Be an Ethical Entrepreneur, Marketer, and Business Builder

Why WhatsApp is NOT everything that’s wrong with the economy

By WhatsApp Inc. (http://media.whatsapp.com/) [Public Domain], via Wikimedia CommonsFacebook recently purchased a startup with no profits for $19 billion dollars in the largest tech acquisition in history.

The venture capital-backed, tech startup world is rife with problems as I’ve blogged about before.

However, Robert Reich has brought up one of the more popularly alleged economic problems.

He claims the problem is that tech companies like WhatsApp are hurting the economy by not creating enough jobs.

In Reich’s words:

Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line – or spread the gains more widely – our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.

In other words, Mr. Reich is saying, “55 employees were able to make a business worth $19 billion dollars serving 450 million people and that’s not fair. Why do such a small group of people deserve so much?”

Of course, he offers no solutions other than to mention income inequality implying that it’s the fault of successful companies like WhatsApp for being successful.

Venture backed start-ups with insanely high valuations, minimal revenue and no profit have all sorts of issues.

But not creating enough jobs is not one of them.

Remember the Luddites rioting to destroy new machines that made the textile industry more efficient back in the 18th century?

Richard Arkwright invented his cotton-spinning machine in 1760 which became one of the main instigators of the Luddite riots.

After all, the cotton-spinning machine would displace the jobs of all of the seamstresses who used to make the clothes by hand, right?

In 1760, there were about 7,900 persons in England engaged in production in the textile industry. In 1787, 27 years after Arkwright’s invention and only 8 years after Ed Ludd destroyed 2 stocking frames allowing his name to become synonymous with all the machine destroyers, there were 320,000 people employed in textile production in England.

Why did more efficiency results in a 4400% increase in jobs?

Because with increased efficiency came lower prices so, instead of having 2 sets of clothes, people could afford to have dozens.

The same complaints have been lodged against every major technological advancement.

Every time we progress, the Luddites come out claiming this time the new increase in efficiency is going to hurt the public by reducing jobs.

The exact opposite is true.

About two centuries ago, the majority of America was an agrarian (i.e. farming) society.

However, the invention of farm machinery didn’t result in the majority of Americans starving because they were no longer needed on the farm. In contrast, less people on the farm meant more people inventing, building, and creating other things.

At its core, economics is very simple.

If something increases efficiency it’s good for the economy. If it decreases efficiency it’s bad.

WhatsApp figured out how to connect 450 million people with only 55 employees. That sounds hyper-efficient to me.

Our knowledge-based economy has seen the fastest and greatest improvements in efficiency and leverage the world has ever known.

The end result of that increased efficiency is always an improvement for society.

Massive fortunes were made by Rockefeller, Ford and Carnegie when we transitioned from an agrarian to an industrial economy.

More recently, Gates, Zuckerberg, Page and Brin have been richly rewarded in our transition from an industrial to a knowledge economy.

Would we all be better off if none of them were allowed to reap the rewards of their creations?

You have 2 options

Become a Luddite, slow down technological innovation, and reduce the reward for being an innovator by asking the government to intervene.

OR

Learn what it takes to excel in the knowledge-based economy and join the successful companies that are improving our lives.

Time will prove, once again, that Robert Reich, despite all of his experience, power, and prestige, is no different than Ned Ludd whose name became synonymous with the machine destroyers’ failed attempt to halt progress.

The problem is education

The problem is not our exponential increases in efficiency.

The problem is an education system that was built at the beginning of the industrial revolution and is still designed to teach students to be good “workers” instead of great thinkers.

As the owner of a marketing tech company who has been almost steadily hiring for 2 years, I can assure you that the education or degree of people who succeed on my team is irrelevant.

A particular degree, or college education at all, cannot predict job success as well as cognitive reasoning abilities, emergent leadership, the ability to learn quickly, a passion for your expertise and a willingness to make mistakes while admitting when you are wrong.

Google recently revealed their top 5 hiring attributes and indicated that the number of people at Google without degrees is increasing.

