This is a follow up to an earlier post titled “The Missing Piece” which is the first in a series of business-related articles aimed at providing valuable insights for budding entrepreneurs in Nigeria.

As business founders set out to create publicity for their products or services in order to ultimately drive up sales, one of the most effective marketing method they often deploy is the use of direct marketing.

Direct marketing is an advertising strategy that relies on the individual distribution of a sales pitch to potential customers. It therefore relies on distribution to individual consumers rather than advertising in mass media.

Direct marketing is the preferred advertising strategy for small local businesses, which can distribute hundreds of flyers, coupons, or menus for less than it would cost them to place an ad or make a commercial.

Most start-ups use direct marketing expense to acquire new markets. While this appears to be a cheaper strategy, over time this may prove to be a more expensive and ineffective approach when marketing pitch is delivered to the widest possible audience(mass market). That is, the company may gain a few customers while merely annoying all of the other recipients.

The cost of acquiring customers through direct marketing can be a huge bother if the effort is channeled to a mass market and especially when you earn a low margin for your products. As a quick check, if the margin on the product or service is less than the cost of customer acquisition, then direct marketing your product to a mass market or any other market for that matter will be detrimental to any business.

Small businesses therefore cannot grow when they lose money on every customer they acquire. And this is aside the competition for the market which is often intense and unhealthy.

The pertinent question therefore is, how do you get around making this expense?

I will provide some clarity shortly!

The key is to find organizations/firms/other businesses that have already acquired your potential customers and then share customers with them. A method known as Piggybacking.

Piggybacking other Companies

For small business owners, rather than start afresh looking for potential customers everywhere and trying hard to acquire customers by making expensive adverts and repeated messages, one of the smartest ways to get your niche market is to approach companies that already have your potential customers and piggyback them.

This strategy, if well executed is a win-win situation for both companies.

Let me use a popular example for emphasis;

Over the last decade, you may have noticed the partnership of the Chicken Republic Franchise with fueling stations in and around Nigeria. The fueling station brand already has the complement of a great location and throngs of loyal customers who patronize and buy petroleum products along with other non-fuel services.
By co-locating its restaurant chain in fueling stations, Chicken republic will gain access to an already captured market whose profile fits its potential customers allowing them to refuel their vehicles and yet buy and eat a varying menu of fast food in one place.

This is a win-win situation because, it would make the fueling station more attractive to customer who desire to catch some fast food therefore bringing sales to the franchise and adding value to the fueling station when they receive money in rents or real estate (for the space occupied amongst other benefit).

Let’s take a second example; suppose as a small scale entrepreneur you make healthy food drinks and work-out supplements that customers who are mindful of their food intake and particular about having a healthy diet would find useful. How best would you market this product?

The entrepreneur will approach a local gym around and partner with them (piggyback) so that he can sell the food supplements and healthy drinks to customers before workout or after workout. After all the primary customers (niche target market) have been captured by the gym owners.

This “symbiotic” relationship will make the gym more attractive to customers and also allow the entrepreneur sell some of his products. Of course, the company piggybacking will pay some amount to the company that has the customers. But in the end, it will be much less than the cost of customer acquisition in the alternative choice through direct marketing to a mass market. This is because the company has already acquired the customer.

The payment arrangement may be in form of revenue sharing or cash for rental spaces etc. However, in carrying out this sort of negotiations with the company that already has the customer, the entrepreneur must carefully analyse his financial position to ensure that he can afford the fee from the product margin perspective in line with forecasted revenue and sales benefits.

This will ensure it is a win-win situation for both companies. This is a very effective way to get customers.

Someone could easily ask, if the same applies to entrepreneurs offering services?

And I say an absolutely YES.

Take for example, a business owner and start-up intends to render specialized medical services and has approached one of the biggest HMO services in the country to partner in a revenue sharing arrangement that allows the HMO refer customers under its care to the business owner for medical services or advise.

Here the business owners simply piggybacked the HMO provider and gained access to captured customers already on their medical health system and platform.

This is in contrary to a similar approach, which could involve using direct marketing/advert to a mass market or even hopping from one corporate office to the other advertising its services and dealing with the unending office bureaucracies that could easily set back an entrepreneur.

In the end, the cost of acquiring one customer could eventually ruin the business model.

In summary, every entrepreneur must ensure that “there is value that the core company gets to give to its customers by offering your company products” This is a priceless advice in executing this strategy.

Another quick win for entrepreneurs to get customers for their products or services without direct B2C marketing to mass market is through online market places.

These online markets or platforms have already done all the hard work to bring customers to their sites. Think of Jumai/Konga and other similar shopfronts. All that is required of a small business owner is to list available products on their site and when a purchase is made, some amount will go to the owners of the shopfront!

Note that there are market places for different products on the internet, you only need to find the one where your potential customers abound. Market places are a great way to start especially if you are a start-up business because it is low risk and you can instantly get your products to the front of your customers with ease. As the business grows, the entrepreneur can then get enough cash to invest in his own site or even in direct marketing.

Knowledge is light. The more information entrepreneurs have at their disposal, the better their chances of staying afloat in their business.

Thanks.