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Here are the Top 10 Basic Principles that every aspiring entrepreneur should know.

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Post Author: David Rusenko is a founder at Weebly, a company that makes a web creation tool.

I, [David Rusenko], first started working on Weebly in February 2006. I worked for about a year on it with Dan and, later, Chris’ help, and we launched a (very) early version of Weebly in mid-November 2006. We were TechCrunch’ed a few days later, and accepted into Y Combinator the same day. (On the morning of our YC interview, we woke up to discover we were on TechCrunch).

Weebly has been growing ever since then, gone through two complete visual redesigns, added numerous features, and doesn’t even resemble the product we launched with at all.

Here’s two of our graphs from May 8th 2007 — five months after we moved out to San Francisco and had been working on the product full-time:

The first is a graph of our new signups per day, and the second is a graph of our total user count per day. I’ve annotated the top graph with what events caused the major spikes.

There’s actually two very interesting things to note about the top graph: First, we had already closed our angel round at this point — looking back, our investors placed a huge amount of confidence in us.

Second, the new users per day looks like it might actually be declining a little bit.

At this point, I’d been working on Weebly for about a year and a half, and we’d been launched for over six months. Judging by the graphs, you might think things weren’t looking spectacular. This is the type of situation when people give up.

I’ve seen it quite a bit among startups — they spend more time developing the product than they do running it after they launch it. Several have followed the same pattern: build, build, build, launch, quit.

But you’ve got to keep with it to gain momentum. It doesn’t usually just build overnight, it takes time. Keep building your product, and eventually you gain momentum and a critical mass of people who know about you and tell others about you.

Now, here are the graphs from a couple weeks ago:

These graphs look a hell of a lot better. There’s 2 things I’d like to point out:

First, the “build it and they will come” mentality is a fallacy. You need to build something great and have distribution in order to succeed. And distribution is hard to get.

There are many ways to get distribution. One of those is through press. If you have a great product, the more people that find out about you, the more people will know about you. And they’ll tell their friends, who’ll tell their friends, etc.

Another subtle press benefit: you’re getting links from a bunch of very highly-regarded sites, and this helps out your rankings in search engines quite a bit, which builds more traffic.

There are plenty of other good ways to get traffic too, such as engineering for viral growth, but press can have huge benefits for the right product.

Second, in order to get people to use your product, you have to stay alive. This sounds obvious, but a ton of people spend 6 months building a product, launch it, and give up within 3 weeks.

Plain and simple, it’s going to take time for people to start using your product — there are exceptions, but it’s generally not the norm. So you need to expect that, and be willing to give it time. If you give up within a month or two, your product definitely won’t be successful.

Once you launch, people start to know about you. If you launch early, you can start earlier on the process of acquiring users. Don’t launch with a crappy product — launch as soon as what you have is better than what is out there. But don’t wait for a perfect product — launch as early as you can, get user feedback, and keep improving the product.

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Article Author: Matt Moore.

I [matt moore] postulate that every single successful technology company has had a winning distribution model.

Success of a product, and any business for that matter, can be measured by two simple rates:

  1. usage, how much a customer/user comes back and use your product again and again, and
  2. user growth (a.k.a customer acquisition), how many new users are finding and using your product

Obviously, both are important areas that products must have a successful strategy for – but user growth is at the heart of measuring success of distribution.

In fact, distribution is one of the most amazing aspects of the internet – it’s revolutionized distribution. It’s now able to be faster, broader, and more targeted all at the same time. Directories, and email started this revolution. It moved to search engines, advertising, and simple syndication. And it will continue to revolutionize, as we are seeing through social means (e.g. Digg & Facebook).

Famous Examples

Not sure if you believe me yet? Let’s take a look at some great examples from the past… and even the present!

gates-centerfold.jpgMicrosoft > IBM
Microsoft was paid $50,000 by IBM to put its operating system on every IBM PC that was sold. Killer distribution for a startup!

google50.jpgGoogle > Yahoo!
Yahoo chose Google for providing its search results, before it decideded to try to compete with them in search. Not before Google milked this distribution, obviously, and people went directly to google.com.

ipodphones.jpgApple iPod > Viral
Although I believe Apple started with a viral product (particularly because they were bad at partnering), the iPod is an even better example. A keynote and ads started the iPod revolution, but the genius was that they built viral distribution into a physical device: the white headphones – make any product a (fashion) statement, and it can be viral.

