Next Step in E-Commerce: Referrals.com
Rationale:
Once upon a time, individuals found doctors, dentists, carpenters and other services through the use of personal referrals. A person in need of a root canal would call a friend for the name of a dentist. A homeowner with a leaky roof would consult neighbors whose roofs had been replaced recently. Word-of-mouth has always been the safest, most reliable form of obtaining referrals. In our modern society in which our neighbor might not know a reliable dentist or our relatives have had no need of a plastic surgeon, we have to rely on other means of ensuring that the people we hire to take care of our needs are qualified and willing to provide us with a good service.
This is why I am starting an online business called Referrals.com. This e-commerce business will be a reliable source of referrals for every type of business imaginable. Individuals seeking a doctor, dentist, wedding planner, veterinarian or a variety of other services will be able, for a fee, to find reliable information on Referrals.
com.
To date, there are some online referral services. Consumer Reports will provide consumers with information about a variety of products (for a fee), while
1-800-Dentist.com will offer the names of dentists in one’s area free of charge. What these types of websites are lacking, however, is a place in which actual customers can rate the business for both its good and bad points; after all, a dentist might be skilled in handling emergency situations, but he might lack the bedside manner that will make a frightened patient more comfortable.
In order to demonstrate this failing, I put in inquiry in 1-800-Dentist.com and I received, in addition to other names, the name of a dentist with whom I was previously acquainted. The problem with this dentist was that he was brusque, rude and completely insensitive to my pain and fear. Yet his name still appeared on this website due to his qualifications and credentials. This is the type of error I wish to avoid with my own referral service.
Rate My Professors is a good example of a referral service, though it is entirely free. This website (as well as its sister site, Rate My Teachers) offers students an opportunity to rate professors they’ve had based on the professor’s knowledge, teaching style, grading style, and overall professor quality. In addition, students can offer comments, such as whether the professor is a good choice for those who aren’t majoring in that subject, or if the professor has a strong accent which might make it difficult to understand him or her. The only drawback to this website is that it is entirely free – the website administrator does not ask for payment in return for this valuable information. I have used this site to determine which professors to take and which to avoid, as well as giving feedback on those professors I know. I have found the site to be entirely accurate and free from irrelevant sniping.
I will model my site after 1-800-Dentist, Consumer Reports, and Rate My Professors. Customers will be able to come to the site and select the category of the service of which they are in need. They will use an internal search engine to locate the services provided in their area. At this point, they can select one of the businesses and find out what services they provide. A separate link will take them to the ratings section, in which they can find out how the business rates by actual customers based on service, product quality/availability, etc. There will be a section in which customers will leave comments. Based on all of this information, the consumer can make an informed decision as to whether or not they wish to use this service.
Setup:
The following issues must be addressed in order to start this business:
Ø Need
Ø Source of revenue
Ø Initial Budget
Ø Start-up costs
Ø Obtaining customers
Ø Marketing
I have already established that there is a need for a referral business, especially for consumers who are new to certain services, such as plastic surgery or some specialties of carpentry (such as roofing, carpet installation, or painting). In addition, smaller businesses need to have a way to advertise their businesses and to compete with larger businesses (such as Home Depot) to whom customers flock due to their reputation and relative size. This business will provide a valuable service both to the consumers and to the businesses.
The Small Business Administration provides a simple online guide to starting a business. They offer quizzes and checklists so that the entrepreneur will have a realistic idea of what it takes to start a business. In addition, they provide information to ensure that one has all the bases covered before putting out any money or making any commitments. Forbes.com has a page dedicated to entrepreneurs, and it includes many relevant links. Though not all of the links are specific for online businesses, they offer advice and a place in which one can ask questions of an expert.
A business must provide revenue in order to be successful, so the first question I must ask is: How will Referrals.com produce income? The earnings will come from two sources: the customers who sign up to use the service and the companies who will pay to have their product or service listed on Referrals.com.
