Archive for the ‘The Garage Entrepreneur’ Category

Making It Easy For Your Customers

Wednesday, June 1st, 1994

(First published in the CAD++ Newsletter in mid-1994)

If you’re trying to sell something to a target audience, a number of things can impact whether a member of that audience will actually order something from you. It’s possible that if you have something your audience needs, they will order those products or services from you. But, let’s say you have competitors who sell identical products, or at least products that are perceived as identical by your potential customers.

What can you do to make sure that these potential customers choose to order from you, or even just talk to you so you can sell them on your offer and thereby not have them buy from or even talk to your competition?

Simply said, make the path to your door the path of least resistance. Make it painless for them to deal with you. Putting this concept to practice is not too difficult, providing you use some common sense, and are willing to spend a little money to earn a lot. Let’s look at some ways you can make it easy for potential customers to contact you.

Toll-Free Access
Almost every industrial nation in the world supports toll-free numbers of some sort. In all cases that I’m aware of, the “toll-free” implies that the caller is charged nothing for that call, which naturally implies that the person/company receiving the call picks up the tab for it. Here in North America, we have 800 numbers.

800 numbers originated many years ago as a way to make it painless (and free) for customers to call a vendor. Initially, vendors had to get several types of 800 numbers for nationwide coverage, including ones for their state, regional ones that might cover more states, and national numbers, that might or might not work in their state of business. When AT&T was forced to break itself up into smaller companies over a decade ago, a number of other companies, including Sprint and MCI got into the act, and started to offer their type of 800 numbers. Thanks to their competitive efforts, 800 service is now painless to set up and maintain, and you can enable or restrict access in many different ways. A local bike shop can actively choose to be accessible from all area codes within a 200 mile radius, for example. On the other hand, here at Panacea, our 800 number is callable from anywhere in North America including Canada and Alaska, as well as from Hawaii.

Your cost for offering 800 service varies anywhere from 10 to 50 cents a minute, depending on where the call is from, and there may also be a monthly fee of around $10 per 800 number. Looking at the numbers by themselves might make this look expensive, but if you figure that it significantly enhances your chances of having a customer call you and pay you money, it’s well worth the cost. Plus, it helps give your company a bigger image, and shows you’re serious about your business.

Getting the 800 service set up requires just a phone call to any long distance carrier – it does not have to be the same carrier you use for outgoing calls. For an installation fee (all installation is remote) of around $10 or $15, you can have your own 800 number, assigned to any of your incoming phone lines. In other words, when someone calls your 800 number, the call gets routed to your existing phone number – no new lines need to be added.

With 800 service this inexpensive, you can even set up private 800 numbers for special customers to call, or as a convenience for you to use to call your office when you’re on the road.

However, it’s important to remember that just having a public 800 number won’t get people to call you. You have to let them know about the number. Make sure to list it in big bold print on all your marketing materials and ads, and make sure to put it on your business cards as well.

A Little Known Benefit of 800 Numbers
Most consumers aren’t aware of this, but every time anyone calls an 800 number, the recipient of the call gets the caller’s phone number. For most companies, this information is provided with every monthly bill, but large organizations can arrange to get the number provided in parallel with the call. This latter step is how many cable companies implement Pay-Per-View (PPV) – they get the caller’s phone number, match it to their customer database, and then enable that specific household’s cable boxes for the PPV program. 800 numbers provide benefits similar to “Caller ID” to vendors. Small companies can take advantage of this as well, without having the expensive real-time tracking links to the long distance carrier, just by keeping a time log of incoming phone calls and matching it their bill every month – this way callers can get matched up to their phone numbers.

Don’t Rely On Just 800 Numbers
With the nice benefits of 800 numbers, it’s often easy to overlook that your international customers don’t have access to your 800 number. After all, if you advertise, you can bet that at some point your advertisement will probably make it overseas. Always make sure to list your non-toll-free number in your marketing materials in addition to your toll-free number, even if you put it in smaller print.

