Monday, April 27. 2009Time For Old Dogs To Learn New 'Tricks'John Linton Advertising is something that Exetel has never done. In the five years it has taken to grow the company to the level it's at today we have deemed it much better to spend any money we had on building the infrastructure that was required by most of the data services and trying to ensure we had more than enough transit and switching capacities for our constantly growing customer numbers and as we more easily achieved those capabilities we then spent any 'spare' money on strengthening the duplication and redundancy of the infrastructure. We have been following this 'policy' for so long it seems very strange that we have been looking at 'advertising' for the past few months as part of our 'counter-cyclical' approach to the "recession". Our original concept was that we would build such a perfect network and deliver such a perfect service to our customers that we would never need any marketing or advertising because word of mouth alone would deliver us all the customer growth we could ever want.....a very naive view as it has turned out. Apart from the many, many mistakes we have made ourselves virtually every supplier we have ever had has, either intentionally or by their own incompetence or greed, ensured that we have delivered far less than perfect services in different geographic locations far too often for us to have achieved our goal of providing perfect services. So our original 'lily pond' theory that we would be able to grow at an increasingly faster rate by simply getting more customers who would recommend us to even more customers has worked but not as well as it would have if we had not encountered so many problems of our own making and many more made for us. Starting with the mistake of helping Lorraine Rose get started in business and putting her in the position of cutting off service supply to almost 60% of our then customer base in April 2005 there have been a continual series of poor to dreadful provisioning times by a range of other suppliers in, on occasions, quite wide areas of the delivery networks over which we can exercise absolutely no control. Irrespective of the errors/mistakes/stupidities/greediness perpetrated by our suppliers we have certainly not achieved the levels of perfection we aspired to on more than a few occasions over the past five years. So for all these reasons, while our business has always grown and at this point in time is growing more strongly than it has for a very long while, we believe we should be able to grow the basic services more strongly as times get more difficult. We have no knowledge of what rates other ISPs are growing and the only source of vaguely meaningful statistics are provided by the ABS whose latest report indicated slowing growth in ADSL and much faster growth in wireless broadband. Exetel's ADSL grows at around 25% a year which is, if the ABS statistics are accurate, means we grow about 2.5 times the 'average' but because we are so very small that is much easier for us to do - obviously if Telstra grew by 25% they would have 100% of the market within three years as an example. Why would we want to do this - grow the business faster than it currently 'naturally' grows at? Basically there is only one reason which is to increase our buying 'power' to ensure we can keep offering the lowest possible cost services to all current and future customers. Right now we are simply too small to be taken seriously by major suppliers and while that has been 'O K' for the past five years it's becoming a negative issue more often than it once was. If we don't do something to move away from being a 'small wholesale customer' we will have too many problems in the not too distant future. My personal view is that there is no place for a company of Exetel's size in the Australian market and if we had set up Exetel for purely commercial reasons then we would have exited this business a long time ago. Having said that, Exetel is governed by commercial imperatives and among those are the need to be a 'bigger buyer' from your main suppliers. I, personally, have zero skills in managing/designing advertising campaigns and even less knowledge of how to budget for them but do have a basic understanding of where to go to get sensible advice. While Exetel still makes very little money from its operations (by intention - I'm not complaining about that situation) we could spend a realistic amount of money on a campaign if we could see that it would make enough money to pay for itself as we have a little more 'reserve than we have ever previously had as we ensure that whatever 'bad financial times' are to come we have some protection against whatever happens. So, it may be possible for us to risk some of that reserve on testing the efficacy of advertising to produce a higher level of growth for our overall business in these times where, if counter-cyclical financial theory is true, there are more opportunities for smaller companies to grow than in 'good financial times' when large companies 'swamp' any thing smaller companies can do with their huge advertising spends and their give away promotions. Perhaps I'm just as naive about this aspect of commercial life as I have been about delivering 'perfect' services. As far as I can see most advertising costs far more money than Exetel could scrape together but equally it also seems to me that companies such as Dodo and TPG only continue to exist, let alone grow, because of their successful approaches to advertising and (I assume) the financial support their suppliers provide to them. So we will re-look at our current plans for advertising/promoting the HSPA services in various ways and also look at directionally promoting our ADSL2 services to 'pensioners' and one or two other specific demographics. My original preference was to spend what ever money we allocated via our regional dealers but that hasn't been a success so far though we will make more efforts between now and the end of this financial year. Whether they will be successful is pure speculation and I really have no idea. Whatever we do in terms of advertising will not be 'huge' - we simply don't have that sort of money available to us but we will do something which is more than we have done in our first five years. PS: Another of P J O'Rourke's observations particularly applicable to the Krudd/Whine handling of the Australian economy I thought I would share with you:
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It's interesting to me that many ISPs that have previously eschewed advertising of any kind have had such a recent, and dramatic, change of heart.
