How We Identified Our Real Customers
Most businesses are either B2C or B2B. Few start out serving one set of customers and successfully make the transition to serving the other set--or both.
Here's another in my series where I pick a topic and connect with someone a lot smarter than me. (There's a list of some previous installments at the end of this article.)
This time I talked to Steve Greenbaum, co-founder and CEO of PostNet, a design, printing, and shipping company with over 700 locations worldwide, about transforming a business from a B2C to a predominately B2B model.
Tell me how you got started.
In the 80s, mailbox rental places popped up all over the West Coast since the postal service couldn't keep up with consumer demand. I was in my mid-20s and it seemed like a relatively easy business, so we opened our first center in 1983 in Las Vegas. How much work would it take to rent mailboxes?
What actually happened was different. Customers would say can you ship this package, can you drop this off for me, it sure would be great if you had a copier... so by listening to our customers we turned into a parcel center during the early days of that industry.
We were young and didn't have much experience but we started helping people open their own independent mail and parcel centers. Between 1985 and 1990 we helped develop over 400 independent centers. We didn't own them--we acted as consultants, helping people find locations, training them, helping them get going.
Why did you stop doing that? Sounds like a great business.
When the economy turned we suddenly realized we didn't have any recurring revenue. In simple terms, we were only as good as the next client.
So in 1991 we decided to discontinue independent center development and focused on franchise development. The success of our first center had funded our consulting firm, and the success of our consulting firm funded our franchise organization in the 90s: Great ideas fund organizations.
We picked PostNet for the business name. That was pre-Internet. I'd love to say it was strategic, but it wasn't.
Initially we thought we'd consolidate our independents, but we realized we had helped them become fiercely independent. So we worked to find people who saw the value in systems, processes, simplification, etc.
So how did you go from predominately B2C to a heavier focus on B2B?
We've always known the best way to grow a business is to listen to customers, find out what they need, and help them easily get it. So we grew from packaging/shipping and copiers, into something much more sophisticated in the last five years.
We studied our higher revenue franchisees and realized they had a higher average transaction and lower customer count. That's interesting, because in the industry as a whole the model is high volume, moderate margins. The average transaction is $10 to $15. That's part of the challenge of that business.
So we started studying our higher producing centers and discovered they had found a niche in their communities by serving small businesses. They were doing print production, receiving packaging, returning items, printing materials, and forwarding to events. They were handling multiple transactions for one customer.
That led us to the realization there was a hugely underserved niche for small businesses.
Serving that market meant a massive shift for your operations, though.
But that's where the real opportunity was and is. Small business owners needed somewhere they could solve their daily challenges: marketing, customer acquisition, SEO, websites, digital marketing. Solopreneurs like lawyers, professionals, accountants, consultants, etc. are good at what they do but they don't necessarily have broad business skills. And they don't want to learn about, say, integrated marketing: They just want to do their thing. We realized we could create a great business by helping them do all the stuff they don't do well so they could focus on doing what they do well.
Shipping and copying is a commodity, roughly speaking--we decided the way to grow an exciting business is to add more value to the transaction.
What are some of the biggest challenges where shifting the model is concerned?
Some aspects of the implementation of Web services and digital marketing didn't go as easy as we hoped in the beginning. We needed to provide training and support in different ways so people could learn and absorb in their own way.
The other aspect is how we reach the customer. It took some time to gain clarity on messaging and create a concise, consistent set of information about our value proposition.
What about the B2C market? Was it hard to let that source of revenue go?
We still serve consumers. Plus, keep in mind small business owners are consumers--they're often the same people.
We don't discourage B2C even though our location strategy has changed. Today we locate in central business districts where we're visible and convenient to the business community. We're still accessible and friendly but we're positioned to be where small businesses are.
If you're a small business customer we can do everything in business printing and we can also do your family's wedding announcements, yard sale signs, etc., but the real focus is B2B. We're B2B--but we're consumer friendly.
Now that you've shifted focus, what's next?
We'd like to have 500 domestic and 500 international centers over the next three to five years.
We don't need 2,000 centers. Our goal is to increase the revenue and profitability of the centers we have. We'd like to double the average revenue of a franchise, and we're on track to hit that.
Profitable and successful franchises make for happy franchisees--and that makes for a great business.