Over the years I’ve seen a number of networks built where the service provider didn’t really know how many customers they might get. I always called this ‘build it and they will come’ because they invested money into an expensive new network with the hope that sales and marketing efforts would somehow make the new venture profitable.
Sometimes this has worked and sometimes it has resulted in spectacular failures. In looking at the failures, I see that every one of them exhibited some degree of “build it and they will come”. There are a number of reasons why a telecom venture can fail, but the number one reason is not getting enough customers. The second most common reason is doing a poor job and not retaining customers after they have been signed.
You can’t always avoid ‘build it and they will come’. For example, if you are building a business-only telecom company in a larger market, there is no amount of research that is going to tell you ahead of time how you will do. Selling to business means slugging it out face-to-face with consultative selling and your success is going to ultimately going to come down to your ability to sale and the performance and the reliability of your network and your customer service staff.
But there are steps you can take that will help assure success in smaller communities or with business plans that include a lot of residential customers. Historically you could get pretty good market data using well-designed customer surveys. I wrote an earlier blog discussing why surveys are no longer a reliable took and I won’t repeat that whole argument here. In a nutshell, the fact that most homes no longer have a landline telephone has killed the ability to do a believable random survey in a small market.
So, if you can’t do a survey you can believe, then how can you know ahead of time how well you will do in a given market? If I was investing in a new venture today I would only commit the investment if I had pre-sold enough customers to assure myself of success. There are a number of ways to do this:
Strong Market Name. If you have strong market name recognition in a new market then you can get potential customers to pledge to your new network. This is the tactic used by Google in Kansas City. They have a strong enough name recognition that they could rely on customers to pledge that they would buy services if Google built to their neighborhood. Certainly every customer who pledges doesn’t follow through, but most of the do, and so, if you have a good market name, then some sort of a pledge campaign is probably good enough to give you assurance.
You don’t have to be Google to have a good name recognition. For example, a municipal provider might have a good name in their own City if they already do a great job in selling water, power and other utilities. In smaller towns a local nearly telephone or cable company might have a good enough name that most people in town know them and want their service. And in parts of the country where cooperatives are prevalent, a neighboring coop can have tremendous name recognition.
Canvas the Area. If you don’t have great name recognition, or if you are an unknown start-up, then you most effective technique is to do a door-to-door canvas and talk to everybody in the proposed service territory. That sounds expensive, but it is not nearly as expensive as building the network and then finding out that nobody wants to buy from you. A canvas is essentially a survey, but when you knock on most of the doors you overcome the limitations from a poorly designed survey and you can believe the results of a canvas if it is done correctly.
You also have to consider a few other issues such as if you want to take a deposit, and if so, will that deposit be refundable in the future. Taking deposits will eliminate some people from signing up, but you can feel pretty secure about building a network to people who ponies up money ahead of time – they want your service. If you really want to be sure before you build, make potential customers sign contracts. Just beware that such an effort is very labor intensive and will take a long time.
The days are gone where you can build a network and just assume that your marketing skills will make you successful. You need to put the marketing effort in up front, before you commit to the build. Only then can you have a good assurance that your new venture has a real chance of success. Anything less than that is a crap shoot.