Ramping up your business is easy to do, right?  Before settling on that conclusion, check this. A careful understanding of your market and your customers is essential.

Now that you have launched your new product or your new company, the sales are starting to roll in. Your beta testers have been enthusiastic and you have made some changes in your original design to comply with their suggestions.

You have thought about adding more personnel to produce your product, handle sales, and gain access to new markets. You have looked into expanding your offices and perhaps your manufacturing area.

Things seem to be rolling with a truly bright future.

However, there are some truly dangerous pitfalls at this critical period in your business life that may derail the best ideas and plans.

The Harvard Business Review has an excellent article, 3 Mistakes Made in Scaling up New Ventures. In it the HBR points out some of the very important subtleties new business owners or managers may overlook. Failing to carefully understand these points risks the very real possibility of the early failure of a truly promising start.

Here are the essential points made in the article:

1. Realize that customers are not the same as users

Key to low cost airline Ryan Air’s growth was the recognition that airports, not passengers, were the real customer. Ryan Air was the first company to realize that municipal airports represented a very large market that could be systematically tapped. So instead of focusing only on passengers, Ryan Air went to smaller, less known airports typically owned by a municipality that was hungry for business. Bringing lots of users to the airports stimulated side benefits: more spending in cafes, more taxis and buses, more store revenues and more business for the locality. These side benefits were so great to these municipally owned airport “customers” that in many cases, Ryan Air was able to persuade small airports to pay Ryan Air to land!

2. Recognize that first users are not the same as scaling users

In the computer games market, the first users are generally not the scaling users, namely the regular players that pay good money for the game. Critical for the success of the game is to get the early users to play the game for free and suggest improvements, but to blog it widely as being good. Quake, launched by John Carmack was an ideal example of how acceptance by this “first user” transformed the later market. id software launched an early version of Quake in February 1996, directed specifically at pioneer users who were encouraged to trial the product for free. The early users were highly proficient at games and provided many ideas for the game’s evolution (”mods”), posting changes to the game on line, which encouraged others and started an upward spiral of sales, modifications and debugs. id software finally launched a pioneer user-redesigned Quake, with pioneer user “rave reviews” to an eager mass market of final customers users who paid for the product. Suggestions and even complaints by early users can be used to powerfully reshape the initial offering. In fact in our work with startups we encourage venture managers not to count early sales as revenues at all, but count them as market research inputs.

3. Anticipate that first products are not the same as scaling products

Early versions of products often feature different attributes than the mass markets users will want. Expect that your prototype product will need to evolve into a much simpler, but more robust, offering for the long-term mass market. It’s a typical “beta tester” approach, frequently used in software development, but it applies to all types of companies and new ventures.

Learn more about these excellent points in the rest of the HBR article here.

To your business success!

Let me help you grow your business today!

Paul Elliott

paul @ MarketingSuccessBlueprint.com

Turning Small Businesses Into Large Ones!

Marketing With Unbelievable Guarantees!™
http://www.MarketingSuccessBlueprint.com/blog

© 2010, Paul Elliott, All rights reserved world wide.