Archive for the ‘Product Marketing’ Category

Social (Marketing) Must Evolve to Survive

A friend of mine recommended yesterday that I rewrite my BIO to reflect my expertise in social marketing. I appreciated the feedback, but it also highlighted an identity crisis that I have been struggling with since before I started this blog.  

I am looking for a strategic marketing role that leverages my experience over the last few years in product managing, evangelizing, and consulting around social media platforms for marketing. I have also been consulting in social marketing and I am getting considerable recognitition for my thought leadership in the space, but I never saw my future as an independent social marketing consultant. I haven’t figured out the consultant’s dilemna; balancing sales with delivery.

Here is my real dilemna… although I am consulting on social marketing, I really see that social marketing as an independent discipline will eventually go away. If it is succssful, I believe that ALL marketing disciplines will be socially enabled thus social marketing as a term will become redundant. I suspect that it will take a while. So for my social marketing colleagues, you can rest easy that you will have jobs for a while.

I see that Social Marketing will be elevated in the marketing portfolios to become a strategic discipline reporting to the CMO akin to Product Marketing, Product Management, Marketing Communications, Marketing Operations, and even Web Marketing. But, I also see that each of these discpilines will need to become proficient in social marketing and understand how the changing dynamics on the web will impact their individual disciplines. I think that social marketing represents a fundamental shift in buyer behavior which will require a rethinking of the marketing function at large. Social media is a catalyst, but it isn’t the actual change. Buyer expectations around information, relationships, and the very nature of transactions are evolving. I see this as another phase (in a long line) of the changes driven by deeper internet integration and evolution.

Product Marketing & Brand Management – Today, the product value proposition is designed for multi-channel, but how do you design for user generated content where you cannot control the location, context, or delivery? Social media and marketing represent a shift in the direct communications of marketing messaging to the indirect. Product Marketing will have to package product messaging to become more compact (sound bites), reusable, and repurposable to ensure sufficient distribution through social media channels; ie. blogs, social networks, digg, delicious, Youtube, etc. 

Product Management – We are already seeing the trend in Web 2.0 product management to build “lite”, component applications that are driven more by adoption that overwhelming features. These applications are built to be a point solutions, but can be scaled easily and as modules. The reasoning is that for many potential users, more is less… attractive. We are so overwhelmed with information that taking time out to learn a complicated application  is not attractive. Building just-in-time functionality to meet specific pain with the ability to add more functionality later is attractive. In reality, you are seeing agile manufacturing of web applications. We are also seeing that happen in manufacturing, services, and distribution across society. This puts more pressure on Product Management to understand the customers, identify the segments, build targeted functionality prioritized to their needs, and delivery the right experience. A much more complicated and fluid environment made more difficult when the potential markets can self identify and congregate virtually. You can miss the mark and it will be much more readily visible.

Marketing Communications – Advertising is in full retreat from the recession, but also from the fact that more messages do not translate to more sales. Actually, the inverse. SPAM has overwhelmed our email infrastructures. The key to marketing communications now is multi-channel, targeted, and coordinated messaging that catches attention, engages, and provides a specific call to action. Social media empowers the audience to tune in or tune out the message as they see fit. Marketing communications needs to adjust to the power shift in this relationship. Marketing Communicatiosn firms are even more vunerable as many of them are transaction oriented (campaigns) where the newer channels are relationship oriented (long-term, one-to-one mass customization of relationships). Marketing communications needs to evolve to more of a pull strategy versus a push strategy.

Marketing Operations – CRM, Multi-Channel Marketing, Enterprise Content Management, Measurement and Reporting, etc. all get impacted. When does a lead start? How do you measure a fluid environment? How do you manage corporate information assets that aren’t in your posession which are designed for reusablility and redistribution (blog posts are an example)? How do you measure all of the activity to develop an ROI? (This one I can answer: you should build the ROI based upon your traditional metrics. Force social marketing to justify why these activities will lead to more effective marketing, not create justification as to why you should do social marketing)

Web Marketing – Where does Corporate Online Communities come into the equation? SEO and SEM? How do you balance the shift from search to social media? How do you manage the transition from social networks to your own onlne community? Engagement, Interaction, Adoption, Momentun?

Ironic that a social marketing evangelist is advocating the end of social marketing as a discipline. However, as a marketing executive first, I believe that social marketing is really about applying the fundamentals of marketing to a new environment.