The Importance of Real FAX
Another vital thing to add to your marketing materials is a FAX number. If you don’t have a FAX machine, your business will never reach its full potential. They’re cheap – buy one. If you want to use a computer to act as your FAX machine instead, just make sure it’s on and actively expecting FAXes 24 hours a day. Also, while it’ll save you $20-30/month, having your FAX share your voice phone line conveys a negative image to your customers, plus, many of the line sharing devices are a pain for customers to connect through. The shared voice/FAX number just shouts “I’m a one-man company!” to your potential customers. If they are looking for long-term stability, you won’t get it with the one-man shop image. If you’re selling anything of value, and want to sell more of it, get a separate FAX phone line.

Why is FAX that important? Tons of reasons!

  • International customers, by virtue of time zone differences and verbal communications barriers, tend to use FAXes to convey information and ask questions.
  • A FAX machine also acts as an answering machine that accepts written messages.
  • You can get contracts, purchase orders, and signed order forms sent to you in a flash.
  • FAX signatures are considered legal and binding in many states.
  • Also, sending a one page FAX during the evening or night is actually a lot cheaper than sending a one-page letter first class via the mail.
  • Sending a FAX is much more timely than mailing the same thing.
  • A FAX can be photocopied and distributed, whereas a voice message cannot.
  • A FAX shows your customers you’re serious about doing business with them.

Convinced yet? I hope so. The FAX is perhaps the most powerful piece of office equipment you can own, besides a telephone and a computer. And again, don’t forget to list your FAX number in every advertisement and marketing piece you produce!

An Answer For Everything
Unless you eat, sleep, and shower with your phone, at some point you’re going to be in a position when you can’t answer the phone when it rings. And the potential customer at the other end is going to be quite perturbed that he can’t get anyone to answer the phone. The solution is simple – get an answering machine. Make sure the message you record lets the caller know you care about their call and that it will be returned as soon as possible. If you keep some sort of regular business schedule, make sure you put that information on your tape as well.

Some answering machines are set up to automatically page their owners via a paging device if a call comes in, while others can be found built into phones or FAX machines (make sure it’s a two line FAX). What you buy should depend on your needs and habits.

Who Needs Telex?
While it once had its heyday, Telex service is a dying breed, totally superseded by the inexpensive and pervasive nature of FAX machines. It’s probably safe to not bother with Telex anymore.

Do It Electronically
Perhaps the biggest new communications technology after FAX, and fast becoming an easy access necessity, is electronic mail (e-mail). I won’t spend a lot of time here discussing the various types of e-mail you can get, other than to tell you that if you do get e-mail (and I recommend it very highly), make sure that people can send you mail over the Internet. Virtually all e-mail and on-line systems offer that sort of connection these days, at varying prices. If the service you’re looking at doesn’t, find another service.

Don’t Forget The Post Office
While all the other technologies described above are instant access technologies, it’s important not to forget the good old post office. Business reply postcards and envelopes are a great way to make it easy for potential customers to get written information back to you. This can be somewhat costly however, running you around 55 cents for each such  postcard a potential customer returns to you, and a little more for an envelope. All that means, though, is that you should make sure that you get something valuable back via the business reply card or envelope, such as a valuable new lead or even an order.

Let Customer Decide How To Pay
Nothing in modern merchandising bothers me more than when I go to a store and try to pay with my American Express card, only to be told they don’t accept them because American Express charges them too much for processing. The net result is that I usually won’t go to that store in the future and will instead go to a competitor that lets me pay the way I want to. The same goes for you as a company. Just because American Express may charge you an additional percentage point or two on the transaction, is it worth losing the sale (or future sales) because of a measly few dollars? I don’t think so. Those that think otherwise are extremely shortsighted.

