On February 24th we had a great panel discussion centered on pricing, customer retention, and referrals. The panel featured 3 professionals representing a pretty diverse range of industries, expertise and professional backgrounds which made for a great discussion on a rich topic. The panel featured Ralph Derrickson, President & CEO of Carena Inc. Ralph has a background in venture capital at Vulcan. Jen Kellum Nausin is VP of Marketing at Trover and was formerly Director of Marketing at Cheezeburger.com. Michelle Saro is currently VP of Marketing and Business Development at iJet Onboard. Her experience includes involvement in 7 start-ups. To recap, we’ll share some of the questions that were posed (in italics below) followed by a summary of anecdotes and takeaways from the panel’s responses.
What are your biggest hurdles in retaining customers?
There was some great discussion here with a couple of commonalities echoed by the panelists. For one, all stressed the importance of figuring out and qualifying 1) who the target customer actually is and 2) which customers are most likely to be retained (since retention is typically much cheaper than acquisition). A lot of time and money can be spent just trying to figure out who the target customer profile should be, and marketing needs to figure out who this is, especially in a startup with limited means. Ralph and Jen also noted that their industries’ pace of change often requires them to pivot to figure out how to continually address their customers’ needs.
Discuss your customer base from the standpoint of new versus repeat and existing users. How do you think about them and how do they differ in terms of value?
Panelists really stressed the value of existing and repeat customers given the major investment (in both time and dollars) necessary to acquire new customers. This is especially true in industries such as Michelle’s (airline) where the target customer base is very finite and those clients are especially valuable and time consuming to obtain. Ralph stressed that rejection by customers is as important as success. Learning who isn’t going to buy your product and why is at least as important as learning who is buying. This traces back to the point above and the importance of defining your target customer.
What systems or strategies have worked in the way of obtaining referrals?
All panelists underscored the importance of referrals in growing their customer base. Jen took special focus on highlighting the importance of early stage partnerships as a means to obtaining referrals. When your company can work with another company to serve your customers both of you benefit and it can be a great way to grow your business. For instance for Trover (a travel startup) they have created some early stage partnerships with MSN and Bing. Ralph mentioned that the damage of one bad referral from Business to Business could be higher compared to Customer to Customer. Thus, it’s important to find the dynamic of the market to obtain referral by focusing on the 2 M, Marketing and Model to Make Money.
What steps have your companies taken in building their public images? Did the image evolve organically or was its evolution deliberate and strategic?
Every panelist echoed that their firms had very intentional and deliberate focus on constructing their public image. All had varying reasons for caring but noted the importance of how their firms were perceived within their industries, the press, and with customers. This can’t be left to chance. In Michelle’s case her customer base is so finite (and accordingly, each player so important) that iJet must exert a lot of control over its image. For Ralph, controlling the public image is especially important because his firm straddles two industries, technology and healthcare (which is very sensitive to image), which have very different cultures and values so he needs to manage his image accordingly. He very purposefully created an environment that would inspire others by combining cultures from health-care, technology and marketing.
How did you develop your pricing strategies and have they evolved over time?
The group had a really rich discussion on this topic. In Michelle’s case her pricing must be cost based because so much of the airline industry’s pricing is already rooted in a cost-plus model, so iJet needs to conform to this industry norm. Ralph noted that his company tried to employ cost based pricing but it was hard given industry dynamics (for one, costs are obscured in the healthcare industry). Carena’s pricing has become more value based over time as they’ve become better known in the industry and they’ve better understood the value of their product to the customer.
Ralph also stresses that you’re never going to get pricing right. You’re going to scrutinize and debate it, but it won’t be perfect. Pricing is fickle and developing it is a trial-and-error process to some extent that is shaped by your company’s culture, product or industry. It’s never perfect and it’s often hard to construct (especially in the case of a startup) because you often have no data or value system. Strategy plays into pricing significantly at all stages of the growth curve, but as your industry or product matures it tends to become clearer.
–AllergenAware: Bijal Ghedia, Chris Daily, Max Sun, Pei Yu, Rob Penney and Jenn Brock