A one day visit to Milan for see the two major openings: the Apple Store in Piazza Liberty and Starbucks Roastery in Cordusio.
The Death Valley of advertising
Imagine a designer — graphic designer, art director, web designer — located outside than a large company, (where he works as employee, ed) who decides to become an independent/entrepreneur and want offer his services directly to local customers.
And he want to live with that, no ethical design, no competition design, etc
It would have to deal mainly with SME companies and micro SME: small industries, car showrooms, artisan families, tax / medical professionals, lawyer etc.
In addition, it would also have access to several retail businesses: grocery stores, luxury goods, cars and the like and so on.
Well, these customers, placed in a provincial territory or a small town have a dangerous feature: they are located in the Death Valley of Adv.
Where advertising works
As is well known, marketing, in the sense of advertising marketing, works best in the case of products with low prices for masses of consumers that are rather similar and easy to reach, or with high-quality products for wealthy customers, where prices allow spending on advertising.
In the first case, TV makes it possible to reach millions of people with commercials and create brand/product awareness — for example some shoes — under € 100, while for the second case, a direct mailing and advertisements in trade magazines can make a niche of collectors of rare furniture worth tens of thousands of euros.
The long-standing problem arises when a company wants to propose itself to independent shops and SMEs on a certain area…
Where adv can’t arrive
In this case we imagine a web agency that wants to offer its services (websites, ecommerce and similar) to this group of shops and SMEs:
in practice the agency will have to reach them and contact them directly one by one.
These customers are too “scattered” for generalist press adverts, and even out of budget for a commercial: the owners of such different activities do not even have common passions that group them well.
Telephone contact — called telemarketing — is downgraded and ineffective, and theoretically outlawed here in the EU after the GDPR privacy law.
Only direct mailing, provided you have first patiently recorded the target activities, may to have some profitability.
In practice, advertising media fail to reach this seemingly easy clientele, as close as a mirage in the desert, the marketing desert.
Door to door
In order to sell or introduce services in these activities, you have to go in person, door to door, to the old one method. This is the conclusion to which everyone arrives early…
However, if you sell websites and related products, the price of the products will be roughly between €1,000 and €5000, with the average set around € 2,000. Services that these activities can buy.
The contact cost — the cost incurred to communicate a message to each customer — increases exponentially compared to advertising: the price of a sales agent who reaches by car and tries to sell to the customer reaches and quickly exceeds €1,000.
Simplifying, we can say that if the sale does not close on the first step, most of the web projects will be more or less strong loss. Every trip, more loss.
Note: the closure to change and a poor marketing culture make SMEs and independent shops to be difficult customers, as well as low capacity / willingness to spend!
The Holy Grail of selling
Countless web agencies and service companies have failed by pursuing what remains the holy grail of Adv and selling: that is, serving smaller SMEs and retail stores, gaining a little sum of money from many small customers.
“On the other hand, with all the activities in the area, if we invoice something to most of them, we will become rich” — Said the Account, self-confident.
A bit of history
The first to try it in a contemporary sense was even Elon Musk, when in the mid-90’s he proposed to the activities of Los Angeles for the first time in history, a directory service and advertising on the Internet. It was Zip2, the first real startup of the young Musk.
Zip 2 in a certain sense did it, but only thanks to the favorable period before the burst of the dotcom bubble, and the right timing of the purchase by Compaq Computer, for 307 million dollars.
Edit. We where in 1999, I do not know if I give the idea to the younger!.
Among the other companies that tried to remember the Yellow pages in the US, while here in Italy we have the Pagine Gialle®, which since the early 2000’s have started to propose the web directory and subsequently websites.
Make business in the Death Valley of Adv — says Peter Thiel, which tends to be right — is at a loss: the Italian Yellow Pages and similar companies have lost over the years millions and millions of euros, managing to continue only thanks to injections of external liquidity, quotations in stock exchange and piloted defaults.
A small web agency would not have escaped, focusing to that slice of customers, and proposing a quality service also at a medium level.
In short, be careful to stay away from Death Valley of Advertising!
Joking aside, the sense is not the on of drop your prospect, but keep an eye on costs and keep a strict look on the customer: you have to give him, following on what he pays!
Note: a customer under € 1,000 in budget, which is valuable and requires more than one visit — apart is opposite — could be the beginning of Death Valley, know it! And even in that case be careful, “never work with the neighbors, and friends!”
(an Ogilvy statement)