Of course, if you don’t currently accept any credit cards as payment, you’ve got even a bigger problem. Talk to your local bank and see what it’s going to take to be able to accept credit cards. A lot of banks give small companies, especially ones that do a lot of mail order business, a hard time in getting merchant status for things like Visa and MasterCard. Persevere and you will usually get the result you want. If not, lots of independent services will process credit cards for you, for a small fee. Ironically, American Express is a breeze to get to be authorized to process – just call the local American Express office to have someone visit you. I should mention that credit card processors tend to charge anywhere from 1% to 5% of the transaction amount, with the range in fees depending on your volume and average charge amount. Fees aside, credit cards are THE most convenient form of payment for most of your potential customers. If you force them to send you a check instead, you’ll loose a lot of sales.

Obviously, you should take checks, and if you’re concerned about them bouncing, just wait a few days to let them clear before sending out product.

CODs (Cash On Delivery, offered by most parcel carriers) are also check based, in that you get checks returned to you a few days after your product is delivered to the customer. You can specify whether you want to limit the checks the carrier accepts for your product to just cashier’s checks or money orders, which are almost as good as cash. You can also specify you will take personal and company checks – these have more risk associated with them, but the odds are still in your favor.

Finally, many large companies really like to have payment terms, so they can pay you 15, 30, 45, or more days after you bill them (and after they receive your product). This form of payment is much more difficult for smaller companies to handle, but if you require the buyer to provide a written purchase order (or just P.O.) in order to process such an order, your likelihood of getting ripped of are greatly diminished. One word of warning, however – avoid taking P.O.’s from outside your country. If a foreign company defaults on payment to you, there’s usually little you can do exact compensation from them. In your own country you can at least use collection agencies, for a fee, of course.

Conclusion
I’ve shown you a great many ways to make it easier for potential customers to contact you and order from you. Most of these methods are really just common sense. However, many people, especially small business owners, have a propensity for being penny wise and pound foolish, and therefore don’t take advantage of the small things that might cost a little bit of money in order to make lots more. Don’t let this lack of vision happen to you.

Are You Paying Too Much For Everything?

Tuesday, March 1st, 1994

(First published in the CAD++ Newsletter in early 1994)

Or, A Lesson in the Proper Channels

It’s often difficult, when first starting your own business venture, to come up with the necessary funds to get the equipment and other materials you frequently need (or just want). This includes magazine subscriptions, new PCs, software utilities, and countless dozens of other things. Now, if you could be assured of getting name brand products at wholesale prices, all for the cost of a few stamps or phone calls, wouldn’t that be worthwhile?

At this point, you’re probably wondering if I’m trying to sell you one of those Price Guarantee Club deals or something. Nope, nothing that obnoxious. What I’m going to tell you about will be obvious once you think about how manufacturers sell products.

The Product Sales Food Chain
In order to get a product to consumers, manufacturers in the PC industry use several channels:

  • Distributors, also known as wholesalers, get large discounts from manufacturers, ranging from 25% to 60% (hardware manufacturers usually offer smaller distributor discounts than software manufacturers). The reason distributors get such large product discounts is because they tend to buy in large volumes and then sell only to dealers and resellers, ranging from the mom-and-pop shop to the big retailers (Egghead, for example).
  • Resellers/Dealers get smaller discounts from manufacturers because, in theory, their volumes are lower (usually ones and twos for most CAD dealers). If a product is available through distribution, this will frequently be the easiest way for a reseller/dealer to obtain the product, although nowadays manufacturers are offering lots of perks to resellers who buy direct. Figure that a reseller/dealer can usually get products at anywhere from 15% to 45% off.
  • Mail Order companies. These guys are another form of reseller, but because they don’t have to provide much support or offer a store front (or even a visitable office), their overhead is a lot lower, which is why they are able to pass much of their discount on to you.
  • Direct. Most manufacturers these days offer products direct to consumers these days. All it takes is a phone call. Frequently they are running some type of special that might get a you better deal than you’d get at your local computer store.