Sales Gone Bad, Blame it on the Customers

You hired a new sales person and for unexplained reason, they cannot perform. They had all of the references, met quota since the dawn of time, etc. When you ask them about it,  they blame it on the customers not buying in this economy. Having run both sales and marketing in previous recessions, I know how bad conditions are for revenue generation in this market. Unemployment in some states is now double what it was just a couple of years ago. Some industries sales are off 25% or more.

It is a tough market, but… with unemployment at 10%, that still means 90% of people are employed. Sales are off 25%, that means you still have a base of 75%. Numbers mean a lot, but only to justify the point of the moment. Good companies grow even during recesssions and I grew sales 280% over one year in the last recession. You have to work harder, smarter, hire good people, and be more innovative.

So, back to your sales person. Not working out as expected? Explainable as a bad hire, yes.

3rd or 4th sales person who came in like a rock star and left like a roadie?  No, probably something else is too blame.

Chances are that you have a marketing problem masquerading as a sales problem. Not just a marketing communications problem, but chances are the sales people are having to do too much conceptual selling too early in the sales process. It shows up in presentations and meetings. What should be a 2-3 minute concept overview turns into a half hour explanation. Good sales people are natural story tellers, but if they don’t feel comfortable, don’t tell the same story each time, or look wooden; you probably have a marketing (messaging) problem.

Marketing’s role is to communicate the concept, support the sales process, and make it repeatable. Sales people in large organizations who take roles with smaller companies, which don’t have the sales support infrastructure, have a hard time transitioning to the new environment. I call it comfort with ambiguity. It is a lot harder to sell without the references, brand, collateral, and case studies.

Also, smaller organizations require sales teams to build the activity structure that large sales organization provide to their sales teams in the form of reports, quotas, and direct management. It takes a lot of self-discipline to build the structure on your own. Some larger organizational sales people do that instinctively and will work through the transition, but others need a more established sales support structure and tools to make them successful.

Marketing can only fix half the support issues (messaging and tools), but will not fix the self-discpline issue. A good marketer will come in and review your marketing collateral and listen to the “story”. Chances are that the value proposition is “fuzzy” and the audience is not well defined. By reviewing the product offering, the marketer can reset the value proposition of the offering and map it to the audience. If the core is correct, building marketing materials to tell the “story” becomes an exercise in building the visual elements that assist in communicating the concept.

A key to success is interviewing potential and existing customers. You have to speak their language and speak to their motivations.

Finally, a good marketer will adjust the marketing materials to support and accelerate each stage of the sales process. One key challenge in any sale is the “porpoise effect.” You gain momentum during a sales call, but lose it in the interim between contacts. This usually results in the sales person reselling the solution multiple times because the stakeholder gets busy and isn’t able to remember the value proposition. Good sales support from marketing allows the sales person to focus on the heavy lifting around the relationship; providing the support tools to do the communication of the concept, value proposition, and credential the organization.

Is Your Marketing Like Teaching A Dog to Read? Part 2

In part 1 of this series, I shared a story about a professor who taught his dog to read… obviously, the dog could not read at the end of the semester, but the professor “taught” the dog. Unfortunately, this is very common in marketing, especially in emerging growth companies. The companies have very “pretty” marketing materials; website, collateral, powerpoints, but when you cannot really understand the audience, value proposition, or why they are different.

The litmus test for marketing materials is whether you can use your competitors name in your materials and it would apply. Or you could insert a company name from another industry and it reads just fine. Finally, you could insert any company name and no one understands what you do.

The real challenge is that the organization did not go through a structured exercise to map the value chain: audiences to benefits to functionality to features. Here is a high-level process to do just that:

1. Focus on identifying the market & associated segments

2. Fnd the pain – immediate call to action – for each segment; ie. this is the problem or opportunity you address; your solution = benefits

3. Communicate in the language the market understands – means you need to have a market SME, customer advisory board, or perform lots of prospect interviews to understand their needs in their language.

4. Test your messaging – social media participation, sales calls, speaking events, networking events, advisory boards, analysts, etc. Frequency and time allow you to polish your messaging. I know that I am ready when I can get through the 1st several meetings with a prospect or an investor without them finding holes in my presentation and Q&A. Doesn’t mean your offering won’t have challenges in due diligence, but if you are targeted to the right audience with the right solution, the first two meetings should be about concept, relationship, and “fit”.

