Enews December 2017

Learn And Perform E News – December 2017 – How Uber, Airbnb and Etsy Attracted Their First 1,000 Customers


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Greetings to all Learn & Perform subscribers,

Welcome to the Learn and Perform E-News! This is Palan, the contributing editor for this month.

In this E news, December 2017, we will cover the following:

 

1. How Uber, Airbnb and Etsy Attracted Their First 1,000 Customers
2. SMR News



How Uber, Airbnb and Etsy Attracted Their First 1,000 Customers



In a 2016 July Harvard Business article Michael Blanding covers a very interesting read on

Thales Teixeira�s work. The study focusing on three of the most successful �platform� startups to understand the chicken-and-egg challenge of how companies can attract their first customers is a valuable read for all of us. Some extracts from the article.

New businesses often struggle finding their first customers. The challenge is even more difficult with startups in the sharing economy that launch as platforms connecting independent service providers with consumers.

Uber�s platform is two-sided, connecting people who need rides with people who have rides to offer. This is similar to Airbnb, which connects people needing rooms with home-owners. So, to launch as a platform service, these companies need to find users on both the supply and demand sides. Harvard Business School�s Thales Teixeira, Lumry Family Associate Professor of Business Administration says: �When you have a two-sided platform, you have to acquire both the customers and the services. It�s the classic chicken-and-egg problem. You can�t have one without the other, but which one do you find first�the customer chicken or the service egg? As a small company you cannot afford to focus on both with the same amount of effort. You may need to prioritize one side.� Teixeira studied three of the best-known and most successful startups�Uber, Etsy and Airbnb�hoping to find some commonalities in how those businesses solved the dilemma. Spoiler alert: it�s the egg that needs incubating.

As Teixeira reports in a new HBS case, Airbnb, Etsy, Uber: Acquiring the First Thousand Customers, all three platforms concentrated on getting the service side of the equation first, customers second. But there�s a catch. �It�s not just the chicken and the egg, you also want to select the right eggs,� explains Teixeira. �If you acquire the wrong eggs and ostriches come out, then you are in trouble. The chickens will run for the hills.� He talks of three lessons:

  • Lesson One: Think Like A Customer
  • Lesson Two: Create A Better Experience
  • Lesson Three: Sequencing Is Everything
Launching in situations of high demand and low supply also helps startups acquire the right type of customers�those early adopters who might be more forgiving of a company while it works out the kinks. After all, beggars can�t be choosers, and if you are thankful to even have a room during a conference, maybe you�ll forgive the lack of hand towels. The last thing a company wants during its early phases is negative word-of-mouth.

�You are still a startup,� says Teixeira. �You have to find people who are willing to accept your flaws and cut you some slack. Satisfying all their needs and wants is just not feasible at this early stage.�

Nevertheless, he says the challenge is to move up to the next level. The Next Lesson: From 1,000 to 100,000,000. With early adopters in place, a company can start thinking about how to expand their customer base through more traditional means of marketing. In each case, the strategies are different. While word-of-mouth might work for the first thousand it�s not going to get you to a million. �You have to be more proactive and control the acquisition process, which word-of-mouth does not allow for.� That�s where digital marketing can help, allowing companies to target specific customers through search ads or social media at a low cost. �It�s highly targetable and you can do it on the cheap,� says Teixeira�adding that digital marketing also makes it easy for companies to rapidly iterate its advertising message, tweaking it to figure out what works best. �Only after passing the millionth customer can you go into advertising on traditional media. That�s when you need massive scale, so you go to mass marketing.�

As a company grows, it must consider the purpose of advertising in order to achieve the best effects in gaining new customers.

�Some tools are better for the beginning, some are better when you are bigger,� says Teixeira. �It�s not about, should I use digital marketing or word-of-mouth or TV ads. The question only makes sense when you say,

‘I am at this stage, what approach should I take?’

Only when you answer that question will you know what tool is most appropriate.�

In other words, he says, �You need the right size of eggs for each stage of your nest.�

To read the full article and get to know more about his work

Visit

Visit Thales Teixeira’s website The Economics of Attention.



SMR News



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Let me take this opportunity to wish all of you Season�s Greetings and to those of you celebrating � Merry Christmas and Happy New Year. Look forward to being in touch with you early 2018.

 

Will be in touch soon.

Best wishes,

Palan

Contributing Editor, Learn & Perform E News




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