Scott Porad

I’m thinking of a conversation I had over Chinese food with a friend who is the manager of a camera shop in Seattle.

Let’s imagine you ran this shop. Obviously, you’ve experienced a lot of competitive pressure from e-commerce over the last decade. If someone knows they want the latest camera gadget there are all sorts of ways to find the best price online for the identical product. These types of businesses have been dropping like flies for some time now.

Lucky for my friend, they’re considered the leading retailer in town, primarily catering to professionals and enthusiasts who expect a high level of service and expertise. As a result, they’ve withstood the competition better than many because these qualities are hard to replicate online.

Of course, with social media these attributes are becoming easier to replicate. Online retailers can develop one-on-one relationships much better than they could have just a few years ago, and social media is still in it’s embryonic stages. Just wait another decade to see what it’s like.

This presents both threats and opportunities to my friend.

On the one hand, the tools of social media make it easier for online retailers to chip away at his competitive advantage by exposing service and expertise online.

Yet, on the other, the opportunity for him is to extend his reach—his customer base, his audience—beyond his local geographic area.

In my view, this opportunity is easier to achieve for him than the threat is for the other guy. In other words, it will be easier for him to put his expertise online through social media than it will for online retailers to develop the expertise.

To start, his store been in the business for 50 years or more…the competition has a lot of catching up to do.  Social media is, at most, five years old.  In addition, the same qualities that have made their store successful—knowledge, service and personal relationships–are those needed for successful customer development through social media.

All that being said, let’s forget social media for now and just think about a topic that has been on my mind quite a bit lately: audience. It was the notion of audience that came to mind over Chinese food.

My friend mentioned that he was going to the Consumer Electronice Show in Las Vegas like he does every year. I asked if he was having any sort of event for fans of his shop.

No, he said, and I pressed a bit further: I’m suggesting not a giant party like the big boys do. Just some sort of a meetup or gathering at a bar…something cheap and easy…for the people who are connected to your store to connect with each other and with you in person.

“No, Scott, you don’t get it. We’re the ones who get invited to the parties, we don’t throw them.”

Our conversation moved on, but I couldn’t help thinking: someone else is developing you as their asset because you’re part of their audience. Although, you’re overlooking an opportunity to further develop an audience of your own.

For your customers, especially your online customers, you would be strengthening their membership in your audience. Perhaps unnecessary, but you can always widen the moat around your island.

And for your vendors, the people who would normally be wining-and-dining you? Seems to me that the extent to which you can make that a mutually appreciative relationship…that you make them part of your audience…well, I don’t see how that can’t benefit you in the long run.

Even backing off from CES, what would happen if once a year my friend threw a party for his audience: his customers. Not a “buy stuff party”, but a genuine “thanks for being a friend of the store party”? To me, this seems like a no brainer.

In a world where audience is becoming everything (because so many products and services are becoming commodities) investments that strengthen the personal relationship you have with your customers seem to me like they would have an enormous ROI. It may be hard to measure directly, but to ensure that your customers don’t even think of looking for a camera elsewhere because they have a friend at the local shop seems priceless.

Ultimately, my point is that Internet and all of the changes it has brought is changing the dynamic of who and what is an audience. My view is that, these days, an audience is quite possibly the most valuable asset, and developing an audience is an important investments to make.

Here’s a really valuable lesson: if you had $5 and 2 hours to make as much money as possible, how would you do it?  That’s the question that Tina Seelig, a professor at Stanford, asked her class.

The nominal lesson that Seelig gains from the experience is that that one of the keys to entrepreneurship is to be flexible and think outside of the natural constraints of the problem.  She split the class in to three groups, and each set them about their challenge:

One group employed a loss-leader strategy: they setup a free bike tire pressure testing station on campus, and if your tires were flat then they offered to pump them up for a small fee.

Another group used an arbitrage strategy: they acquired reservations at popular restaurants, then sold them to people waiting in line.

But, the group that made the most money thought outside of the box: they sold a classroom presentation to a consulting firm that wanted to recruit students from their class.

Photo Credit: Steve McN.

Personally, I see a totally different less in this experience: the understanding that the asset is the audience.

I was making a similar point last week when I talked about how important it is to get your product in front of the right customers:

…once you know your potential customers, how do your reach them? Effectively, this is sales and marketing. Typically, product development types detest the marketing types as slick, do-nothing, blowhards. But, it turns out, they have a pretty tricky job which is, “how do I put my product in front of my potential customers in a cost-effective way”. Turns out this is easier said than done.

The bottom line is that when you have an audience what you have is a set of consumers, and when you have a set of consumers there is inevitably a set of sales and marketing people who will pay to get in front of them.

Of course, this is not revolutionary: it is the fundamental premise by which media companies like Cheezburger work.  Media companies offer content so that an audience is attracted to their broadcast, and then sell visibility to that audience to advertisers.  However, and this is why I’m writing this post, it’s an asset that is often overlooked.

Twice yesterday I had conversations (one in person, one over IM) with entrepreneurs in Seattle who have ideas for startups.  One idea was related to helping bloggers better monetize and the other was related to providing cheaper services to cell phone users.

Both of them come from a product development background—one is a designer and the other a developer.  Both of them were able to eloquently describe for me the product that they wanted to create.

In addition, after a little inquiring, I was able to work with them to effectively articulate the market of people who would be interested in their product.  For example, with the second person it was “people who want e-mail alerts on their cell phone, but don’t have a smartphone”.

With the second person, I had some more time than the first, so I pushed further…here’s a part of our chat transcript:

Me: So, how do we reach these people?  That was the problem with your last startup…you had a great idea, but couldn’t find the customers, right?

Startupper: hmm, reach – I would suppose we’d have to sell it to a carrier, or get an article on Tech Crunch

Me: So often we think about how to make a great product, but often the product isn’t really the issue.  I’m sure, like your last startup, you could build this app great.  The issue is really how to get it in front of the right people.

To me, this seems like a pretty critical sequence of understanding for people who want to launch product companies.  Really a company is more that the product: it’s the product plus the customers.

• First, there is your product—what is it, how does it work, etc.  Most product development types can figure this out, and typically when you go out for drinks with them they have lots of ideas for products.
• Second, there is defining your market.  In other words, who would want this product and how many of those people are there?  I have a few killer product ideas, but there aren’t many people who want them.  That’s not to say they’re bad ideas…they’re probably just bad businesses.
• Third, once you know your potential customers, how do your reach them?  Effectively, this is sales and marketing.  Typically, product development types detest the marketing types as slick, do-nothing, blowhards.  But, it turns out, they have a pretty tricky job which is, “how do I put my product in front of my potential customers in a cost-effective way”.  Turns out this is easier said than done.

This reminds me of a few conversations I’ve had recently.  Yesterday, I was at coffee with Andy Sack and he made the comment to me that one of the most important things he learned as an entrepreneur is the importance of sales.

And, earlier this year I was having dinner with Jeff Sass who made the interesting comment that, paraphrasing, everything is becoming a commodity—hardware, development, even design…everything except marketing.

Finally, Eric Ries said to me over drinks last fall that that startups fail, not because they don’t have a good product, but because nobody wants to buy the product.  I would add my own corollary to that: many startups fail because they can’t find a way to get their product in front of the people who do want it.