Entrepreneurship

Friday Q & A: When to Ask For Referrals, Whether You Should Deliberately Choose a Competitive Market, and Does Inbound Marketing Work for Expensive Products?

Friday Q & A: Should You Deliberately Choose a Competitive Market?

Every Friday, we’re answering your questions about business, startups, customer success and more.

Happy Friday!

In our Groove Friday Q & A segment, we’re answering any questions that you have about, well, anything.

A huge thank you to Gary W., Jure Žove and Matthew R. for this week’s questions.

Check out this week’s answers below, and jump in with your own thoughts in the comments!

When is the best time to ask a customer for a referral?

Referrals are absolutely critical to the growth of just about every successful business I’ve seen.

Customers who are referred by loyal customers tend to become loyal customers: they trust you more from day one, they stay with you longer and they spend more over their lifetime.

But asking for referrals can get tricky. If you ask at the wrong time, you’ll either get ignored (if you ask when they’re simply not thinking about you) or worse, you’ll get an angry customer (if you ask when they’re actually dealing with an issue with your product).

Aside from the built-in referral buttons that we have on Groove customers’ support widgets—which are static and not time-based—we do ask our customers for referrals from time to time.

What I’ve found to work best here is to make the ask when the value that you deliver is most apparent to them.

That will be different from business to business, but for us, that might mean:

  • Right after a support interaction where we’ve helped them accomplish something
  • Right after hitting a particular usage milestone (e.g., sending 1,000 support emails through Groove)
  • Right after they add-on another feature/product (e.g., a third-party integration)
  • Right after they positively respond to an NPS survey

It’s not something we’ve perfected yet, but it is something that we’re continuously working on.

The idea here is to make the ask when they’re most likely to give you the best, most positive (and effective) referral.

Should you deliberately choose a competitive market?

I’ve told this story on the blog before, but early on in Groove’s development, a fairly well-known VC asked me:

Why on earth would you want to enter this space? You’ll be fighting an uphill battle against huge players. Zendesk, Desk.com, plus an overcrowded market of smaller companies.

And he was absolutely right – our customers had dozens of options.

But that was exactly why I wanted to get into this market.

Fifty other companies trying to solve the exact same problem?

Fantastic. I’ll take that over trying to convince people of a problem they didn’t even know they had.

The frenzy of customer support software companies shows that it’s a problem that people want solved.

Plus, we don’t have to be better than Zendesk. We just have to be better than Zendesk for our specific audience.

Groove isn’t right for everyone, and neither is Zendesk. Or Uservoice. Or Desk.com.

But by building the best damn support software possible for our specific users, Groove can become the no-brainer best option for enough customers to still achieve our goals as a business.

A competitive marketplace means that there’s a need for a solution, and there’s no way the biggest players are solving the problem for everyone. There’s almost always a (potentially profitable) niche to carve out, with the caveat that you can’t simply build another solution; you must build a better one for a targeted audience.

Does inbound marketing work for expensive ($10K/year) products too?

While this isn’t my industry, I have seen a lot of examples of this being attempted.

And my answer is: absolutely.

Look at the middle-and-higher-tier pricing for products like HubSpot and KISSmetrics: easily in the 10k/year range and up.

Both of these companies rely heavily on inbound marketing to fill lead funnels (I believe both close some of their sales via self-serve, though they also both have sales teams to nurture/close the majority of the leads that the content marketing drives).

If we were at that price point and had a higher-touch install, I’d still go with the content marketing approach to fill the top and middle of our sales funnel, and then offer some more hand-holding at the bottom of the funnel to the leads that drip through.

Ultimately, regardless of your price point/market/product, your customers will have problems that you can solve for them with content, and they’ll be more likely to trust you and do business with you if you can deliver value to them before they’re ready to buy.

The other great thing about this approach is that, you can start marketing and building an email list long before you actually launch (as Unbounce did), which will give you a list to market to once you do launch.

Alex Turnbull
Alex Turnbull Alex is the CEO & Founder of Groove. He loves to build startups and help others do so by writing about his experiences with being an entrepreneur.