ppal.jpgPayPal > EBay
It was way easier then check & money orders, and the acquisition proved it. Product and network affect were important players as well, but initial distribution went a long way.

chad_n_steve_of_youtube_tn.jpgYouTube > Viral – blogs & email
Clearly the big winner of the acquired companies recently. It made sharing via blog embedding and emailing so easy, people couldn’t help but show their friends how to waste time too.

scribd.gifScribd > Digg
A much more recent example, at least from what I’ve heard, a great portion of Scribd’s traffic comes from the fact that its documents frequently get dugg. Obviously, there are similarities to YouTube as well, so viral distribution is also at play.

logo_beta.gifiLike > Facebook
The power of the newest form of distribution on the web, social sites like Digg & Facebook. Facebook apps, can get more than a million installs in 3 months. And it’s all due to the power of the social graph. Something to keep an eye on.

So How do I Distribute My Startup Product?

This begs the question of how to follow in the footsteps of these companies and design a successful model for distributing your product. Big companies have it easy – they typically rely on money to solve their distribution problems. They can easily afford large marketing budgets and big partnership/distribution deals.

But the internet is the great equalizer, and it will only continue to become more that way. The most popular, but incredibly difficult to pull off explosively well, is viral marketing. It’s still hard because it has to be inherent to the product – people have to intrinsically want to share the use of your product. Only then do the features that enable viral distribution matter, as Andrew Chen explains in Viral Marketing is Not a Marketing Strategy (talk about link-bait!). His tip: don’t think about what viral features you can add, but rather how your product fits into an intrinsic, viral loop. Another way to think about it is why will your user contact their friends about your product, strictly for their own selfish reasons? This could include being perceived as being intelligent, fashionable, fun, or humorous.

Even for viral applications, it can help to use a viral distribution product (and/or platform) that already has traction, like Digg or Facebook. Almost any truly viral applications can exploit the use of these networks, and quite easily at that.

Of course, not all products can be inherently viral. But, of course, you do NOT want to be selling to one customer or user at a time. Aside from the normal online distribution methods, like SEO & link-building, you *have* to find a distributor. Online distributors are typically easiest to find, whether it be the expensive Google AdWords, or some other online advertising. What might be more interesting, depending on your market is affiliate networks – where you pay someone every time they generate a sale for you, on (and even offline). I’ve always thought that college students would make great affiliate marketers, if implemented correctly (I mean, painting, for god’s sake? there has to be something more interesting – not that I want to upset paul)!

Other strategies including partnerships with real businesses require true salesmanship. There are lots of companies out there looking for a partner to do exactly what you’re doing (more than likely), so you just have to go to relevant industry events (a LOT of them) and meet the people in the companies you want to make relationships with. Amazing things can happen just by talking to a lot of people. Of course, this takes time, and you have to love it. At least, someone on your team has to. And be sure to practice spinning your product and company.

But I believe something better will be built out there for distribution of products, using social-like distribution strategies, but for products that aren’t inherently viral. I mean, searching for something you need after you know you need it is so 2002. The next stage in distribution is when great products are put in front of people who need it so they stumble upon it — before they even heard of it, and before they knew they needed it.

Authors Blog.  Due Credit to Matt Mooree

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In the last 2.5 years, Google has conducted the largest corporate experiment with prediction markets we are aware of. Here, we illustrate how markets can be used to study how an organization processes information. We document a number of biases in Google’s markets, most notably an optimistic bias.

Newly hired employees are on the optimistic side of these markets, and optimistic biases are significantly more pronounced on days when Google stock is appreciating. We find strong correlations in trading for those who sit within a few feet of one another; social networks and work relationships also play a secondary explanatory role. The results are interesting in light of recent research on the role of optimism in entrepreneurial firms, as well as recent work on the importance of geographical and social proximity in explaining information flows in firms and markets.

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Author: Douglyss Giuliana

 

Owner-managers of start-ups and small businesses have a long hill to climb. In order for the business to generate sufficient revenues let alone be successful managers must get the word out to the buying public. The entrepreneur must creatively marshal limited resources to promote, sell, and distribute the product. This is clearly a challenge for the small business for a number of reasons.

