Harvard Business

Bottle the energy of your customers, you can become a Billionaire

By Robin Trehan, B.A, MIB, MBA electronic business

We all want to retain customers. We know the high cost associated with making new customers. But sometimes customers do switch and here comes the concept of “Switching cost.” Switching cost has negative effect both for the switching company and also for the customers. In case of customer, switching costs encompass all the costs incurred from signing a new contract, establishing new relationship and building on it. There are at least three types of switching costs:

1. Transaction costs are costs that transpire to start a new relationship with a provider and sometimes also include the costs necessary to cease an existing relationship.

2. Learning costs represent the effort required by the customer to reach the same level of comfort or facility with a new company product or service as they had for an old company.

3. Artificial switching costs are created by deliberate actions of firms (loyalty rewards). In addition to these explicit costs, there are also implicit switching costs associated with decision biases and risk aversion.

Companies can create concept of “lock-in” effect to reduce switching. This notion refers to the capability of a business model to prompt users to engage in repeat transactions. Lock-in can be enabled by creating switching costs that customers would face if they were to switch to a different service provider. Switching costs are created through loyalty programs, by providing transaction safety and creating the perception of trust, through familiarity with the site, and also through customization and personalization of product and services.

Lock-in prevents the migration of customers and strategic partners to competitors and is manifested as switching costs. A firm’s strategic assets, such as its brand name, the design proprietary standards, loyalty programs and buyer–seller trust, both contribute to lock-in effect.

In the past a companies were the boss. Today company must partners with their customers. Companies should act as host and customer as guest invited to a party. It should be the job of the company to make customer experience a little better each and every time. This will help to retain the customers and reduce switching.

All companies have to always driven, determined and always remain insecure to remain competitive. Stay hungry with passion to bottle your customers. Be the code maker and code breaker and stay ahead of your competitors. Treat your customers as king and word of mouth spreads faster than any marketing efforts. Bottle your customers and you will be Billionaire.

Robin C. Trehan can be reached at robin@tafunds.com

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Time To Become A Public Company?

Written by creditcapitalfunding on

OK, so you want to go public? You have valuated the market and determined what you are going to do with the capital raised. You also have precise ideas about your products & services and their unique selling point (USP’s). Beside this you know that you are in the right sector, have the right management capabilities and a team to go public. You have contemplated how to go public, which is by Initial Public Offerings (IPO’s), Reverse merger / Takeover (RTOs) etc. The question of choosing the right trading board is the next question? You have analyzed whether you want to trade on NASDAQ, the NASD OTC (National Association of Securities Dealers over the counter bulletin board) or the NQB (National Quotations Bureau – Pink Sheets). You choice are based on your experience, management capabilities, in house support and the amount of cash on hand. If you are cash short and want to test the water, you know that NQB-Pink Sheet board might be the right one for you.

The NQB-Pink Sheet board is very fast and comparatively less expensive. The levels of reporting required on Pink Sheet are considerably fewer in terms of audits and SEC reporting. A company can initially begin trading on the Pink Sheets, if they want to become public quickly. Then based on the response from the public and the success of the company, they can move up to the OTCBB or other higher board. You also know going on NQB-Pink Sheet board is risky as there are chances, that that you will not be able to raise the requisite capital. After the dot com bubble bust investors are shying away from less audited reporting companies. You know that you have brain- stormed with you internal core team about raising money both within and outside. You know how much money you want to raise through equity or debt, you know your company valuation and know what percentage of the shares goes to the investor. You have also thoroughly analyzed the option of private placement and other means of raising capital.

You understand the role of the investment bankers in the transaction. You know that for your company to grow and expand in a cutthroat marketplace, the availability of capital is the most critical element. Investment bankers works with you, hand-in-hand, to find the most appropriate forms of capital by identifying the needs of the company, and then finding the capital structure that best fits that need.

The investment bankers will go through each and every step of taking you company public by raising money for you. Good investment bankers will review your business plans and make it full proof. Each phase of the business plan will be properly time framed with time specified tasks and probable results. You will weave a MAT (Milestones, Assumption and Tasks) and work on it. You business plans, managerial business plan, financial business plan, marketing business plan, balance sheet, income statement, statement of cash flows, current investment position will be analyzed and fine tuned to bring in overall success of the offering.

You know that investment banker is a critical player in the team. Typical fee for the investment banker depends on the range of money to be raised but it is in the range of 7.5% success fee and a 2-3% unaccountable allowance.

Now you are going public and you know your responsibility to the stakeholders. You know you have taken big step and risk and rewards are directly proportionate. You know that you will be successful and most importantly you have the courage to follow your heart and intuition. You have a competitive spirit to play and win, you are accountable as you own the outcome, and you have the desire to be recognized as “the best.”

Robin Trehan
http://www.creditcapitalfunding.com
rtrehan@creditcapitalfunding.com

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