Take my two local (i.e. Adelaide-based) ISPs, for example. Adam Internet is now advertising on TV, radio and the sides of the city trams. Internode have gone large at various football grounds. I guess the good old days of exponential customer growth really are at an end, and it's going to be a hard slog from here on in to pick up any new subscribers (although Internode are claiming growth figures of 250 new punters per day which is... extraordinary). My own (totally uneducated) view is that if Exetel do advertise, you should play on your strengths. Which is to say... big quotas, great value and your commitment to the environment/ ecological causes. I think the last one, in particular, is a big selling point and one you should be proud of. I am also very impressed that despite Exetel cutting so close to the wind, you've done so without ditching your commitment to customer service... http://thebernoullitrial.wordpress.com/2009/04/15/which-australian-isp-has-the-best-customer-service/ Customer service is very important to many people, especially people considering signing up to an "unknown". But in terms of customer service, Exetel are a statistical dead heat with iiNet, and you outplayed many of your larger competitors. This too, is a credit to the way you run your company. Cheers, Stan Comment (1)
The point Stanley made about highlighting your eccological side raises a good point. There is a whole niche industry of "Ethical Manged Funds". Eg they certify they won't invest in companies that hire child labour. Notwithstanding their financial acument, they attract investors.
Drawing a parralel to highlight a point of differentiation: Not only do you get the best quotas for the cheapest price, but part of your fees contribute to Australia's eccological furture. "Exetel! More than just an ISP. Saving Australia's Creatures" Green is definitely lucrative in today's climate *cough*. Comment (1)
Thank you for the comments.
In terms of service - we will continue to work on improving all aspects of it. Comments (2)
Dear John,
I have recently joined Exetel and believe me I am really happy with it so far. As you mentioned your strategy of 'world of mouth' is very successful and I am trying my best to let all my friends know about the great service and value exetel is providing. I wont comment on your new initiative to take on some advertising as I lack much experience in that arena but please do make sure that it doesn't deviate you from your strengths - big quotas, reliable service and a humane approach to things. Good Luck, Amit Comment (1)
Hmm I am of two minds here I'm hoping you can grow without too many growing pains!
I understand that you need to grow to compete in some fields - especially mobile phone buying power, etc.- so you can try to keep your 'cheapest, most efficient provider' moniker Comment (1)
Perhaps you are overlooking the fact that we have grown from zero to a $A50 million company in five years operating in two countries providing ten different products/services?
It is far, far easier growing from $A50 million to, say, $A80 million than it is to grow from $A0 to $A30 million Comments (2)
Hi John,
I like your blog, as you definitely don't mince words; unlike the spin regurgitated by our elected representatives. You mentioned that Exetel was looking at a magic box to go with your hspa modems. Have you considered this? http://www.linuxdevices.com/news/NS5364496136.html? Pete Comment (1)
It doesn't do VOIP.
And I think the goal includes integrated HSPA, not a USB port for a dongle. But having easily-flashable Linux on the inside would be an awesome addition! Comment (1)
lots of these similar devices are built on embedded Linux platforms
Comment (1)
Just my 2 cents... if you're to advertise an Internet company, Internet advertising only makes sense. This should be your primary medium.
Facebook? Ninemsn? Doubleclick? The HSPA promo with agents (which I was all for, but never ended up participating in) was good - it'd seems to make sense to extend this, to further support agents. Local newspapers can work... inserts are probably better than appearing in the paper itself. Agents could really utilize pre-printed marketting material, something that looks more flashy than my BW Laser printer from the Agent PDFs. On another note, those agent pdf's are of too low resolution and use too many colours that don't appear well on B&W. Regardless, EVERY new PC & ADSL modem I sell comes with Exetel crap trying to score more commission. The reason for pre-printed is simple: send them out to your agents, and ask they do the same as me. Comment (1)
John
Maybe consider affiliate marketing as well. Dodo, Optus, Virgin, 3 Mobile all use this as a platform. What is great about this form of marketing is that it only costs you when a sale is made. In other words you get free branding on other's websites and if they sell anything you pay them. The key networks are www.dgmpro.com, www.commissionmonster.com.au and www.clixgalore.com.au. For the promotion of our Carbonite Online Backup Service we have used clixgalore as the entry price was $0. For each sale we offer 13%. We also offer a lead campaign at $1. Clix Galore make 25% on top of what we pay out. Eg a sale of $71.95 for a 12 month license means we pay the Affiliate $9.35 and CG approx $2.33. I can't say it has delivered us too much in sales to date but it has helped from a branding perspective. I have a few personal websites that I use affiliate marketing on eg www.prepaidplans.com.au and its a nice little earner on the side for me. Might be worth looking into as part of your advertising/marketing spend. Let me know if you need any further info. Comment (1)
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