5. Model your marketing on the sales process – each stage is idenitfied and marketing’s support required – One of the biggest challenges to getting the marketing materials “right” is identifying the scenarios under which it will be used. If your sales process is to work through partners, then providing a generic sales presentation won’t work. If you are selling into a specific vertical, then understanding the buying process may mean that you have to have 2 different presentations; one executive and one technical for different meetings. Collateral and sales support materials are very expensive to produce (opportunity costs) so focusing on a limited number of high-quality tools versus having a checkmark for materials is critical.

6. Focus on how to speed up the sales process – optimize, accelerate, replicate – momentum, reselling, bridging – One of the biggest challenges in any sales process is the “porpoise effect”. You build momentum and then it subsides, you resell and build momentum, and then it subsides. Most qualified buyer sales that seemingly look qualified with a need, but don’t get beyond the initial sponsor die due to lack of momentum. Either the sponsor could not sell internally or lost focus… The ability to empower your sponsor to be an evangelist will assist you in maintaining momentum. Everything in sales support should be around how do we help the potential customer make a decision faster. You will close more sales this way.

7. Participate in the early sales – look for objections – price, package, credentialling, references, technology, features/functionality, language, benefits, positioning, competitors. My biggest beef with some marketing communications people is that they don’t understand the market, customers, or the products. I want to get in front of the customers and interact with the market. I need to understand the buyer behavior and get feedback to fine tune the messaging.

8. “Save your powder” – the first set of sales to early adopters doesn’t require big marketing; focus on sales support, business development, online marketing, andPR; expensive marcom, tradeshows, events, and brochureware after the message has been tested. Save the marketing dollars till you have proofed the model and are ready to grow big. My approach to marketing budgeting is like “rolling a snowball downhill”. Make a small investment to credential your sales process;  when the market is proofed, build upon the foundation.

9. Build a customer lifecycle early. Know where you are going and how you will get there. Build towards a critical mass of referencable customers. Shrink the product’s functionality & features to slightly beyond what your target market requires. Also, make sure you set customer expectations so that you can exceed them. Make sure the roadmap is clearly articulated and scales with your customer expectations and your identified new market segments.

10. Your first set of references and referrals are the most expensive & the most valuable. Focus the organization on wowing the customer and tie all organizational goals to customer satisfaction.

Making sure your marketing “dog” can actually read is critical to scaling your business. If you have to personally evangelize to every new prospect to get them to understand the concept of your product and the value for them, you will have a very expensive sales process. Even service companies need to package their services to scale effectively.

Part 3 will address the challenges of Mid-Market companies.

Part 4 will address the challenges of Established Brands.

Is Your Marketing Like Teaching a Dog to Read? Part 1

I had an accounting professor who told us a story about a colleague of his who decided to teach his dog to read. This professor crafter a full lesson plan and spent 12 weeks delivering a daily lecture to his dog. At the end of the semester, he certified that he had taught his dog to read. This obviously doesn’t actually mean the dog could read, but he delivered a beautifully, executed lesson plan.

This is a common occurance in Marketing, as well. It manifests itself in several ways:

Smaller, Emerging Growth Companies – Marketing Collateral Which Doesn’t Say Anything

A common challenge for smaller companies is the mistake that Marketing Communications equates to Marketing Strategy. The first thing early stage companies do is engage with a marcom firm and focus on building the prettiest branded website they can afford. Then they throw in the logo, marketing slicks, and a powerpoint. All of these are important, but they skip some important steps; like defining the product target audience, defining the value proposition, and mapping the features/functionality to the product benefits, validating the pricing and packaging, and then testing the messaging to make sure the priorities of the market are accounted for in their planning. This results in a marketing program that “teaches the dog to read”, but doesn’t actually communicate a clear call to action or even explain what the company does for whom…. the end result is that the actual communication and education about the product’s value has to actually occur during a sales call which isn’t very scalable. Part 2

Mid-Market Companies – Siloed Marketing Communications Channels

More established mid-market companies have a different problem in that they have mostly grown organically so they have done a good job of communicating the concept & value of their offerings. The common approach to marketing tends towards mimicking what larger, enterprise companies have done with a “pasta method” approach to marketing… throwing everything up against the wall to see what sticks… Without the coordination or the brand recognition of larger established brands, the market really doesn’t see the “get” the value of the offerings because there isn’t a cohesive multi-channel story. The lesson plan is a fully fleshed out lesson with multi-media slides, but you only get to hear half of it….

