If you had a great product and gave it away for nearly free, how long before you would have a big customer base?

This is one of the questions I sometimes ask when I am consulting to a new start-up, particularly one who thinks they are going to ‘disrupt’ the market in one year. In many cases I may have doubts about how good their product or service is, but in this exercise we assume that it is the best on the market and for some strange reason they can give it away for almost nothing, indefinitely (perhaps they plan to fund it via advertising, perhaps they plan to simply sell the business when the customer base is large, perhaps it is hyper-automated – let’s not worry about that).

So, let’s assume you have a new way of testing advertising that is better than anything on the market and almost free (let’s say $100). How quickly would your business grow? The answer is, usually, not very fast. The following hurdles tend to inhibit growth:

  1. How are people going to know about your service? Few buyers read press releases or the magazines with ads in them, they don’t attend many conferences and only rarely go into exhibitions. Even when you begin to be well known in one market, you will have to start almost from scratch in the next country. It can take several years to become well known. One of the companies that rose to fame faster than almost any other was BrainJuicer, but it was launched in 1999 – it took 10 years to become famous, similarly it took Vision Critical 10 years to go from Canadian start-up to global fame. Ten years is a stiff benchmark. Perhaps the fastest mover at the moment is ZappiStore, but it is already 6 years old, and is probably at least two more years away from being a household name (even in the houses of market research buyers).
  2. You may need to pivot. Because success does not come overnight you may need to change direction, which will add to the time it takes to become famous. One brand that broke into the Global top 4 last year in the GreenBook GRIT Innovation ranking was InSites Consulting, but it started in 1997 as a Belgian website evaluation company, it was only in 2006 that it pivoted on its route to global fame, which then took about 8-10 years.
  3. Once people hear about you, how long before they believe you are good enough to use. Even if you are almost free you have to be believed to be good enough. Usually that means people will have to trial you. If your results are the same as other companies then you are not better, but you are good enough. If your system is better than other companies it will produce different results, with different results it will take longer to show you are good enough – for example the gap between tests and market success/failure (typically a couple of years).
  4. For some buyers you will never be good enough until other companies have used you for a few years – which is part of the classic adoption curve.
  5. Where are all the salespeople going to come from? Unless you are selling a self-buy-off-the-web type operation you are going to need to phone people, email people, set up meetings, do negotiations, and follow –up. It takes time to recruit, train, and equip an effective sales team.
  6. What about changes in benchmarks? Your test may be better and free, but the client has benchmarks and a system that relates to those benchmarks. If they want to change the system they will have to work hard to change the rules and perceptions inside their company.
  7. How quickly can buyers change their habits. We know from Daniel Kahneman’s work that people are basically lazy, they use System 1 (the auto-pilot) whenever they can and System 2 (the thinking bit) when they have to. Changing supplier requires clients to use their System 2. They may mean to make the change but 100 other things compete for attention.

So, do not give up, but do not think that overnight success happens overnight, it is usually the result of years of groundwork. So, my key tips are:

  • Ensure your business is going to be viable for a five-year window to gain reasonable traction. The combination of funding and revenue has to take you through a reasonable period of time.
  • Have a plan for how you (by which I usually mean your product) is going to become famous.
  • Develop an effective sales approach.
  • Create pathways to usage, work out how somebody goes from slightly interested to using you and try to replicate that.
  • Know when to pivot, if you keep doing the same thing you will get the same results, if the ‘thing’ is not working you need to change the thing or change the result you are aiming for.

Note Zappistore is a sponsor of NewMR, GreenBook is a media partner, and Vision Critical is a client of The Future Place.

One thought on “If you had a great product and gave it away for nearly free, how long before you would have a big customer base?

  1. Couldn’t agree more! Don’t remember how many times I have said almost the same things to potentially disrupting startups. Of course, not to discourage them. People with potential to disrupt must read this to succeed.

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