Now, why is this important? Because, as a reader of this publication, you probably qualify as a consultant, and many consultants also resell other companies’ products. So, this means, as a consultant, you could honestly promote yourself to distributors and manufacturers as a reseller (think of the price benefit you could provide your acquaintances with!), in most cases.

The reason you won’t always qualify has to do with the various levels or types of reseller programs manufacturers offer, as follows:

  • Authorized Reseller, Type 1. This tends to be the most stringent type of reseller program, requiring certain volume commitments, and certification that you have certain skills. Frequently, a business plan is required. Unless you intend to spend most of your time actually reselling these products. This is the type of program that most large CAD companies use for their mainstream packages.
  • Authorized Reseller, Type 2. This one is a lot less painful, and easier to deal with, as it requires you to fill out a reseller application, and possibly a credit application, but the likelihood of not being approved is virtually non-existent. Most distributors require you to fill these out. Think of it as a great way to build a credit history for your business.
  • "Hi, I’m a reseller/consultant/dealer". For many manufacturers, telling them this is good enough to get you dealer pricing, although you may have to buy more than a single product to kick off your reseller status with a given manufacturer. It also frequently gets you access to low-cost, not-for-resale versions of the manufacturers software. Microsoft had a program like this where you could get a not-for-resale copy of any program they offered for only about $50. It may still exist, but I haven’t checked it out in the last couple of years.

Note that just about any company you try to buy product from as a consultant/reseller/dealer will also require you to supply a State Sales Tax Reseller’s Exemption Certificate (or simply said, a Sales Tax ID), which is something you’ll have to apply for in your own state (usually with the Secretary of State or State Department of Revenue). This certificate basically indicates to the companies that you are purchasing goods from that they should not charge you sales tax for the products you purchase from them, because you will be reselling or integrating the products in your offerings and charging your customers sales tax instead. Legally, if you keep the product you purchased for your or your company’s personal use, you must pay your state the sales tax for the product, since the distributor or manufacturer didn’t charge it. On the other hand, if you got the products via mail order from a different state, there’s currently no real way to track the value of such transactions, so your conscience must be your guide. Several bills are floating around Congress to force mail order companies to collect sales taxes for all destinations because states feel cheated in their sales tax revenues. For those of you in Europe, some countries handle VAT (Mehrwertsteuer auf Deutsch) in somewhat the same way as U.S. states handle sales tax.

If you have a Sales Tax ID, most distributors and manufacturers automatically assume you are a reseller. I should point out that if you live in a state with no sales taxes, like my current home of New Hampshire, you may have to argue with the distributor or manufacturer for a while to explain that no Sales Tax IDs can be had in your state.

A couple of the largest distributors you should be aware of: Ingram-Micro at 1-800-456-8000 and Merisel @ 1-800-MERISEL. Call them and ask for reseller applications and sample catalogs. You can also call Computer Reseller News at 516-562-5000 to get a sample issue and a subscription form, now that you’re setting yourself up as a consultant who resells. Finally, to get yourself on all the proper lists to get mailings from people who think you’re a reseller, attend a COMDEX tradeshow or two. It’ll work wonders for getting on mailing lists.

Alternate Channels
I’ve spent a lot of space here on how to be considered a reseller to get lower pricing, but I wouldn’t want you to overlook the obvious: buying generic and buying mail order, and developer programs.

While buying products from distributors is great for name-brand products, you can frequently get a better deal going with generic versions (i.e. a no-name local brand PC vs an AST PC) or by going mail-order (Gateway, for example). This is very likely to be a worthwhile bit of research when looking for systems, peripherals, and other hardware, but not for software, where distribution or the manufacturer are far better options.

