Know Thy Customer: 3 Tips for Success From a $285M Company
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
For entrepreneurs, few issues are as important -- or as challenging -- as connecting with the right customers. Reaching target consumers is key to gaining traction for any business, but startup companies face a unique hurdle: They must go head-to-head with large, established organizations for customer attention.
Just over a decade ago, online marketing company Constant Contact was one such startup, servicing just 5,000 customers while vying for new ones in a crowded tech-startup market.
So what transformed the fledging Constant Contact into a company with 600,000 customers and $285.4 million in revenue last year? A recent sit-down interview with CEO Gail Goodman revealed three parts to the answer: understanding customers, defining a clear business purpose and building the right team. The conversation also offered up some expert marketing advice for aspiring entrepreneurs.
Understanding customers. Goodman, who took the helm at Waltham, Mass.-based Constant Contact in 1999 when it comprised just seven people, explained that understanding customers has been central to the company's success, as well as to her own career. Indeed, Goodman -- formerly an IBM employee in mainframe subsystem design -- left the tech world to get her MBA because she wanted to narrow the divide between technology and consumers.
"My essays to business school said, 'I want to help bridge the gap from the technology side to the customer needs [side],'" says Goodman, who ultimately attended the Tuck School of Business at Dartmouth College. "My career has followed that path."
But as most entrepreneurs quickly realize, that's easier said than done. For Constant Contact -- which offers email marketing and other digital tools to small businesses -- learning how to effectively market its services to the right customers required three important steps: experiment, experiment, and experiment.
"We knocked our heads against a bunch of things," Goodman explains.
When something finally worked, it worked extremely well.
"We started to really understand the power of education," Goodman says. "If we could sit next to someone for five minutes, we could get them to understand [online marketing]."
This realization led to the roll-out of free seminars headed by regional development directors to educate small businesses about marketing. The results were soon clear: Customers were connecting the dots and reaching out to Constant Contact for online marketing services. The company now has 23 regional development directors who led seminars for 200,000 small businesses in 2013 alone.
The takeaway is that entrepreneurs must experiment to see what works best for reaching their particular customers. While experimentation can be costly -- for example, Constant Contact doled out a quarter of a million dollars to test radio-marketing campaigns that ultimately proved successful -- the reward is a tried-and-true marketing strategy customized to reach target consumers.
Defining a clear business purpose. Even the best marketing campaign will fall on deaf ears if one key ingredient is missing: a clear business purpose. This means that startups must be able to pinpoint exactly what they do.
"It starts with knowing who your customer is and what problem you're solving for them," Goodman notes. "I meet a lot of entrepreneurs that are trying to do too many things for too many people."
Many entrepreneurs think that attracting customers will actually help them define a business purpose. They surmise that if they get customers on board first, then they can figure out what's needed and shape the business around that. But the opposite is true.
"[Customers] can't tell you what your product should do -- they can tell you what their business problems are," Goodman says. "If you think your customers are going to have the answers, they won't."
Constant Contact's clear business purpose drove the success of its marketing campaigns early on. As Goodman described it, that purpose is to help small businesses create and grow customer relationships by picking the very best of what's available for digital marketing, and simplifying it.
This type of clear purpose is important for all companies, but it's especially critical for startups.
"When you're little, you'd better be really good at one thing," Goodman says. "If you don't master one thing that gets people to use, stay, share and repeat, you'll have trouble getting traction."
Building the right team. The third piece to this marketing puzzle might seem obvious: have the right business team in place at all times. Due to the fast-changing nature of startups, business needs and problems shift frequently. But sometimes these shifts must be reflected by changes to management so that each part of the company remains in the hands of the right person.
"The person I had running marketing was a [business-to-business] software marketer," Goodman explains. "It started to become really clear that direct-response marketing was going to become a core competence [at the company]. [But the head of marketing] knew nothing about direct-response marketing. So suddenly we had a core competence that we knew nothing about."
The answer? Find expertise.
"As your business evolves, there are going to be things you'll need to be good at that you had no idea you were going to need to be good at," she says.
The successful entrepreneur will recognize when business needs have changed -- and make changes to the business team accordingly. Failure to do so may blur the business purpose, weaken understanding of customers and undermine the organization's marketing strategy as a whole.