So whether it’s Twitter, Google, Facebook, WhatsApp or my company, Optimized Marketing, fast growing companies that understand how to leverage technology are coming to realize that relying on someone’s particular degree or level of education is not a good predictor of future job performance.

In other words, our education system isn’t reliably producing people with the skills we need.

The problem isn’t successful companies.

The problem is we haven’t yet learned how to educate students for the knowledge economy.
Don’t blame successful entrepreneurs for not making more jobs.

Celebrate their success and start teaching more people how to do the same thing.

There’s a reason Ken Robinson’s below TED talk explaining how schools kill creativity is the most popular TED video ever with over 25 million views.

Mr. Robinson’s talk is popular because he’s right.

Whether creativity comes in the form of becoming the dance choreographer who wrote Cats or the founders of a successful startup company that sells for billions, creativity is the solution.

Taking away the rewards of creativity, as Mr. Reich seems to be implying, would further hinder creative pursuits and not help anyone.

Imagine what the next 100 years will look like if we are all allowed to “come up with original ideas that present value”, as Mr. Robinson defines creativity.

To your passionate, creative success,
Bryan

P.S. For more examples of technology increasing employment in various industries, check out Henry Hazlitt’s Economics in One Lesson.

93% of Word of Mouth happens on this Social Network… It’s not Facebook

Before I tell you the name of this social network, think for a second about your marketing budget.

Word of Mouth

How much are you investing in Facebook? Twitter? LinkedIn?
Don’t think just in terms of money.
How much time are you investing in each of those?

If you could get 93% of the results with a single social network, are you willing to invest your time and money where you can get the best results for the least amount of effort?

According to research by the Keller Fay Group, only 7 percent of word of mouth occurs online. The other 93% occurs offline.

You know… Face-to-face, people talking to other people.

In other words, if you want to grow your business with more referrals, you may need to start focusing your energy on getting your customers to start talking about you OFFLINE.

How to leverage the original social network

It comes down to this, how do you get your customers to talk about your business and tell their friends?

The book, Contagious: Why Things Catch On, by Jonah Berger lists out a 6 step process he calls STEPPS to make your ideas interesting so people want to talk more about them and tell others. It’s loaded with examples of contagious ideas like:

  • A “secret” bar in NYC that does no advertising and you enter through a secret door in a phone booth.
  • The book company that sends 2 copies of pre-print books to prominent figures whom it would like to receive an endorsement. The second book is for them to share with a colleague to get them used to recommending it.
  • The discount luxury goods website that ditched the standard online discount retailer and replaced it with a “members only” online discount luxury retailer that you have to be accepted into.
  • The gourmet Philadelphia restaurant that offered a $100 cheesesteak sandwich to get people talking about their new restaurant. They got featured in USA Today because of it.

These are all great ideas, however let me break it down with some simple actions you can take in any service-based business.

3-Step Process to get Your Customers Talking about You

  1. The Original Social NetworkAsk – Find out which customers LOVE you and which are just satisfied. Online survey’s are a great, low-cost way to do this with your customer base.
  2. Segment – Find out which customers have already recommended you and which would never recommend you.
  3. Develop Exclusivity – Give a limited number of special offers and services to your top customers for them to share with their friends and family.

Ask

In one Nebraska business, we sent out written surveys with self-addressed return envelopes to over 3,000 of their current customers. On it was also a link to complete the survey online. About 1/3 of respondents opted for the online survey. At last count, we had around 450 responses.

This provided a gold mine of information, however the most important question was:

  • How likely are you to recommend us to your friends and family? The answers ranged from, “I’d never recommend you.” to “I’ve already recommended you.”

This business had 97.4% of respondents say they would recommend them. The other 2.6% were neutral. No one said they would not recommend them!

Another part of this survey was to find out how each customer preferred for us to communicate with them.

  • Text
  • Email
  • Social Networks
  • Phone
  • Letter

For this particular business, not a single customer wanted us to communicate with them via Facebook or G+. However 49.6% preferred email with another 36% choosing a phone call and 12.8% requesting a text.

