10 BUSINESS STRATEGIES
June 1996
An ISP has to be quite a technical wizard to run his operation. However, modems, servers and hard drives are not all you need to be more successful as an ISP business. The truth is you also need sales and marketing and customer satisfaction.
While the Net is so ultra hot, acquiring customers probably has been pretty easy for you. Run an ad or hang out a shingle and new subscribers come in. More good news is outfits like AOL keep generating dissatisfied customers creating a wider stream of incoming subscribers for you.
The bad news is the "fun and easy" times won’t last too much longer because big corporate guns like MCI and AT&T want it all; all your subscribers that is. You probably have only two choices; let them put you out of business, or be big enough so they buy you out when the consolidation times come. Money for them is not as important as market share and a huge buying spree is in the cards if you have something to offer. Did you know the going rate for cable TV subscribers was $1500-2300 each when the average cable bill was around $7 a month? Trust me, the mega coporations will pay you big for your Internet subscribers.
In my "old days" I was in the cable TV business, back in the early 70s when the FCC regulated the business and catered to the network bosses. I was always in sales and marketing and hung out with sales types. It was a bit of a shock to learn the technical staff had a very low regard for me because I was "just a salesman." They felt what was important were the coax wires and the amplifiers and the head-end gear. They were right but on the other hand, without subscribers, the business was going nowhere.
After my sales people sold customers cable TV, another issue became important; service. We would sell ‘em but subscribers would quit almost as fast. Field service and the cable TV business office in those days was a disaster. In some cities, it still is.
A few companies started to buy other cable companies and now in the 90s we’ve got less than 10 companies totally controlling the entire industry with TCI alone controlling about 50 or 60 percent of America. That same thing is going to happen in the ISP business. You can either be a winner and sell out or get kicked in the teeth. What are you going to do?
For one thing, you need more than technical savvy. You need to grow a business or die before the buy-out opportunity time is here. You can’t do it alone. I personally can’t be a good ISP because I can’t handle technical issues and you probably aren’t a salesman or an office manager or an accountant, right?
I’m not saying the following 10 business strategies are everything you need to know or everything you need to do to grow your ISP business and be alive and well when the big bucks are offered, but it’s a start. Business is business and you have to do it mostly right to be successful in the long term.
1 - Hire Great Sales People
Let’s assume you’re not a salesman. Even if you are, you need to be a manager and not do every job in your company by yourself. You’ll need good people to do for you what they do better than you. The most important job is generating new sales. You need to hire a sales person or two or three.
I say two or three but I could easily say five or 10 sales people, not necessarily all at once. Most sales people are lousy sales people so what you need is the math on your side. If you suddenly had 10 people out peddling, only one to three will be successful, making you and themselves money. Expect to have to hire and fire and hire and they quit. Don’t worry about that. It’s just part of the reality of developing a good solid sales crew.
I have a hiring rule which may sound prejudiced, but it has been my experience that certain types of "experienced" sales people are bust-outs. These are real estate people, insurance sales people and retail sales people. I have hired, trained and managed thousands of sales people and these folks just don’t work out.
What you want are inexperienced sales people. What? How can I say that? It’s true though. Younger people, men or women, with little or no sales experience who are enthusiastic and hungry are the best to hire. They "don’t know any better" and just go out and start selling. They’re not full of "you can’t do this" and "you can’t to that" baggage. They just take what little tools and information you provide and start talking to people and selling product. Find some of these people and hire them.
2 - Love Them
Good sales people are highly emotional. Also, they are moderately to very insecure. They need quite a bit of attention and affection. The better they are at selling, the tougher they’ll sound, but their talk is 99 percent BS. They desperately need to feel appreciated and wanted and needed. They need lots of love.
You need to tell them how great they are. Listen to their stories and their sales problems. The best sales people are very lazy, i.e. they want to find ways to make more sales in less time with less effort at less cost and more profit. The problems they bring to you will be road maps to making their selling easier, which is also what you want. Stroke them. Listen. Be nice to them and let them love their work at your company.
3 - Handle The Volume
So here come the sales. Now you’ve got to handle the new business with aplomb. If you’re suddenly getting, say, 10 new orders a day but can’t get to more than six or eight and do a very good and timely job, you have to make business changes. With your staff’s help stop and figure out what your company (not you alone) has to do to make new business get online smoothly and with customer satisfaction. Chances are you need a check list system or some other simple way of being systematic.
Maybe you need a new system or one or more new employees. At some point ASAP it will be important to know exactly how many people, dollars and widgets you need to add, say, 100 new subscribers. Armed with that information, you’ll know exactly when you have to add a tech or a customer service representative or a phone line as you grow. Don’t expect to double your business, for example, and not add people and resources to your company. It won’t work. Add people before you need them.
4 - Customer Satisfaction
If everyone who ever signed up with AOL was still on AOL, they’d probably own the whole online market. But AOL (it’s OK to keep picking on them, isn't it?) is adding 250,000 new subscribers a month while losing a little less than 250,000. Their cost of sales is astronomical! This is called churn. Churn is defined as the number of new subscribers you have to sell and install to net one new subscriber. Once I worked at a cable TV company in Texas where the churn was 9. My team had to sell 900 new people to net 100 subscribers! Boy was that depressing.