Customers will pay a subscription fee in order to use the service. They will be given options of a one-time fee, then monthly or yearly fees. The customer will receive a discount for signing up for three months to a year; in addition, they will receive a discount for membership renewal. The discount will be nominal in the big picture, but it will be presented to the customer in such a way that it appears to be a good deal. The second source of income will be derived from businesses who will use Referrals.com as a way to advertise. Business as large as Jiffy Lube and as small as the mom-and-pop appliance repair will be contacted to advertise on Referrals.com. They will be advised that customers will be able to rate their services online; therefore, if they provide a good service, their listing will be a good investment. In return, I will suggest that they offer a discount to those customers who rate their services on Referrals.com. Of course, not every business will pay to be listed on my website. Customers need to be able to discuss good and bad experiences that they have had; therefore, the businesses who have paid to be mentioned will receive a more prominent mention, such as having the name of the business in bold or a link that goes back to their own website.
I recognize that I am not in a position to make a large investment in a business, nor can I afford to throw away money on services or advertising that will not produce a return. For that reason, it is important that I create a budget. The bottom line for my budget is that I need to find all of the free services that I can. In order to increase my minimal budget, I can apply for start-up grants. About.com lists a number of websites where I can apply for funds in order to get started. I will not take out a business loan because I cannot be sure that I will be able to pay it back.
The start-up costs for this business will be minimal. I can start this business in my spare time so that I do not need to be concerned with how to get by financially until the business takes off. The first consideration will be a domain name and website. Most web hosting services start from $19.95 and up per month. Having no experience in designing a website myself, I could pay a professional to set up and maintain my site. It would be very expensive, considering the amount of work involved in design and the inclusion of the amenities that are necessary to list and rate the businesses as well as to accept payment. Rather than getting myself into debt immediately, I have another plan. I will make an appointment with professors at local universities (or technical schools) and request that they assign my website as a class project. Not only will it fill a gap in the professor’s curriculum, but it will give the students an actual reference to include on a resume. They will complete the project for credit rather than pay, though I will encourage them by providing snacks (and other affordable incentives) while they’re working. The site will later require maintenance, but by this time I will have accepted payment from businesses and customers alike, and I will be able to pay for this maintenance.
Once my website is up and running, I will have to find customers as well as businesses that will pay for the privilege of being listed on my site. I will start my advertising my business on my personal MySpace page. In addition, I will have my website listed in all major search engines, such as Google. I will contact business magazines and journals about getting a free mention on their websites and in print. Once I have exhausted all free ways of marketing, I will pay for advertising. The next step will be to contact businesses about being listed on my website. While they will have to pay for the service, I will offer a big discount in order to get started. As part of my fee, I will require them to include a link to my site on their own websites. The goal is for my business to work together with other businesses in order to add to each other’s revenues. Through Entrepreneur.com, I learned of specific ways in which I can obtain cheap advertising:
o Google AdSense – I can include a Google-sponsored ad on my website, and they will pay me for any income that is generated from that link. In addition, I can pay for a Google ad, and a link to Referrals.com will appear on other websites. I will have to pay a commission, but in order to get started, this might be a worthwhile investment.
o Affiliate programs – Much like Google AdSense, I can find other businesses who would like to advertise on my site. In return, I can use this to advertise on websites with heavy traffic.
o Pay-Per-Click – Websites such as Hits4Pay.com will pay individuals to view websites. I would need to pay them to include my website in their promotion, but the additional traffic would be worth the initial investment.
When Referrals.com begins to provide an income, I can invest in heavy-duty marketing. I will purchase direct mailing lists and send advertisements through the mail, I will send out bulk e-mails, and I will pay to have a link to my website included on other websites.
Staying In Business:
Once I have started Referrals.com and I have established a customer base, I will need to focus on the following matters:
Ø Website maintenance/improvements
Ø Customer service
Ø Category expansion
Ø Comment/rating concerns
Ø Competitors!