Your market and customers may be different which is why you need to ask. It’s not just about what you say, but how you get your message to them.

Segment

Now that you know who has already recommended you and who is very likely to recommend you, focus on those groups. These people are basically telling you, “I love your business and service and will gladly tell others if you make it easy for me.”

These are your Brand Lovers. All they need is a little friendly assistance and some easy ways to communicate to others what makes your business unique.

In the survey, 32% of respondents said they had already recommended the business. Another 47.2% said they are “extremely likely.”

Let me put this into perspective.

In a business with about 3,000 customers, 450 people responded to a survey in which almost HALF of those people, about 212 customers, are ready and willing to recommend their services but NEVER have.

That’s over 200 people who can be out “selling” their products and services if we just tell them how.

Develop Exclusivity

Now that you have your list of people who have recommended you and those “extremely likely” to recommend you but never have, your goal is to figure out how to get them talking about you.

Here are a few ideas:

  1. Offer Preferred Customer deals. Give your preferred customers 1 card per year to give to a friend with offers that no one else has. The only way to get this “secret” deal is by knowing a preferred customer. Since you’re only giving them 1 it makes it even more exclusive so they have to consider who they really want to tell about your business. Test with different quantities.
  2. Offer Insider Only landing pages. Picture this. John Smith is one of your customers who said he is extremely likely to recommend you. So you send him a couple of cards each year with his name and your business on it, a website with a landing page like http://mybusiness.com/john-smith, and a QR code. On it is an exclusive deal just for his friends. This deal isn’t advertised anywhere else. It’s John Smith’s deal to offer to a couple of friends per year. Scarcity is just as powerful as exclusivity to have people clambering to join and talk about you.
  3. Provide free, useful, interesting gifts. Most people entertain friends and family at their home. So what if you provided them with something to talk about? A unique mug with fun facts (think Snapple). An entertaining BBQ apron or spatula.  A cool brain teaser for their coffee table. If it can relate to the benefits of your services, even better. The goal is a conversation starter that may just lead into why that customer does business with you.

Try to offer the special offer cards without providing any gifts or benefits in return to your current customer. Actually tell them that.

“We don’t want to bribe you. If you’re happy with our services, then here’s an easy way to help your friends with some money-saving deals. If you’re not happy, then please tell us.”

People know a bribe when they see one.

However, if someone asks you if you know who can help them with a kitchen remodel, you have no reservations in telling them who to call and who to avoid. The same is true for your preferred mechanic, plumber, air conditioner repairman, insurance agent, dry cleaner or water treatment dealer.

Now imagine you follow that up with a sincere,

“Bryan’s Plumbing is the best. They’re always on time and charge a fair price. Because I’m a good customer, they gave me this card with a special deal on it to give to a friend. You can’t find this deal anywhere else and I don’t get anything in return for sharing this with you. I know you’ll be happy with them so you might as well use my deal and save yourself a few bucks.”

Helping a friend with an exclusive, scarce deal because they will honestly appreciate it, is often much more motivational than a $50 referral fee or credit.

You should have a record of your preferred customers so that the cards aren’t really necessary. If someone calls up and says, “John Smith said I need to talk to you,” then give them the John Smith Special.

Did a web expert just tell you to kick it old school?

It seems somewhat ironic and even counter-intuitive that the owner of an internet marketing business is telling you the opposite of what all the talking heads are.

If the message isn’t crystal clear yet, don’t waste your time and money with online social networks unless your ideal customers want you to.

For many small, service-based businesses your business is… uh… Boring. Your customers may not really care to like their plumber’s Facebook page. This isn’t an opinion. This is what hundreds of customers have told us so you need to Ask your customers how they want you to communicate with them.

In reality, the best way to determine which local service company to use is still the old fashioned method of asking your friends.

Face-to-face. Person-to-person.

You may just find out that 47% of your customers are “extremely likely to recommend you to friends and family” and just need a little reminder and guidance on how to do so.

 

To your success in developing better relationships with your customers, Bryan

P.S. If you want real, actionable ways to generate more leads online for your business, sign-up for my email news in the footer below.