Why do your subscribers quit? You’re going to have to find out ASAP and stop everything that is causing them to disconnect. Just as likely, you’ll have to start doing new things you’re not now doing to keep them happy.
You see, you can have a (much) higher cost of sales if you have a much lower churn. A new sale must be defined in this larger context. Just ask your accountant.
When the mega corporations seriously start invading your market, people will flock to them for several reasons. The top of the list is customer satisfaction followed by name recognition followed by confidence in the company. People will automatically assume AT&T will answer the phone 24 hours a day and simply "handle" whatever ISP problem they have called about. You have to compete against that and if you’re a weak ISP, your customers will be the first to defect. Why? Because they’re already online and want to stay online and will assume better service from the big corporations.
Notice I didn’t say subscribers would defect from you because of price. You may be sensitive to price meaning you think your customers are sensitive. But people don’t quit because of price too often. They quite because of service. Give them what they want and charge what you have to to make a sturdy profit at that level of service (the level which customers expect/demand) and you will keep your subscribers. All around you you’ll see other ISPs trying to compete with price, but they’re losers in this business battle. You compete on service. And make sure your prospects and your customers know it.
5 - Charge More, Pay More, Make More
One of my most successful strategies in 30+ years of sales management has been to slightly overpay my people. I like to overpay about 15-25 percent compared with my competition. The reason is I want the services of only the best people in my company. I can do with three great players what my competition can’t do with five also-rans.
When a person is considering working for you, he/she compares your employment opportunity with all other potential employers. If you’re paying $10 and hour and that’s the going rate paid at the majority of companies needing the same type of job filled, people will tend to select the bigger more established companies; often those with better benefits. That leaves your company saddled with hiring the second stringers. However, if you pay $12 and hour, for example, versus the $10 going rate, you’ll far more easily be able to attract and keep the better people.
This strategy will also save you lots of money. Four or five average people can’t do what three excellent employees can do. If one average employee costs $400 per week, having five on your payroll will cost you $2000 per week. Paying $500 per week each to three excellent employees, your payroll is only $1500. Plus, the three can possibly do 2X or 3X times the quality work as the crew of average people.
Another big bonus of this strategy is in business combat situations. You can’t sit around with dullards and seriously contemplate business strategies and system implementations and fall-back positions. You need players who can work and think, both. For that advantage in your company, just pay more, then let them do more. When you hire excellent people, they always come through.
6 - Be Uniquely Customer Service Oriented
Marketing is an art and a science. Many rules have been proven over time and always work. These solid rules are always based on an understanding of human nature. Cooperate with human nature and be successful. One proven rule is people are lazy. Accommodate that fact and your business will soar.
For example, here’s one idea for your ISP business. Rather than do what every other ISP does, offer personalized customized service when a new customer subscribes. People willingly and happily pay more for clearly superior service.
Since about 90 percent of customer problems are in the start-up phase of getting online, solve that problem to reap the rewards. I recommend creating two start-up packages that cost $69 and $99 to get online with your company. Further, set your monthly service rate 20-30 percent higher than the going rate in your community. Simply put, charge more than your competition.
Scared, eh? Charge more than my competition? You also think $99 is way too high, right? But wait. Here’s what you do with your $69 or $99 budget and what new subscribers receive:
1. Provide superior customer service. Be the best in town. Be known for that fact. Make service your ISP company logo. That’s your marketing and the true experience of doing business with you. You’ll be able to easily afford providing the best service in town because you’re charging more.
2. Pay the whole up front fee as a commission to your sales person. Yes, I said 100 percent.
3. Install online service to new customers by having your sales person go to the customer’s home or office. Make personal installation of your service integral to the sales process.
4. Your sales person installs the software, configures to modem and all the other settings, tests the whole package then turns the PC over to the customer in complete (online) working order.
5. Depending on the package they buy ($69 or $99) your new subscriber now receives either 15 or 60 minutes of hands-on instructions right on their PC. The sales person gets them up and running and having fun right then and there. Avoid FTP, Gopher and all the other marginal services. Keep this simple and satisfying. Show them email and show them the Web. Stop.
You enjoy:
No tech support calls. No frustrated subscribers. No after-the-sale remorse. We’re talking surfing and email right from the gun. We’re talking instant customer happiness! You’ll smoke the competition!
BTW, don’t violate #2 by paying less. You need to create a system whereby superior sales people can earn superior pay. Don’t pay sales people hourly or on salary. There’s no incentive. Only weak sales people like hourly or salary compensation plans. The people you want prefer commissions because they can make more money. Let them make more money. This is the win-win system.
7 - Think Seriously About A Partner
Would you be just as happy or happier simply handling the technical side of your business? Chances are taking on a partner or a general manager will be a successful move. Like a good marriage, each brings something to the business and you both prosper.
