May 14 2008
Why you and Low Fat Lattes are Google’s Worst Nightmare
As a frequent conference attendee, I hear this keynote often. In other conferences the keynote has been entitled, alternately, “How to compete with 1and1 and Microsoft,” “Withstanding the entry of the giants,” and so on, and so forth. Depending on the audience, the theme always seems to be “specialization and customization”
I wonder, honestly, how specialized and customized companies can get and still make money. Early on in my practice, one of my clients had the idea of creating different brands for different segments of the hosting market. The CEO called this the “supermarket” strategy: he wanted to own the most shelf space in the hosting market. Consequently the company had over 10 brands, each with a different message, back end, support needs, etc. Needless to say, this level of specialization became uneconomical over the long term, and we ended up folding all the brands into two major brands.
Similarly, another client sought to compete in various segments of the market. So he targeted lawyers, doctors and chambers of commerce. This specialization required an enormous amount of sales time, and very expensive marketing (getting a lawyer’s attention isn’t cheap). This marketing effort worked, but the customer market was so specialized, and the product not scalable to other markets, it was eventually folded into a standard “unlimited bandwidth, storage, 10 GB e-mail” plan, with resulting churn.
What Elliot talked about, that strikes me as true, based on those of my clients who are successful, is that successful Internet businesses are high touch, and that people will pay to have their problems go away. Examples of this, and hosting companies that are taking business from 1 and 1, etc., include those that focus on customer support, implementing complex outsourced solutions like exchange, and hold the hand of overburdened IT departments.
In each of these examples the customization and specialization is applicable across the entire product line, and is not feature based. So instead of creating an e-mail solution that meets the unique needs of lawyers, they have support that teaches the lawyers how to create the e-mail product they need.
I see an analogy in my own business: clients pay me to make problems go away. They’re not interested in the most recent regulatory pronouncement about green marketing from the Federal Trade Commission, they just want to be able to market their new “green” data center. Similarly, the nuanced thread that has run through all these keynotes, whatever their title, has been that customers will pay you to make problems go away. Seems to me that’s a great way to succeed.