First, start-ups and small businesses have limited capital to spend on marketing campaigns. The capital they do have must be split between product development, personnel, operations, sales, and marketing. In addition, the battle for consumers attention from the growing number of companies and brands has driven up marketing costs. Managers must find ways to make the most of the marketing funds available, often relying on inexpensive and even free marketing vehicles.

Second, traditional marketing techniques have become less effective. Television, newspaper, and magazine advertising have simply become noise. Consumers are bombarded with so much advertising that they often tune it out, change the channel, or fast forward past it. In addition, consumers have become more and more skeptical of and insensitive to traditional broadcast advertising.

Third, these traditional techniques may not reach the target market. More people are heading to blogs for their news, satellite for radio, MP3s for music, and the Internet for entertainment. These media are, for the most part, beyond the reach of traditional marketing.

This post digs in to a number of alternative marketing techniques appropriate for entrepreneurs and owner-managers engaged in business-to-consumer venutres.

The Challenge of Entrepreneurial Marketing Start-ups and entrepreneurial ventures suffer from very limited resources, including personnel, time, and money. Yet, every business large and small must learn to cope with less, especially during times of downsizing, cost cutting, and reorganization. Even Fortune 500 enterprises wish for larger budgets and bigger departments.

Marketing also plays a key role in attracting other critical assets employees and capital. The start-up or small business must be visible, attractive, and look like a winner; these are things that customers, employees, and investors all look for.

The start-up or small business must be visible, attractive, and look like a winner; these are things that customers, employees, and investors all look for.

 

The Owner-Manager Difference:Decisions are made almost exclusively by the owner-manager in a small business or entrepreneurial venture; there is little if any delegation of tasks involving strategy, finance, control, and marketing. Therefore, any marketing activities will rely heavily on the owner-manager’s experience, expertise, and knowledge.

 

Marketing Strategy for the Entrepreneur
The small business owner-manager must often focus so much on daily operations that strategy is something left for much larger companies. In fact, entrepreneurs often start with an innovative product but little understanding of the target market. They are content to use their intuition, throw the product into the market, and see who buys. As customers start rolling in, the entrepreneur simply tries to find more of the same. This is quite the opposite of traditional marketing techniques where the target market is identified, a message is crafted, and a strategy to reach the target is developed. The traditional top-down approach of segmentation, targeting, and positioning is replaced by a bottom-up approach that starts with identifying an opportunity, attracting initial customer, and expanding by finding similar customers.

 

Marketing Mix
In choosing methods of communication, it is important to use as many methods as can be executed successfully. Multiple methods will reach a broader audience, and different consumers will be affected by different techniques. The investment in marketing is a bet on future returns. Much like an investment portfolio, you should spread the investment around to different vehicles. The trade-off is that spreading too thin might dilute each piece to be ineffective. Also like an investment portfolio, understand the potential cost and return of each option and craft a mix that maximizes that return.

 

The Offer
While most entrepreneurial ventures are based on an innovative and therefore differentiated product, it is important to understand why this is the case and the subsequent responsibility of marketing. Simply because of their limited reach and capacity, small firms perform best with a narrow focus. While the narrow scope allows the small business to cater to a specific market, it is also likely that the small market is not enough to attract the attention of larger competition, allowing the small firm to fly under the radar.

 

Market Research
It is rather common for an entrepreneur to start the business with only a limited understanding of the product, the market, the plan, and the competition. They go with their gut; they use intuition. They sense a need rather than rely on analyst reports or detailed competitive analysis. In fact, many entrepreneurs start with only a product or service idea, and then try to find a market for it. They focus on developing a great product and only later shop it around, then focus on the market that had the strongest response. Indeed it is innovation and creativity that propels the small business to success, but this contrasts the customer orientation that lies at the heart of marketing.

 

Word of Mouth and Buzz
Word of mouth is the direct person-to-person communication in which one person describes the attributes or experience of a product or service to another person. It occurs when we tell a friend about a great movie or when we brag to a colleague about a new car or a fabulous vacation. However, word of mouth is just as likely, maybe even more likely, to occur when we tell someone about a terrible meal we had at a restaurant or a new computer that constantly crashes. Good or bad, the word spreads. Word of mouth spreads from those who know about your product, typically existing customers, to those who are unfamiliar or maybe familiar but not yet convinced or sold. Many start-ups rely on word of mouth to attract that initial critical mass of customers, and many small businesses count on the recommendations for all of their new business. In either case, the high effectiveness and low cost of this marketing method makes it a staple for any resource-constrained venture. According to a 2001 McKinsey report, 54% of sales in the United States are affected by word of mouth.