Established, Enterprise BrandsFighting Economies of Scale

Large enterprise brands have the resources and the history to communicate brand strategy. The challenge for large enterprises is the challenges of coordinating the vast organization to deliver a consistent message. A friend of mine told me about working with one major brand that had a different agency of record for each communication channel. And the different agencies didn’t play very nicely. Now, add in multiple products, divisions, and new communications channels. Large enterprises have the access to talent and the resources to deliver the “whole lesson plan”, but without the ability to coordinate, it is like having the lecture delivered by multiple professors on different campuses.

The rest of the series will focus on strategies to enable companies of different sizes to build sustainable foundations for communicating the value of the product offerings. At the end of the day, if you cannot get your message across in a way that is compelling & differentiated, translated into actionable prospect leads, and resulting in closed sales; it is like “teaching your dog to read.”

Part 2 – Emerging Growth Companies

Unhorsing an Entrenched Competitor

Since my last post was about first mover advantage https://rosenhaft.wordpress.com/2009/06/02/web-marketing-leveraging-first-mover-advantage-on-the-web/, this post will be a how-to on enter a market with an entrenched, but less capable competitor. The assumption is that your offering is of superior quality or has unique attributes for the market at large. There are different strategies for purely niche products, “me-too”, or purely local offerings that are the subject for later posts. This post is for that company that has developed a better mouse-trap and needs a market entry strategy to unhorse an less capable, but established competitor.

My last post discussed the micro-economics behind the marketing and this post will do the same. Displacing a competitor is all about two costs:

1. Opportunity Costs – the value of your opportunity outweighs the switching costs; time, money, resources, pain, risk, etc.

2. Switching Costs – hard AND soft costs; time, money, resources, training, risk, pain, etc.

The entrenched competitors barriers to exit are your customers barriers to entry for your offering. Many companies under estimate the switching cost equation in displacing a competitor. Many times a company has a much better offering than their entrenched competitor, but cannot seem to get traction. When you di deeper, you find out that there is much more to the “cost” of switching beyond features or a small price difference. You find out a customer has to go through extensive training, has an extended contract that is not up for renewal, or doesn’t perceive the value of the offering as worth the hassle of switching for such a small price savings.

The keys to switching are really about changing the rules of the market. Bringing something new in terms of capabilities, changing the cost structure through planned commoditization, providing a different focus, bringing a targeted solution, AND FINALLY – being easier-to-do business.

Major Factors

1. Price –  Competing on price alone is a very difficult as it actually devalues the offering and discourages loyalty. “Cheep” is different than “economies of scale”. At the onset of the article, I positioned “me-too” offerings as a different strategy. This is why… “me-too @ a lower cost” has a place in the spectrum of the market targeting the cost-conscious buyer. Knock-offs are a good example; however, this takes a different type of positioning to target the cost-conscious buyer with a specific call-to-action. This is a particular market strategy that, in reality, is a niche. If done poorly, or not by design, it can lead to devaluation and rampant commoditization. If you can match the quality with 20% less cost, you generally can attract a portion of the market’s attention depending upon the industry and the competitor (see relationship below).

2. Capabilities – Features & Functionality – This is the secret-sauce approach. We are better because we can provide better capabilities that the competitor cannot. This may be a segment of the market or the whole market depending upon your capabilities. Features tend to not be sufficient on their own to motivate switching.

Better functionality may not necessarilymotivate a buyer to switch either. If you are higher priced with better functionality, you will have trouble with major displacement . The cost factor will be weighed into the equation unless your capabilities significantly change the buyers value equation; ie you save them much more money than the offering’s cost. “Our product saved the buyer 35% in processing time which translated into $250,000 in savingsover 3 years.” If your product costs $75,000 installed, which is $25,000 more than your competitors, but you save them $$225,000 in total cost over 3 years, you can make a case for displacement. If you are more expensive and cannot calculate a hard $ ROI, you will have to rely on a combination of techniques for displacement. For products that are truly revolutionary in which you change the cost structure of the market, you can introduce a lower price, and show a better ROI; then you have an opportunity to displace a large part of the market.

3. Relationship – Customer Support /Responsiveness /Ease-of-Use / Easy-to-Do-Business – Most companies provide mediocre service by definition. Whether by scale issues, complacency, or distraction; a majority of entrenched industry players are vulnerable to displacement based upon customer dissatisfaction. The notable exceptions are the ones that really shine. Service is particularly challenging for product companies.

