Business Essentials: It's worked for schools and parents. But will others shoot the Messenger?

A firm that alerts people to the whereabouts of their kids asks how its system could ride into new markets
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The idea for Lawrence Royston's business came when it took his children's primary school three days to contact all the parents to advise them the start of term would be delayed.

In 2004, he and his wife launched Groupcall, whose Messenger system lets schools send automated and pre-recorded voice and text messages to the landlines or mobiles of parents, staff or other school contacts in any language.

The system is now being used in over 450 schools throughout the UK for absence management, emergency response and to enhance pupil safety. It also has big-name backing. After meeting Mr Royston through a mutual friend, Sir Bob Geldof was so impressed by the idea that he agreed to become a founding partner.

But although the business is doing well, there is a concern it could be squeezed out by bigger rivals. "We think it's time to become less reliant on the education sector," says Mr Royston. "And since our system can be applied to any organisation that may need to alert people to something, we feel ready. Our dilemma is how to make this move."

Groupcall deliberately structured Messenger as a subscription service. It does not tie schools to long-term deals and gives them the chance to "try before they buy". This has helped in achieving a 98.6 per cent retention rate since the service was launched. What's more, 84 per cent of schools have been converted from quarterly to annual contracts, helping the company to boost sales from £60,000 in 2004 to £560,000 in 2005.

In his quest to expand into other sectors, Mr Royston has already trialled Messenger in a housing department, where tenants are alerted to when repair men will be attending their flat for maintenance. "This has gone well and proved to us that Messenger is a solution that would fit well in any database. So if we worked in the NHS, for example, our software could see who has an appointment tomorrow and send out reminders."

He believes it could work in the private sector too. "Say you have a big football team, with a database of fans. You could remind them when their season ticket was up for renewal."

He adds: "Also in our favour is that we could walk into any company and set up Messenger without them having to do anything to their system. It's very straightforward."

There is nothing like Messenger outside the education sector at the moment, but Mr Royston is aware that his competitors may soon see the advantages of expanding. "I'm particularly concerned that because we're a small firm, and we have a much smaller sales team than them, we don't necessarily have the resources to target big companies on the same scale."

www.groupcall.co.uk

WHAT THE EXPERTS SAY

Nigel Reynolds, Partner, Pricewaterhousecoopers LLP, and Head of 'Vision to Reality' Programme

"Having succeeded, where many fail, in spotting a need and serving it, Groupcall must seize its next opportunity in a highly competitive, crowded messaging market. Increasing pricing pressure and consolidation are inevitable and the firm should identify what differentiates it from rivals.

"Groupcall needs a clear, concise strategy and must focus on delivering it. Without significant funding, it would be foolish to adopt a scattergun approach. Being the leader in a niche is easier to defend than being a small player in many markets.

"By identifying where there is the greatest need for its system, it has more chance of success.

"The corporate market is already heavily targeted. However, Groupcall's success in the public sector will act as a good reference site for expansion."

Paul Gostick, Chairman, The Chartered Institute of Marketing

"Groupcall is not the only business to come up with a great idea... and see its market snatched from under its nose by bigger, more powerful competitors. However, there are advantages in being the first and in being the renowned specialist.

"Instead of aiming to broaden his offer for a range of applications, Mr Royston should consider which markets he is best equipped to dominate. This could be NHS customers, clubs or councils. Once he has identified these areas, he should develop a product that is not simply a generic system but is perfectly crafted to suit specific needs. Creating a sub-brand, with a name that links it strongly to a market, will help to sway potential customers and command a premium price.

"With a strong foothold in these sectors, the larger players will find it tough to remove Groupcall from its position as market leader."

Tony Cattermole, Business Adviser, Business Link for London

"It appears that Groupcall has grown steadily and has a loyal customer base, with existing clients subscribing to an annual service. Since it is much cheaper to keep a customer than to find and win a new one, the firm should make sure it monitors satisfaction levels closely and responds to any queries promptly.

"Groupcall should maintain the strategy it has used in the education sector as it seems to work well. Focusing on key strengths - in this case, flexibility of installation and subscription - should help attract potential customers.

"Mr Royston has referred to a few areas where he could expand. But I would recommend he target one new sector at a time to use his sales team to full efficiency.

"Once new types of business have been signed up, use these to demonstrate the benefits of the service to other prospective customers in the sector."

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