 

Viral Marketing
Viral marketing is a special case of buzz in which the product itself is the way that word spreads. This term was coined by Steve Jurvetson who was one of the venture financiers of Hotmail. At the bottom of every email sent through Hotmail was the line Get your private, free email from Hotmail at http://www.hotmail.com By using the product, customers were passively spreading the word. This small start-up, with no spending on large media advertising, grew and grew until it was acquired by Microsoft.

 

 

 

Customer Evangelism
A customer evangelist tells your story and tells it to everyone. He purchases your product, believes in your business, recommends it to friends and colleagues, supports you even when you make a mistake, and provides feedback even before you ask. He wants you to succeed. This action and belief is based on an emotional connection the customer has with your product, service, or company. Customers become evangelists when they are so pleased with their experience with the product or service that they want to tell others and even want to help the business succeed. People love to talk about their experience with products and especially like to be the one that pointed out a great product that everyone subsequently adopts.

Building Brand
While strong brands are typically associated with larger, established companies that have had years to build a reputation and become widely known, a strong brand can also be successfully built by the small business. The purpose of developing a strong brand is in its ability to communicate the value proposition easily and effectively.

Partnerships
There are two types of partnerships that small businesses can take advantage of. First, by partnering with another small business, the two can join forces and their limited resources to promote, package, or distribute their products together. Beyond simply sharing the bills, the two businesses can split up the work and offer expertise that the other business might lack. Second, a small business can partner with a larger, established company. While this is typically much more difficult to accomplish, if a relationship can be forged, the small business can benefit greatly.

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Why does one product succeed while others crash? And why do the second and third products from a successful company almost always fail? The crew at Pragmatic Marketing determined that there are more reasons than features and price when determining the success (or failure) of a product, including “inside-out thinking” and the distractions of running a successful company. Here, they present 7 Secrets to dramatically increase the likelihood of becoming a market-driven success.

Why do some products fail while others succeed? that question keeps many CEOs, venture capitalists, employees, and shareholders up at night. Customers want to know too, because after all, they are spending their money on products.

The 7 Secrets of Market-Driven Leaders :

SECRET #1 = Work as a Trusted Advisor
SECRET #2 = Build from the Outside-In
SECRET #3 = Simple is Smart
SECRET #4 = Leadership is Distributed
SECRET #5 = Stop Being a Vendor
SECRET #6 = Marketing with a Big “M”
SECRET #7 = Measure only what Matters

Download [Must Read] Full Article as PDF Here.

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The practice of ‘price skimming’ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market.

 

The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls.

 

The success of a price-skimming strategy is largely dependent on the inelasticity of demand for the product either by the market as a whole, or by certain market segments.

 

High prices can be enjoyed in the short term where demand is relatively inelastic. In the short term the supplier benefits from ‘monopoly profits’, but as profitability increases, competing suppliers are likely to be attracted to the market (depending on the barriers to entry in the market) and the price will fall as competition increases.

 

The main objective of employing a price-skimming strategy is, therefore, to benefit from high short-term profits (due to the newness of the product) and from effective market segmentation.

 

There are several advantages of price skimming

 

• Where a highly innovative product is launched, research and development costs are likely to be high, as are the costs of introducing the product to the market via promotion, advertising etc. In such cases, the practice of price-skimming allows for some return on the set-up costs

 

• By charging high prices initially, a company can build a high-quality image for its product. Charging initial high prices allows the firm the luxury of reducing them when the threat of competition arrives. By contrast, a lower initial price would be difficult to increase without risking the loss of sales volume

 

• Skimming can be an effective strategy in segmenting the market. A firm can divide the market into a number of segments and reduce the price at different stages in each, thus acquiring maximum profit from each segment

 

• Where a product is distributed via dealers, the practice of price-skimming is very popular, since high prices for the supplier are translated into high mark-ups for the dealer

 

• For ‘conspicuous’ or ‘prestige goods’, the practice of price skimming can be particularly successful, since the buyer tends to be more ‘prestige’ conscious than price conscious. Similarly, where the quality differences between competing brands is perceived to be large, or for offerings where such differences are not easily judged, the skimming strategy can work well. An example of the latter would be for the manufacturers of ‘designer-label’ clothing. Source

Image Credit: Darwinbiz

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