Companies traditionally put a huge amount of resources into carving out and dominating niches within a particular product category. Airline loyalty programmes are one example of the lengths marketers will go to in order to retain customers. But in more dynamic markets such as web-based services, the old rules no longer apply. Customer acquisition trumps retention every time. Do the math.
For argument’s sake, let’s say that there are a total of 100 customers in your target category and that 20% change their loyalty each year. So, ignoring any organic growth, there is a total pool of 20 customers up for grabs in any given year. A start-up entering the field does well and secures 5 of these floating customers in the first year. But they will lose one of these customers at the end of the first year on average. In the second year there are still 20 customers looking to change provider. If the start-up succeeds with customer acquisition at the same rate it will still more than double it’s user base.
Being a small brand in a market with high defection rates is risky. Growing customer numbers as quickly as possible is insurance against future defections. A larger brand can weather the storm. For many product categories in fact, 20% loyalty churn would be extraordinarily high. So a new entrant has its work cut out for it on both fronts because in some industries the number of shifters is fewer.
I’ve over-simplified the figures, but you see my point. Acquiring customers from the pool of dissatisfied users is the primary goal of a start-up. In the case of web-based services, create a better user experience and you immediately tap into that pool. Customer retention will also take care of itself. Because the domain registrar industry is in dire need of innovation and there is a large number of disaffected users, this is the approach we have taken at iWantMyName.
Lean Startup methodology when applied to technology start-up companies advocates rapid prototyping, iterative re-testing of market assumptions and soliciting frequent customer feedback to more quickly evolve a product offering. At a recent lunchtime seminar hosted by Wellington’s Lean Startup group, we discussed when to pivot.
Pivoting involves a fundamental change to one or more of the three fundamental questions that frame the business model and could be a response to either a flawed model or a new opportunity.
We Are Selling What? + Via Which Channel? + To Whom?
Bruce Aylward from Psoda described how his company underwent a complete change in strategic direction in terms of how their product was marketed and distributed. Psoda is a SaaS suite that assists professionals to manage programs, projects, requirements, testing and product development. Psoda’s pivot point came when they realised that customers only wanted some of the services being offered – so they created a pick ‘n mix option. It was a subtle change that boosted the company’s revenue take.
The domain registrar industry has a well established model and hundreds of incumbents. Finding ways to innovate within such a model is tough, but it is the only way forward for a new company. At iWantMyName our pivot point came when we realised we were creating a scalable platform-as-a-service offering that we could rapidly roll out to channel partners. It was a great learning experience for us that added a lot of value to our business.
Speaking of taking Kiwi tech global. It was with a huge amount of pride that that we announced the launch of two new registrar sites over at ideegeo this week. In conjunction with a great partner in the Netherlands we’ve created Ben ik Vrij a Dutch language version of our iWantMyName site. With all the functionality of our existing platform plus full Euro currency integration Ben ik Vrij allows us to enter one of the largest domain markets in Europe.
But we aren’t just stopping there. We’ve also opened a wholly owned and operated German language site and we called it simply Mein Name. The German site is a special achievement because ideegeo in part has its origins in an idea that began in Germany. Mein Name is a little bit like a return home for us.
The new sites demonstrate how ideegeo can powerfully leverage the underlying technology behind iWantMyName and how we can make other partnerships work in new markets. Expect to see further rollouts and cool new services in the future as we change the face of domain name management.