Developer Programs
My company is a registered developer with a bunch of CAD software companies. When we started out 6 years ago, at several thousand dollars a package, there was no way we could have possibly afforded to pay for all the CAD packages we use for testing and developing. The CAD companies realized this was a problem, and came up with registered/authorized developer programs. By signing up with these programs, you can get free copies of pretty much any of the software a given CAD company offers, providing you sign an agreement to only use the software for testing and development purposes and not for any real commercial CAD use. If you’re developing a CAD add-on, that’s not a bad deal.

Registered developer programs are not only limited to CAD software companies. Most large software companies tend to have such programs, where they may offer their product at a discount to developers. Novell, Microsoft, and Lotus, among others, offer these types of programs.

Other Types of Soft-Goods
Before I close out this month’s column, I’d like to mention two often overlooked computer related items: Books and magazines.

I’ve found two ways to save on books. The first is arranging an institutional discount at our local Barnes & Noble, where they whack off an additional 5% off the existing 10% they already provide on all books. They justify this because we buy hundreds, if not thousands, of dollars of books per month. It’s a good thing to try to do if you have several avid readers in your community – pool your buying power.

The other way, which also involves buying in volume (10 books at a time), is to go direct to the publisher. For example, Random House, which has published my latest collaborative work, AutoCAD
Power Tools
, offers anyone who orders 10 books at a time a 50% discount. If you whine and wheedle, they may even let you mix and match.

Finally, we get to magazines. At Panacea, we get over 30 different magazines delivered to us a month. We pay for none of them. Some we get because we filled out a little qualification form for a free subscription, but many we get because we are "comp’d". A "comp" subscription is a complimentary one, given to you by the publisher either via a sales manager’s request, or via an editorial request.

Getting the advertising manager to comp you on a subscription requires just a call to the magazine you want, asking for the sales department, and explaining to the sales manager why it is you are interested in his or her magazine as a potential venue for your advertising. The magazine should have some relation to what your business does, since it’s unlikely that you’ll convince a sales manager for a cycling magazine that your CAD product is a good match. If you have a reasonable match, ask to be put on the comp list. More times than not, a sales manager is not going to risk annoying you by refusing your request for a comp subscription in case you really will advertise with the magazine at some point in the future.

Getting an editor to comp you is much more difficult, and can generally only be done in one of two ways. The first is that you write for the magazine occasionally (more on this in a future column). The second way is if the editor in question is a friend or an acquaintance that needs your help every so often (for quotes, for example).

Conclusion
Many people in our industry often pay much more for products than they need to. All it takes is a little entrepreneurial spirit and some know-how, such as what I have provided, to be able to save a little bit of money for the future.

The First Step

Tuesday, January 1st, 1991

(First published in AutoCAD Market (The CAD++ Newsletters’ predecessor) in January 1991)

Let’s say you have a product – a device, software package, or
service – that you think you can sell to the public at large.
Does it (and do you) meet the following criteria?

  • It solves a problem and/or makes certain tasks easier.
  • It has a target audience.
  • It works solidly and reliably.

These criteria are important for anyone, whether it be a
one-man operation looking to start up or a large, established
company. Let’s look at why these criteria are important in
launching a product.

Solves Problems/Increases Productivity
Unless you’re the kind of person that can sell refrigerators
to Eskimos, you need a product that will make sense to the people
you try to sell it to. If it solves a problem, especially a
problem that is really irritating, then it makes sense. In the
AutoCAD environment, a good example of this is a plot spooler.

A plot spooler helps eliminate the wasted time spent waiting
for a plotter to plot a drawing. That wasted time translates into
time, and hence, money. A plot spooler also happens to increase
productivity – but almost any product that solves a problem will
do that.

If your product is a service, it still needs to meet this problem solving need. Services such as plot scanning, 900 numbers for ACAD help, and being an AutoCAD dealer all meet this requirement.

