our positioning was so narrow that few people understood what we did. Only once someone needed someone with that technical experience would they become aware that our role existed. The result was that we built up our inbound leads through SEO and directory listings.

SEO worked great for several years and then our market tanked. I decided to reposition again. When I repositioned our agency, I tried to apply the advice of the business experts in our field. In brief, that advice was to focus more on selling strategy and less on the actual execution. The result was that our website and marketing framed us as digital strategists.

In retrospect, this was a big mistake.

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Market > Product > Marketing

How would you change your approach to growth if marketing was completely ineffective? In a no-marketing, no outbound sales, world, how would you get new customers?

You would probably have to focus on finding market demand and ensuring what you sold met that demand. Customers would be a function of the environment. It would be the total available customers in your area divided by the number of vendors there.

This is pretty close to how things actually work.

Marketing is a layer that we add on top of available demand. It amplifies your visibility in an environment, but it can’t actually create new customers, only harvest the available ones.

In the startup world, there’s a concept of product market fit. Product market fit is where your product matches what the market wants. It’s expressed as the feeling of effortless growth: the market seems to pull a stream of purchases from your business. Startups are all about innovation and fit is where most of them fail. But even in conventional businesses, few have product market fit.

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Do You Need to Love What You Sell?

I did an impromptu straw poll this weekend at a party I was hosting. A bunch of smart folks stood in a circle around the grill, watching me cook Okonomi dogs, Yakitori, and toasted mochi. We were celebrating Hanami, the Japanese cherry blossom festival.

I asked the people in my little circle, “Do you watch Instagram reels or use Tik Tok?”

Everyone in the circle said they did and they loved them. It surprised me that I was the only one who abstained.

I work in technology, but I’m a bit of a Luddite. Back when I started out, there was an explosion of mobile development. As a developer, I never invested in learning it because I don’t particularly like phones (though I’m grateful for them.) Around the same time, social media erupted and I didn’t do anything with that either because I don’t want to fritter away my life in meaningless interactions.

In the market we’re pursuing, there’s a rising trend of customers looking for support with their social media and especially in reaching younger professionals through mobile social media.

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Ahead of the Curve

I had lunch a couple of weeks ago with a guy that has been operating an agency for over twenty years. I asked him what the perfect agency looked like and he said, “If you want to make money: just you or a couple of account managers and everything outsourced overseas.”

I know of several agencies that already operate with this sort of model and one of my friends is shifting his local team to an international one. As time passes, pressure will build that will cause it to become the standard or a common approach.

In the meantime, no-code tools and AI can do more and more of the specialized work that agencies need.

The agency of the future will probably be a combination of software and commoditized labor.

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Chatty Kathies & Referral Strategy

Last fall, Philip Morgan recommended to me, “Why Clients Buy” as part of my investigation into referral focused strategies (thanks Philip!) A thesis of that book is that for client work, you only need around 200 possible clients to know you. It’s a relatively small number of people (with the caveat that the number is based on income per client.)

From my research on agency channels, a little less than 1 in 3 referrals came from colleagues and peers, people who would probably compose much of that group of 200 people from “Why Clients Buy.”

I’m in the early phases of implementing a referral strategy and how I’m thinking about this is networks. Every person is a node in a network that connects to a certain number of other nodes. For a client serving business, you need 200 that have some sort of link to you, either directly or within one connection. As in, they know you, or when they ask for a referral, someone they’re connected to knows you.

People are not equal (sorry founding fathers, you got it wrong.) We don’t have the same abilities. As it pertains to networks, not all nodes are equally valuable.

Due to this, as strategic priorities, in building a referral network, I’m looking at building relationships with three kinds of people:

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