Consider actively looking for a partner and one with money is best. Sell off some of your company and make this a working relationship. Were you free to make things purr on the technical side, your partner can manage the other critical business functions at your company.
Michael Jordan is a great athlete but he failed trying to switch sports from basketball to baseball. Could you really be as competent in all phases of your ISP business as you are in technical issues? Probably not. Start actively and aggressively looking for a partner to team up with for the greater good of your company. After all, 50 percent of something big is better than 100 percent of a small or defunct operation.
8 - Advertising Versus Selling
Almost a lost art in America, the real proving ground for superior salesmanship is door-to-door selling. Nowadays door-to-door can also mean telemarketing. It can mean consumer sales or sales to business prospects. Regardless, my point is to generate/create sales by going directly to your prospects versus general advertising, which almost never pays for itself, much less makes you a profit.
Reject every type of advertising suggested to promote your business. No newspaper ads. No magazines. No bowling score sheets. No specialty magazines. No plastic-packed flyer bags. No billboards. No radio. No TV. No nothing.
I don’t mean this 100 percent because at some point in your company’s growth, advertising will be useful and profitable. In the early stages of business development, there are much better ways. For example, direct sales is the most powerful, no contest.
If I came to your town and went door to door from business to business and asked business owners if they wanted to get on the Internet, every day, without fail, I would return with new subscribers. Why? Because I was there in their face and simply asked for the business. Ask and you shall receive is a solid sales rule. The more people I ask, the more I will sell. I don’t even have to be particularly good at selling. I would have math on my side. It’s a numbers game and door-to-door selling is the best because it always succeeds. The name of this game is prospecting.
Prospecting is worlds apart from selling. Prospecting is finding people who already want what you sell, not selling them what you offer. Meeting disinterested prospects means I move on. I don’t try to sell. I recommend spending your energy on prospecting alone. Try it. Set out target (test) areas and start knocking on doors. Your sales people need to have a nice simple qualifying spiel they will deliver and the rest is math. You could test areas of your community for consumer sales or business sales or both.
9 - The DM
Unless your sales people are speaking with the DM, the decision maker, their efforts are totally worthless. In the vast majority of cases there is only one DM per household and one per business. The DM (owner) must be identified and an audience with that person is the critical key to sales success. In sales, often 90 percent of energy is expended in getting to see the DM. Selling is about 10 percent of the job. I can be half the sales person you are and make 10X the sales by being great at getting to see the DM. Thus, the prospecting function are efforts made to see and speak with the DM. No one else will do, period.
10 - Customer Satisfaction Research - Why and How
Imagine two companies equal in every way but one. In my ISP company I do research to know and understand how my customers feel about (perceive) the service they are receiving from me. In your ISP company, you don’t make the effort. If this were true, it will only be a (short) time before I win over all your customers to my company and you’re out of business.
The business game is not about just price and service. The winning posture is to be willingly and enthusiastically offering customers exactly what they want; not what you want to sell. You do this by polling your subscribers and doing market research. For example, the CEO of a top-5 computer hardware company has tripled business adding hundreds of millions of dollars in profits in just three years. His main rule is to build and sell what customers want, not what he and his executives think they or the general public wants. Simple, eh?
I recommend you use the power of email to do your surveys. You’ve got all the email addresses and email is free and fast. Now here’s the key; ask just one question. Ask "Are you completely satisfied with the service you receive?" and you’ll get maximum quality actionable results. Don’t get into scales of 1-10 or check boxes or other techniques. By asking one powerful open-ended question where the subscriber must type in text, you will get both the content and the emotion of what your customers feel and perceive. The critical words in the question are "completely satisfied" and must be included. Don’t even dream of changing one word. Run the survey 4X annually. Take business action on the results.
Closing Comments
Are you doing what every other ISP is doing to run and promote your business? That approach is wrong. You need to test new ideas and be open to new concepts and approaches in everything you do. The Internet is so new and everything is changing so fast, new and different is the norm, not the exception.
If you’re not too creative, listen to the creative people on your staff. Don’t have any? Get some. Look for people with energy driven personalities that smile and talk a lot and seem forever to be generating new thoughts. Combine innovation with customer satisfaction research data to make your ISP a big big winner.
© 1996 Home Page Press, Inc., All Rights Reserved. Permission to reprint/republish this article is hereby granted only when you provide credit to Home Page Press, Inc. and the URL http://www.hpp.com in the acknowledgment.
Dear ISP Reader,
The staff at Home Page Press is hopeful the report you just read will assist you in growing your ISP business. We plan to add more content for ISPs like you in the future.
Perhaps you would consider doing Home Page Press and your subscribers a favor?
Kindly tell your subscribers about Home Page Press in email, especially about Online Business Today and Go.Fetch. OBT is our FREE Internet business newsletter. You're very welcome to sign yourself up for OBT too. OBT is FREE. You and your customers will find other valuable resouces at this site, like Go.Fetch, our exciting new "browser buster" Internet personal agent software. Thank you again for coming by our site!
Sincerely,
staff @ Home Page Press