I should point out that "sex appeal" plays a part, especially for products that are not especially useful. Sex appeal not only applies to beautiful models wearing the latest in skimpy apparel, but also to products that touch the emotional part of the soul. These "sexy" products have to look neat (as in "wicked awesome" – a term widely used by today’s teenagers) and appeal to our sense of adventure. An example here might be the "beetle" mice, mouse warmers, or even Autodesk’s Animator. Animator is definitely useful, but generally only to the small set of humans that have creative and artistic skills. But yet, Animator and its resultant creations, raise that emotional spark in the rest of us, giving us the feeling that by using that package, we might in fact find an artistic streak or a flair for visual creativity within us.

Target Audience
In addition to solving problems, your product must have a market. If there are only 14 other people in the world who can use your product, you either have to be able to justify an outrageously high price, or have minimal overhead – and this only applies if you can easily contact these 14 people.

What this boils down to is that you need to target your audience. If it will take thousands of phone calls, letters, etc. to land minimal business, you should probably find another product. However, if your product applies to a reasonable subset of people that you can target (i.e. 20% of all readers of XYZ Magazine), then you have a potential winner, just by using XYZ Magazine to market your product.

Target audience mismatch is one of the biggest flaws in product marketing strategies. This is important to consider if you are planning on developing a product you think will be useful to others, because targeting an audience should be part of your development and design efforts. Too often, an engineer will develop a "great" product, only to discover that no one wants it. You shouldn’t be developing pink pastel gun racks for members of an all-macho-male gun club, nor should a portable cassette player mean one that weighs 10 pounds and comes with an atomic generator on wheels.

Targeting also applies to price. Look at other similar products that may already be on the market and see what prices these products sell for. Look at what features they offer that are better or worse than yours. And based on that, price your product. If the competing companies have had the products on the market a while, these companies have probably determined the best price point for their product, and you can use their research. If you don’t have much to differentiate yourself with, offer a lower price. Make sure however, that your price covers at least your material expenses, such as packaging, shipping, and even phone calls. This gets a little bit more complicated if you go through dealers and distributors, and I’ll cover pricing and price elasticity in a future issue.

If the product you have is new and different, you can do some inexpensive research that will help you better price your product. Call other likely targets. Also take advantage of local user’s groups and even electronic conference, such as CompuServe. Ask questions and maybe provide an incentive, such as a discount on the product, in return for useful information. This approach can also help you tailor the product more towards your target audience.

Solid and Reliable
This should go without saying, but unfortunately, pride in workmanship has sagged badly in past years, and usually seems to be inversely proportional to the size of the company behind the product at times. In any case, in order for you to survive in the long run, your product must be solid and reliable, and if a customer discovers a problem, do your damndest to resolve it, quickly. The best way to ruin a company is to ship incomplete or buggy product, or provide lousy service.

Secondaries
If you managed to respond positively to the three main requirements above, you may have a good chance establishing your product in the market place. Two other criterion are useful to help you do a better job of marketing and selling your product:

  • Writing well or having a friend who can write well.
  • Being able to afford to spend at least a couple of
    hundred dollars.

Writing Well
Writing is important because it is used in a wide number of areas: product manuals, product literature (brochures, etc.), cover letters, correspondence, and publicity. If you do the writing yourself, always have someone else proof it. If you have someone else do your writing (preferably someone known for his or her writing skills), compare it to how you would write. Have them compose a sample cover letter, and use it as a template for all your future letters. And use your spell-checker or dictionary. There few things that will turn off an educated customer more than improper use of language and bad spelling.

Money
Money is always important. The reason I specified a couple of hundred dollars is because that’s what it will take to buy an answering machine and get a separate phone line installed in your home. This is to make sure that once you start your marketing efforts, any customer or potential customer can get in touch with you. Make it as easy as possible for a customer to order your product. This grows down the road into 800 numbers and FAX machines, as well as BBSs and participation in electronic conferencing systems.

Summary
While this is still a coarse view of product planning and marketing, using these tips should help put you on the right course towards making a product successful and profitable. See you in the next Garage Entrepreneur!