Put Your Customers in Charge

My Smartest Mistake: Find out what your customers want.

Who: Tom Van Horn, 38, founder, president, and CEO of Mercata Inc., Bellevue, Washington
Mistake: "Starting out with too narrow of a business plan."
Payoff: "Real-time customer feedback is the most meaningful way to gauge your company's success."

"It's true what they say: The customer is always right. Mercata was the first online marketplace to capitalize on group buying. When we launched in May 1999, we focused on providing mostly higher-end products, such as stereo equipment and appliances. We had relied on focus groups to direct us toward the kinds of products that people would buy, and the research indicated that 'considered purchases' -- high-cost products that customers research and comparison shop for before buying them -- were what drew people in."

"But real-time feedback indicated that customers wanted more moderately priced items. We added items such as phone cards, small gardening equipment, and cutlery. Items that cost less than $100 now comprise about half of our business."

"This experience hit on a key point: Getting valid feedback from customers is a lot more powerful than relying on focus groups. We have a 'Product Request' button on our home page that gives us an idea of what new items we should provide, and users contact us thousands of times per week. I've coined a term for how we make decisions at Mercata: 'customer-driven business evolution.' Customers tell us where to go, and we let them guide our decisions."

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