“On demand” businesses have certainly taken off in Australia, with the model disrupting everything from food delivery to parking.
But some of these are starting to falter, unable to pay staff costs and burning through investment dollars fast.
CEO and founder of Zoom2u Steve Orenstein, who’s now onto his third business, shares his key tips on how to set up an “on-demand” business model for success.
1. Select a model that provides customer advantage
It’s important to choose an “on-demand” model that provides ongoing advantage to the customer. For example, booking a cleaning service “on-demand” is great when as a customer you need a last minute cleaner. But if as a customer you’re looking to book an ongoing cleaning service, there may be no appeal in a service that markets itself as fast “on-demand” or worse the customer may just contact the cleaner direct to arrange future bookings. This was a big reason why Homejoy in the USA failed. Don’t just copy businesses in the US — just because it works in the USA doesn’t mean it will work in Australia. Spend enough time researching to understand the market size in Australia and what the potential differences are.
2. Define your service
This is true for any business, but for an “on-demand” service model it’s especially critical because you’re offering one service. For us, it’s fast and affordable delivery. The “on-demand” market is very competitive with a new service launching in Australia practically every week, so you really need to do your research and find out what makes you different. Are businesses and consumers willing to pay for your service? You need to define exactly what your service is, right from the outset. Speak to people in the industry — reach out to people overseas who are running a similar model, find out what is working for them and what isn’t working. You will be amazed at how much information they are willing to share.
3. Secure your own network
A number of “on-demand” players are already beginning to wobble just a year after they entered the market because they didn’t secure their own network and are reliant on third-party performance. At Zoom2u, we invested in our own network of couriers from the outset which means we don’t rely on the large courier companies that are consistently letting businesses and their customers down. Our drivers are compensated to put the parcel in a customer’s hands and our customers receive a status update on every single delivery.
4. Use technology
For “on-demand” services to flourish, they must be much more than just coordinating and delivering conveniences via smartphones. How can you use technology to improve your customer service? For us, it’s being able to offer our customers an app that shows them exactly when their parcel will be picked up and delivered. For a local grocery service, can you provide an app that shows your customers suggested meals they might like and add those ingredients into their shopping basket? You need to change that customer’s habits; so think about how you can use technology to do that.
5. Get your customer volume up, quickly
Margins in “on-demand” businesses are so slim, so volume is key. And you need to get this volume up, fast. So buy customer lists, acquire potential competitors and do what you need to do to get that customer base up and fast. If you don’t, you’ll lose money and go under. Simple as that.
6. Raise capital early
It might be tempting to bootstrap and fund the business through your own means, but raising capital early is crucial so that you are able to pay your costs and staff properly. It’s all about scale in this game, so operating out of one or two states or capital cities in Australia isn’t enough. You need to provide your service all over Australia which is difficult. For us as a courier company, it’s a huge challenge to do that at an affordable cost.
7. Get the word out
As a new “on-demand” service you’re not going to have a big marketing budget, so you need to spend it on the right things. For us it’s our digital footprint — making sure we come up on Google’s first page of results when customers type in couriers or delivery in major Australian cities. PR has been a great investment for us — customers have called us from seeing articles in the media and we’ve noticed spikes in website traffic from the results of our PR activity.
Social media is another channel to engage with potential customers without needing a huge advertising budget. But at the same time that you are busy promoting your service, remember to maintain quality as you enter your first growth phase. One key for success is making sure you have the measures in place to monitor customer satisfaction.
Understand what metrics you can look at to see how customers are enjoying your service so you can quickly identify impacts on quality.
8. Don’t do it alone
You can’t do this on your own. Who should you be partnering with to grow your business? For us, in just under two years, we’ve signed agreements with both Greyhound Australia, which enables us to provide our service interstate for an affordable price and also Menulog, which means restaurants can provide a takeaway service using our network of couriers. It also gives us access to two very large customer databases in Australia.
9. Hire slow, fire fast
We’ve probably all made mistakes here, but don’t hold onto staff who aren’t up to the job. You might be able to afford to in a large corporate but in a fast moving startup, you just can’t. Every day they’re not doing what they need to be doing is costing you money. Learn from those mistakes. We’ve put time and investment into our onboarding process and have reaped the results, but having the right people in your business who are all pulling in the same direction is so important. Your business won’t succeed otherwise.
Steve Orenstein is the CEO and founder of on-demand courier service Zoom2u.
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