Location used to be the defining success factor in retail, and in many other businesses. Yes, even in most B2B. Location as a constraint has shaped industries during the last century and protected local business from competition. However, the internet and other technology innovations have eroded location’s meaning. In many businesses, the game is shaped like it is, not because location is still shaping it, but because it had previously shaped the game that way.
Let’s investigate...
Location (delivery)
Products and services need to be delivered in order to be consumed. Delivery used to be expensive, so most businesses were close to their customers. Since customers are scattered across countries and cities, businesses had to open premises, offices, warehouses, shops and delivery centers where they wanted to do business. Expansion was slow and expensive, especially across country borders. This protected local businesses from competition. It was cheaper to deliver to shops and let customers pick up from there, than to deliver directly to homes. In many B2B-businesses, service and support is part of the business. Although goods are usually delivered to business clients and can be done over long distances, service people needed to be local, thus usually requiring local premises.
Digital delivery is transforming many product categories: we don’t buy CDs anymore, we download music. We don’t rent videos, we use Netflix. We don’t read newspapers, we read news sites. We don’t buy magazines, we subscribe to blogs. And our businesses are running more and more in the cloud than on our own servers. Instead of physical toys, my kids prefers digital ones: games and in-app purchases.
But it’s not just products that are digitalized. Services are also digitally delivered, transforming not just service industry, but practically all industries.
The IT support industry has long used remote access, increasingly from places like India. People can attend Yoga classes from home. Doctors help patients remotely. Radiologists do not need to be hired directly by every hospital, nor even in every country. Skype, Lync and other remote meeting tools help professionals to meet and help their clients and end-users over long distances. Customer services and telesales have long ago moved out of big cities to where wages are lower. Chat and other online tools help businesses to serve customers better online, and to save them a trip to local store.
A colleague told me about a friend's dog that had a condition unknown to any veterinarian in Finland. So the friend did what people do nowadays: they googled. And found a veterinarian in Münich, Germany, who has done research on the topic. They emailed Finnish medical case summary to him. Luckily vets use Latin, so the vet was able to understand the problem and recommend proper medication.
Location (reachability)
Delivery is one thing, but a product or service has to be sold, and it’s easier reach people where they naturally are: on the high street or shopping mall. Or within a short drive from customers so you could squeeze more sales calls to a day.
But the internet is (again) changing all this. Shopping is no longer the way to learn about new things. Or get information. All that happens online. Over 80% of people buying more expensive consumer goods, have done research online. B2B buyers on the other hand do 60-70% of the purchasing process online. That is: consuming content, googling, socializing.
It is obviously quite a short distance to complete the purchase online! Luckily for brick and mortar stores, many brands still prefer to stay out of selling directly online or even linking to online stores. But for how long?
Location (marketability)
Being able to deliver, and be found is not enought for success. Businesses have to do marketing. And marketing is usually also location constrained.
If you put an ad in a newspaper, you reach people only in its circulation area. You cannot target the ad to a certain area of the city, since the same paper covers the whole city. Nor can you reach customers in the next city since they have their own newspaper. Transporting newspapers has been expensive, and takes time, so most newspapers are strong only in the area close to their printing presses.
Since marketing is both major expense and key customer acquisition method, the reach of marketing media also shapes where businesses operate. Adding a new store within a newspaper’s circulation area may decrease customer acquisition costs without increasing total advertising costs since the same ad can now serve many stores. Expanding to the next city will, on the other hand, double marketing expenditure. Brand advertising happens in magazines and tv, both national in coverage. It makes sense for a consumer brand to cover a country, and stay within its borders. Thus most brands are national. Going to the next country will increase risks and costs so much that, it’s just as well to be more ambitious than that: to have global ambitions.
But what happens now when people go online to search for their next car? They find dealerships all over the country. And if they are looking for, let say, Social Media Consultant, they are likely to run into best Social Media Consultants, not the one closest.
I am writing this at the cafe of a car logistics company whose business is to delivery new cars to dealerships all across the country, and move preowned cars to other dealerships and buyers. The business is booming. Customers are increasingly shopping new and preowned cars online. Someone has to move the goods. Good for them!
Language
Together with three Locations, comes forth L-word, and it’s Language. Language used to be major barrier shaping commerce, but not anymore.
A decade ago we were increasingly dependent on local language media. We read news in newspapers, read articles in magazines, watched TV, all written, spoken in, dubbed or subtitled to local language. Even video games were often translated. Foreign languages were reserved for travelling.
Not anymore. Together with online media, the sources and references are one click away. We watch hilarious videos in any language. Our life is a constant language bath. And if we run into a language we don’t understand, luckily Google Translator will fix it.
When we google, we tend to use language we think will serve us best. I don’t use Finnish for searching information on business, startups, strategy, marketing, technology… So even if your market is still local, you may need to go global with your content to fight for your position in Google. This means you may still need to produce content in English even if you are targeting Finnish customers. Why stop there? If you need to write in English, why not try to serve global.
Yesterday I shopped online at Amazon.de. I do speak some German, but still preferred Google Translator to turn the site, product categories, product descriptions and especially reviews to English. It even translates my searches within Amazon from German to English. So much more convenient.
If not location, then what?
Online first: If a product or service can be sold online, even theoretically, it's better to spend some time investigateing if that is feasible.
I often hear from business leaders that customers value their salesman, but at the same time, I see customers are complaining about the negative value of such "service" in social media. Cars are difficult to sell online because the customer already has a car to trade-in, not because the car itself is difficult to sell online, or that people are unwilling to buy cars online.
Businesses lock themselves to untested or old beliefs, not facts.
Self-service makes the game: Purchasing products and services needs to easier. The local dealer, shop or sales person has now handled all the hassles of poor marketing and delivery.
For business software a customer usually need all kinds of services to complete a purchase: A salesman had to translate features into benefits the customer recognize. Understand what it costs. Then plan, implement, install, integrate, train and so forth. Yet at the same time Software-as-a-Service-vendors can offer software for the same problem with simple "view pricing, try free for 30-days, buy with credit card, no help required" -model.
Global is the new local: when location loses its importance, the entire world is the market. Startups are now "born global". Yet all existing businesses should do a mental exercise to explore whether it's possible to be, let's say, the #1 LinkedIn recruitment consultant in the world, rather than just #1 recruitment company in Helsinki, Finland. Or instead of selling consulting service, explore if it's possible to package the expertise into a software or a service than can then be delivered online to the global market as a friend of mine is doing.
Content Marketing is the only marketing left: global marketing requires either billions, or content marketing. Guess which one successful startups are using. They are building their own audience one post at a time.
"Content Marketing is the only marketing left"
– Seth Godin
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Written by Antti Pietilä Antti is the founder and CEO at Loyalistic (Simple Content Marketing Software for B2B Companies) who loves to help SaaS-companies to grow at Software Entrepreneurs (@ohjelmisto_ry) and cycle. Say hello to him anytime @anttipietila. |