The website will include a space for comments and concerns, especially for part of the site that aren’t working properly or could be working better. I will hire one of the college students to perform maintenance on the website. It will be especially helpful if the actual customers and businesses have suggestions on how to improve the website. Along the same lines, I will need to pay special attention to customer service. For example, if a customer is dissatisfied with the payment options available, I will have to consider expanding it to include options that will increase my customer base. Initially, I plan to accept direct payments and also use PayPal. PayPal has a good reputation and consumers trust it to handle their payments without fearing that their credit card or checking account information will be distributed.
I will start with a minimum of categories (Carpentry, Doctors, Dentists, etc.) but will expand according to the needs of the customers. For example, if a customer sends a message stating that they need to find a good veterinarian in their area, I will perform the research myself and find businesses who are willing to: 1) provide me with customers who will act as references; and, 2) be listed on my website, though not necessarily for a fee. Not every business will pay to be listed, though those who receive business because of my website may consider paying to be upgraded. Ultimately, I would like to have a menu that includes many different categories and subcategories. For example, a customer may find:
v Doctors
Ø General Practitioners
Ø Pediatricians
Ø Cosmetic Surgeons
Ø Podiatrists
v Lawyers
Ø Criminal
Ø Civil
§ Divorce
§ Accident
§ Family Law
v Automotive Services
Ø Sales
Ø Repair
§ General
§ By Manufacturer
§ Specialty
· Transmissions
· Tires
Any website that allows space for individuals to comment needs to be prepared for the worst: hackers, insincere comments and junk e-mail will be the most common. In order to prevent this from happening, I will need to invest in a good firewall. Business.com provides a list of firewall vendors from which I can choose a variety of programs and services. Not only will this protect my website integrity, but it will also ensure that my customers’ private information is not compromised.
In spite of the fact that this is a pay service, I must anticipate that some customers will feel the need to offer comments that are, at the very least, insincere, and at worst, slanderous. If I find that this is becoming a common problem, I will change the format of the website so that all comments must go through the website administrator before they can appear on the site. While I want to give consumers an honest picture about the quality of service provided by the businesses, I don’t want to alienate anyone. It is entirely possible that, given the knowledge of bad service, a business might be willing to make it up to the customer in order to prevent bad publicity.
Finally, I can anticipate a host of junk e-mail being filtered through the website. Just as I intend to use bulk e-mail as a way to advertise, other individuals may try to advertise their businesses the same way. Therefore I will block nuisance e-mail addresses in order to prevent them from delaying response to the legitimate customers.
My final concern must be with competition. While imitation is a form of flattery, in business it can mean losing one’s customer base. B2B Online Marketing offers some advice in dealing with competition, the most important of which is to have a competitive advantage. I will need to ensure that my customers receive something from me that they cannot get anywhere else. I believe that offering both listings, the willingness to search out new listings, and a ratings system will take care of the competition. In the event that a competitor uses the same strategy to steal away my customers, I have a few options.
The first thing I can do is offer a Customer Loyalty Discount. While I don’t want to offer a discount that will eliminate my profits, I will need to be able to compete. I can make up the loss of income through increased advertising and a more aggressive approach toward obtaining paid listings. Next, I can survey my customers to find out what I can do better and what services they would like me to offer in addition to those that are already available. The key is to keep the customers happy.
Conclusion:
The goals of Referrals.com are not only to provide a service and make a profit, but to offer a direct customer service link between businesses and their customers. For example, if Mrs. Smith goes into Pet Kingdom to buy a leash for her dog and experiences a long wait in line combined with a disinterested employee at the register, the managers of Pet Kingdom might want to know about this negative experience before Mrs. Smith can share it with the customers of Referrals.com. A simple e-mail letting them know that a comment has been posted will not only protect their reputation, but allow them to mend a relationship with a customer. Referrals.com has the potential to be a groundbreaking new business.
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