Monday, September 10, 2012

Crowded Out

Just a few weeks ago, Steve over at Mission Research informed me that they had recycled or trashed all of the remaining CircleDog boxes that were in storage over at our warehouse office. I was unmoved--I had gotten over that set of failures a few years ago.

Ok I'm lying--you never get over the one where you drive everything at high speed into a brick wall, but that's another story for another time.

CircleDog was a desktop-web hybrid CRM for small business. Meaning you installed it, but there were web services, so you got the performance of the desktop and utility of the web. The Hybrid Web is what we called it, and it's interesting to see how much that approach is still in use.

But try marketing it through Google AdWords. At the time, any term around sales management software, CRM, contact management, etc, cost anywhere from $8/click to $25/click, thanks to Salesforce.com and its competitors vying for enterprise customers.

We weren't. We wanted to sell to the little guys. The guys stuck with Act, and who weren't comfortable using Salesforce's shitty interface and user experience (at the time. I recently tried it again and, well, it still sucks in a lot of ways).

In 2008 I developed a radical strategy to get around a major problem, and failed at executing on it. There were two parts: promote and sell through our existing customer base of something like 6,000 nonprofits, all of which had boards and donor bases representing about 5 million people, many of whom worked for or ran small businesses.

The second was to get the software on the shelves at the office supply stores right next to Act. Act had no shelf competitors, and I figured we could beat them on usability. We'd price it the same, and have some entry level version that was $99.

At $99 in the retail channel it's almost a loss leader given the channel costs, but given the AdWords costs it simply made financial sense--IF a lot of things fell into place. Each chain meant something like 900 stores, and all required about 1 sale per week to  maintain shelf space. If it worked, those numbers looked great. If.

Well. Ahem. Here's a shortlist filed under what could possibly go wrong:

  • Staples dragged its feet early.
  • OfficeMax wanted it but hated the box. Resubmit in 2 months please. 
  • The box sucked and took too long to complete. 
  • Lehman Brothers collapsed, triggering a massive selloff and scared the shit out of everybody. 
  • Circuit City filed for liquidation. Ouch. That was one of our channels. 
  • The software crashed when installed on a nonprofit's PC running GiftWorks, our flagship product and trusted brand. So we completely lost our ground game. 
  • The entire retail office supply business just stopped putting new stuff on the shelves, which also meant no new orders. For us that meant no orders at all. 
There was more. But that's not the point. Actually I left the point way back at the top. The rest is a bonus section (having fun yet?). 

The point is that small businesses are crowded out of a lot of online marketing simply because they're competing in keyword auctions against massive businesses that can afford to drive the price up. 

Amazon and eBay are good venues, but the cost of sales is very high. SEO...well that costs a lot to implement and maintain if you use an outside agency, and costs you a lot of time if you do it yourself.  

I'd like to see a search engine that offers paid placement for small businesses at very low per-click prices. I don't know who would shop there or how they'd find out about it, but I'd really love to see that. 

There's real injustice in that kind of crowding out, but I guess that's been there since the first printing press--advertising is part of the cost of doing business, and if you can't pay that price, you have to get creative and find another way to reach people. For small business, word of mouth is typically the best way. 

And there you have it--today's rant, inspired by this NY Times article. 






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