"It’s not whether you win or lose, it's how you play the game" is one of those quintessential expressions we grow up being taught to live our life by from a young age. And that’s true for Little League and most amateur sports, which is in fact who the sports poet Grantland Ricef was addressing when he wrote what would become one of the most famous aphorisms of all time. In all aspects of competition “how you play the game,” should of course always be conducted with good ethics and morals, honor, and integrity. Sportsmanship aside though, winning matters. As you get older and graduate from the minors to big league, winning becomes essential with real situations in your life and career. With big wins you can take care for your family, rise the ranks at work, or accelerate your own company to new heights. Contrary to popular belief however, competition does not mean there is only one winner. Often in business competition is desirable and necessary to drive growth so that everyone wins.

In 2005, business texting was non-existent in the USA. In Europe people had already been using SMS for a while as a means of connecting with friends. UK businesses were even starting to text their customers and while by no means was SMS business marketing widespread, they were definitely ahead of us. It wasn’t until the advent of smartphones like Blackberry, which were infinitely easier to type on, that texting finally began to take off in the US. I was looking for a new channel to connect to our customers at JoonBug and since I couldn’t find a simple and easy way to text them, I came up with Ez Texting.

At the time there was NO market for business texting so we had to essentially create that market. Imagine googling the terms “mass texting” or “business texting” and getting 0 results. Since nobody had even heard of business SMS, a ton of time was required just to educate businesses on how they can use SMS effectively to market themselves. This is analogous to the way that email marketing platforms started back in the late 90’s. Before Constant Contact or Mailchimp, no ESPs existed so those companies had to create the ecosystem that is now the root of everyone’s inundated morning inboxes! 

We had the advantage of not only being the first out of the gate with business SMS software, but also being the only one on the playing field. Unlike ESPs that were simply sending emails, texting required you to also get connectivity into the carrier phone systems. That was expensive, esoteric, and technically very complicated to do. These barriers to entry actually served a huge advantage to us in the beginning as it deterred others from even trying. But as the lone pioneers, we had to figure out how to get it done on a technical level and also faced the challenge of building awareness and teaching consumers and businesses how to actually use it. 

When I first started EZ, we built an informative website that served to both capture incoming leads and educate businesses on how to use text messaging with their customers. We used the “Farmer SaaS Model” where we sowed marketing seeds, funnelled prospective customers into a free trial, and then converted them into paying customers through our inside sales team. At first we also tried the “Hunter SaaS Model”, in which our inside sales team cold-called businesses, but we quickly realized that wasn't very scalable or cost efficient.

We found the most success initially through SEO and SEM. After all, we were providing mass texting at a time when people were just barely texting one on one, so getting high organic google rankings was a breeze. Facebook hadn’t even opened up to the masses yet and so our only option for paid ads was Google and Bing/Yahoo search. We were racking up a lot of customers everyday on the cheap and for the first couple of years it felt like we had struck gold: there was no competition, we were first on Google, our marketing costs were minimal, and we were super profitable. What could go wrong?

Well, once we went through signing up most of the early adopters things started to dry up and it was getting harder everyday to get the same amount of new customer sign ups. The problem was that we weren’t creating demand, but merely soaking up existing demand. According to Tomasz Tunguz, a Venture Capitalist at Redpoint, “At the early stages of market creation, the most threatening competitor isn’t the startup down the street. It’s non-consumption. Simply put, the customer does nothing, buys nothing. Non-consumption is the most-worrisome failure mode.”

It was clear that two things needed to happen: we needed to cast a wider net and we needed to create demand by educating businesses on why (and how) texting would be effective and beneficial. One counter-intuitive strategy we employed was to white-label our software. (White labelling is essentially a service created by one company that another company rebrands under their own company’s logos and labels). Initially we did this by going out to marketing agencies and web hosting companies who already had many SMB customers. They could potentially self-brand our software and sell it to their existing customer base as another service they offered. However that didn't work very well because of two issues: 1.  Although it was clearly another good revenue stream for the partner selling the software, they didn’t know how to effectively sell it. Business Texting was outside their sales team’s core competency and so they would simply ignore it. 2.  Many of the potential partners we approached were uneducated and dismissive about business SMS and would call it “spam” since again, they simply did not understand it. (I imagine this is the same thing that ESPs like MailChimp went through when they were in their infancy as well).

I knew something had to be done because without actual competition or the appearance of competition, the niche we were in would not be legitimized to potential customers. The answer was simple: we were going to compete against ourselves. I took our software and rebranded it under new company names, logos, websites content, and domains. Now when someone would search on google, EZ Texting wouldn't be the only result showing up. Now our 10 other websites, which were really white label sub-brands of the Ez Texting software, would come up as well! Each of the new “companies” had their own look and feel and some were even targeted at niche industries like nightlife, real estate, and restaurants. We created fake demand.

That actually started to get us more clients because with the appearance of many companies offering the service, business mass texting was validated and no longer seemed like a fringe tool. We essentially created an economy, a marketplace for texting amongst businesses. Also since we targeted business verticals, we began getting coverage in trade magazines which helped create more demand and awareness for our software. It seemed the more business texting companies that “existed,” the better off we stood.

After creating artificial competition for ourselves, we not only ended up getting more customers but real entrants began appearing into the space. At first I wasn’t very happy about the newcomers but later I welcomed the competition. A logical analysis revealed that there are 20-30 million SMBS (Small to Medium Sized Business) in the USA. We only had a few thousand of them as customers and were still highly profitable. Even if we were to 100 fold, our customer base would still be a drop in the bucket in terms of total market size. In that scenario, competition wasn’t going to hinder our growth or steal my customers from me. It would however increase total demand and educate businesses on who (us!), why (expand your business’ reach!) and what (business texting!) our service was. Competition, counter-intuitively, actually helped cast that wider net we all needed.  

As we grew I was able to talk to some of the former and current execs at Constant Contact. I learned that in their infancy they were also running radio and TV ads, which are great for getting the message out to more businesses. The problem with those ads is that unlike online ads, it's extremely difficult to figure out their ROI. But Constant Contact understood something that I didn't at the time: they were reaching out to an extremely large audience that online alone couldn’t do. The ads result in an immediate sign up of only a small number of customers. But after hearing their commercials in your car radio and on your tv sets over and over again, the messages linger in people’s consciousness and eventually potential customers finally google “email marketing” or “constant contact.” That's when the real win comes into play and that's when they scored the chance to funnel masses of customers into a signup and convert them into paying customers. 

By paying for Ads to create the awareness and need to search “email marketing,” a demand for the service was established. Granted, Constant Contact was no longer going to be the ONLY email marketing company coming up in search results and they would inevitably lose some business to competitors, the net effect was that it was widening the universe of businesses signing up for their software. It’s like the cliche, “the rising tide lifts all boats”.  It doesn’t matter if you win it all. Even when you lose some business (like in this scenario), overall you grow more and everyone, including your competitors, win more.

If you are starting a new niche company, you have to think “How can I create enough demand” so that the competition can be healthy and help you grow. At first you can create artificial competition like I did by doing “private labels.” But hopefully and eventually, more genuine competitors will enter the market. 

If you have competition, that means you are doing something right! If you don’t, you might want to analyze: 1.Why is there no competition? 2. How can you change that to grow and ultimately become successful?

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