Americans love a good underdog story. Think “Rudy,” “Rocky,” “Star Wars,” “It’s a Wonderful Life,” and the cult classic “Red Dawn” – we love it when the little guy overcomes impossible odds to rise to victory. It’s a great way to get elected too (the “outsider” from humble roots in Arkansas, Kenya, Georgia, etc.), and it can even work pretty well in marketing (Avis’ “We try harder” campaign; Apple’s “1984” campaign).
It’s one thing to root for the underdog; it’s another to actually be the underdog. This is especially true in business. Businesses spend billions of dollars annual to build and maintain powerful brands for a reason; once you get to the top, it’s hard for the new kid to knock you off the block. Are there sodas that taste better than Coke or Pepsi? Of course! Will these sodas ever overtake the leaders’ market share? Unlikely. Like it or not, purchase decisions are heavily influenced by brand.
The massive buying power, brand strength, and resources of large brands are very intimidating to new entrants into a market. So much so, that many entrepreneurs surrender before even launching their business. Imagine, for example, that you had an idea to create a better search engine than Google. You go down to Sand Hill Road – home of the most prestigious venture capital firms – and you pitch your concept. The objections that you’d hear would no doubt include:
- Even if your idea is better, people love Google. They won’t switch;
- It will cost billions of dollars to keep up with Google’s massive team of engineers;
- If you get any traction at all, Google will just copy/steal your idea;
- It’s been tried before – it can’t be done.
These are all strong arguments against starting your business. And while most new businesses don’t have to compete against Google like the hypothetical one above, in any category where there is money to be made, there is a strong brand standing between your new business and success.
I had this thought myself when I started PPC Associates. There were – and are – tons of large, talented SEM agencies out there. Some of the larger agencies spend millions annually on marketing, have dozens of well-polished salespeople, and have the “cover your ass” (CYA) credibility that comes with being in the business for many years. Why would any sane company choose PPC Associates over one of the SEM giants?
As I’ve discovered over the last few years, there are many reasons (thankfully!). And I suspect that the circumstances that have enabled PPC Associates to take a small dent out of larger SEM agencies exist in many other businesses as well. Here are some of the ways our agency managed to succeed – hopefully they will be valuable to you and your business:
- Offer pricing the big brands can’t/won’t touch: Big brands get very comfortable with high-margin, low-expectation clients. As such, they tend to shy away from customers who won’t pay them ridiculous prices, or who require actual work! As a start-up, you are likely hungry for any business to just put food on your table. Taking the table scraps from the big boys at a price that they could never match is a great way to drive market penetration of your disruptive service or technology. At PPC Associates, in our first year, we offered monthly PPC management for just $500/month – a fraction of the $10,000+ that top agencies charge (note: now that we are bigger, our fees have gone up quite a bit, but we are still at least a little less expensive than the big boys!).
- Win on service: The bigger the company, the harder it is to pay attention to every customer. As a result, many customers get bad service from big companies (there are rare exceptions to this rule, e.g. Zappos, RackSpace, and Nordstroms). Promise these customers extraordinary service and then deliver on this promise. You’ll steal away business from the brands, and you’ll build lifetime net promoters who will help you bring in more business in the future. At PPC Associates, we’ve focused on customer satisfaction above all other metrics, something I can say with confidence is not the focus of many large digital agencies.
- Set reasonable short-term goals: Don’t expect to become number one in a year or two. Instead, measure your company’s success with simple, achievable goals. This can include goals like “achieve profitability,” “add one new customer a month”, or “hire one employee by the end of the first year.” Don’t get disheartened if your first year (or first few years) do not result in market domination. At PPC Associates, our first year in business was in a coffee shop, with no employees, no Web site, and just a few clients. And we (um, I) were very happy!
- Establish niche-expertise: An expert at everything is an expert at nothing. Many large brands believe that growth is established through “horizontal expansion” – moving into new categories of services or products. This ends up diluting the expertise of the brand and opens up an opportunity for smaller competitors to attack an area of weakness. Think about what happened to Yahoo – they dominated search, until they decided that they wanted to focus on email, media, news, sports, jobs, and 50 other topics. Google started small – just search – and ate Yahoo’s lunch. At PPC Associates, we realized early on that few SEM agencies had much experience working in the rough and tumble world of Silicon Valley start-ups. We made a point of reaching out to entrepreneurs and venture capitalists, and today we probably represent more Internet start-ups than any other agency.
- Iterate rapidly – the way big businesses cannot: Big businesses have armies of lawyers, product managers, QA engineers, and brand marketers. Any change requires numerous approvals, meetings, and documentation. A relatively simple task that might take your business five minutes might take a large business five months (example: we’ve had corporate clients say that it would take them three months to implement a basic tracking pixel!). As business moves faster and faster, small businesses that can quickly change to meet new business needs can win deals that big businesses cannot. We’ve seen this at PPC Associates a lot. Google releases a ton of new features every quarter (social extensions, topic targeting, new YouTube formats, DCO, etc) and we quickly build these new tools into our processes.
- Reduce CYA barriers: Doing the right thing and doing the thing that will keep your job are sometimes different choices. Choosing a new agency or software or product is risky at a large company – if it works, you might get a pat on the back, if it doesn’t, you’ll likely get fired. Hence the phrase “no one ever got fired for choosing IBM.” As a start-up, there are many ways to reduce customer anxiety: offer a free trial, suggest a “bake off” of your product versus a big competitor, craft a phased integration that starts with a very small amount of work. One of the best innovations we’ve had at PPC Associates: offer clients a 48-hour out clause. Instead of requiring a one-year commitment, we require two days. If we do a terrible job, the internal person who brought us in can easily kick us out.
At the end of the day, starting a new business and trying to compete against people who are bigger, more credible, more experienced, and richer than you is a daunting task. There’s a reason that 50% of small businesses end up failing. Of course, 50% also end up succeeding. One thing is certain: if you never start your business, your chances of failure are 100%. As the Great One said “you miss 100% of the shots you don’t take.” Here’s to hoping you take a couple of shots in 2012!
– David Rodnitzky, CEO
– Questions? Comments? Email us at blog at ppcassociates dot com.