28 November 2017
In a high-tech world the opportunities for e-commerce entrepreneurs are seemingly endless. But to grow their bright ideas into sustainable businesses, they have to know how to market them - and it starts and ends with the customer.
By Dr Mlenga Jere
The internet has become an incredible business enabler. It has not only reduced barriers to entry for entrepreneurs in many markets, but also created new ways of reaching customers.
We've seen the huge success of innovations like Uber that allow people to receive services on demand. The internet has also given businesses the ability to offer their products and services directly to consumers without the need for bricks and mortar shops.
The opportunities in e-commerce are so rich that new ideas seem to be launched every day. The best of them challenge traditional markets and disrupt the way that competitors are used to doing business.
Take Utyre for example - a tech start-up in Cape Town that has turned long-established business models in the tyre industry on their head. When South Africans have needed new tyres, they have always had to take the time to drive their cars to a fitment centre, where they invariably wait an hour or more for the work to be done. Nobody thought of taking this service to the customer. Until now. Utyre takes orders online, where customers can search for and choose the tyres they want, as well as where and when they want them fitted. A mobile fitment unit goes to wherever it is convenient for the client.
It's a great idea, and one that has already proven successful in Australia, which is where Utyre's founder picked up the model. However, the question that it and other businesses like it have to answer is: how do they turn their idea into something sustainable and successful?
Such businesses have very little in the way of competitive advantage. The model is easy to replicate and is therefore extremely vulnerable. If the established companies in the market feel threatened by the upstart, they could easily start their own, similar offerings, probably with far more capital behind them.
The one thing that disrupters do have in their favour, however, is first mover advantage. As the first company to bring a concept to market, they have some leverage. And it's important for them to use this head start to build their brands in a way that will help them remain robust. The only way to do that is to have a strong value proposition and delight the customer so that they not only have return business, but their customers become their best marketing tools.
This is easier said than done, because a new business in an untried market faces real challenges. For a start, they are immediately competing against established companies with big brands that might have a strong physical presence and a fair amount of customer loyalty.
Customers are also used to doing things a certain way. They know how things work in the traditional industry and unless they have a dramatically bad experience, is there enough incentive for them to try something new?
For many people, e-commerce businesses also cause some anxiety around the safety of their information. There is still resistance to entering details like credit card information online, and the recent revelations about Uber's data breach and cover up will do little to alleviate this concern.
In essence, the challenge facing the e-commerce start-up is building trust. They have to show that what they are offering is credible, that it delivers an experience superior to what customers are used to, and that it can do so repeatedly.
The e-commerce entrepreneur needs to appreciate that their very early customers are a precious resource and it's critical that they are not disappointed because they will spread the word either way. Word-of-mouth is powerful in the early stages of any business and is even more so in an untested market. Potential customers will care a lot less about what the business is telling them about itself, than what they are hearing from others. Increasingly this is not just in personal interactions, but on social media. The things people say on Facebook, Instagram or Twitter have become vital in building a brand.
Social media is obviously an ideal platform for e-commerce businesses, since it is cheap and reaches an audience already using internet services, but start-ups also have to be careful about how they use it. What people want is authenticity. Customers are becoming increasingly sceptical about what businesses say about themselves, and rather looking for independent voices on social media.
This is true even when those voices are people they don't know. This is the concept behind ratings sites like TripAdvisor. Potential customers may not personally know any of the people who have reviewed the restaurant they are thinking of visiting, but they trust their feedback far more than the restaurant's own marketing material.
Few industries have the equivalent of TripAdvisor, however. Start-ups like Utyre therefore have to encourage their customers to spread the word on their own. They have to provide an avenue that encourages customers to talk.
While social media is powerful, it is not likely to be enough on its own. Start-ups need to find a multi-channel approach that engages people in other ways too. Whether that is through traditional media like radio, or identifying opportunities to reach potential customers in places where they are likely to be receptive to the idea.
In the case of Utyre, the company has distributed air-freshener tags that double as tyre tread depth indicators through a local car wash. It's an innovative way to reach the kind of customer they are likely to attract - someone who wants convenience, values service excellence, and probably has a low interest in the technical details when it comes to their car.
Crucial in any marketing campaign however, is to make sure that when you do attract customers you deliver what you promise. If you give them more than they expect and encourage them to share that experience with others, you will have turned your customers into your most potent promotional tool. And for any start-up, that is marketing gold.
Dr Mlenga Jere is an Associate Professor in marketing at the UCT Graduate School of Business (GSB). This article is based on a case study written with MBA student Warren Gatcke. The case study is one of ten recently published by the Case Writing Centre at the UCT GSB as part of a wider aim to increase the amount of African-centric, professional teaching material for business schools around the world.
Issued by Rothko on behalf of the UCT Graduate School of Business. For more information please contact Michelle Ford on 021 448 9457.
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