If you are a new entrant, make service a hall-mark of your offering. Take the time to put in place the processes that will enable you to demonstrate your responsiveness to the challenges of the market. If your competitor’s customers are annoyed by the amount of training it takes to get people productive, then this should be your focus. If a competitor takes 2 business days to answer an email, then this should be your focus. My guess is that average companies probably have 10-20% of their customer base vulnerable to switching due to service. Below average service companies probably have a lot more.

4. Speed– the axiom of “time is money” is a great selling point for a potential customer if you can demonstrate the ROI from the change. Selling that we are faster (slightly) in itself does not generally motivate buyers. Proportionality is critical. Did you upgrade your last PC because it was milliseconds faster? If so, you were a minority; hence why the PC & chip industries are rethinking the “speed is better” industry sales pitches. Save 20% in a major operation & improve quality; you have a customer’s attention. Do it at a lower cost due to changes in technology; better. Now, do it without disrupting their organization’s operations while they switch; you have a “winner”.

5. Tailored Solutions –A large competitor’s niche or market segment, may actually be your market. Once again, proportionality applies. For your competitor, a segment may be 10% of their total market. A niche may be 1 or 2% of their revenues. For a company with $2B in revenues, $50M may not be sufficient to focus. For you, $50M is a sufficient market to enter and begin your market domination. If you competitor is not focused on a part of the market, then the obvious strategy is to pick a small enough market segment that you can dominate with a more tailored offering.

The challenge is to balance the entry into the niche without pigeon-holing yourself or awaking the sleeping giant. Your ability to service this niche with ramifications for the rest of the market, may be just the wake-up call and the validation for upgrading their offering. You could create your greatest competitor; who then leverages their relationships to the market with a “me-too” offering. Your competitor could even use your “newness” against you as a risk mitigation strategy.

Figuring out how you will enter, how you will communication the value, how you will expand beyond the entry point, and how you will evolve your offering to stay ahead of the competitor is critical. You don’t want to win the initial battle and find yourself losing the war….

6. Risk Management – Most new entrants fail to gain traction because they fail to account for the buyer’s fear of change and overall inertia. “I am not really happy with our vendor, but….. we would have to go through training, we have a contract, saving that little money isn’t important, we are comfortable, we are used to it, etc.”

Pick your excuse…. what they are really saying is that your offering isn’t worth the trouble in switching. You haven’t built a sufficient case to risk switching. Contrast that with a resounding YES that certain products and services elicit. These offerings provide a significantly, measurable, emotional, and tangible improvement over what they are doing today. AND these offerings do it in a way that seems easier and doesn’t involve much risk of switching.

Pull all of the above together to build a multi-faceted, multi-stage market entry strategy and you have the potential for a “disruptive” offering. The reality is that most companies don’t have a disruptive, “home-run” where they can drive word-of-mouth merely by “building it and they will come”. The majority of younger companies will have to focus on the fundamentals and build upon their slight advantages. In essence, they will have to manufacture runs from their singles and wait for the “right pitch”. Understanding your competitors strengths and weaknesses, the market opportunity for improved offerings, and understanding the market’s risk equation are the keys to successfully entering a new market. 

There is a concept that I call “switching point” which is the micro-econmomic version of Malcolm Gladwell’s “tipping point”. The switching point is the threshold in which you have created sufficient value to convince the potential customer that the opportunity of your offering outweighs the switching costs from the competitor. This is not an absolute, in fact may be unique to each customer, but a good market analysis should incorporate an identification of this equation into the sales process. Understanding the buyer motivation, switching challenges, and pain points will assist you in displacing an entrenched competitor.

Web Marketing: Leveraging First Mover Advantage on the Web

Since I did a MBA research project on First Mover Advantage on the Web in 1996 for a hybrid Micro Economics & Marketing class, I have approached marketing on the web with an eye to the economic impact that the low (near zero) cost for distribution on the web would have on competition.

We have seen it in multiple online vehicles; first it was email, then application distribution, ecommerce, blogs, online communities, and now social media tools like Twitter. My research was about the challenges first movers have in creating sustainable barriers to entry for subsequent market entrants. The ability to create entry barriers for competitors directly impacts their ability to maintain profit levels (reflection, in part, of customer acquisition costs) as subsequent companies enter the market.

We are seeing in the IPhone market with applications. Someone creates a popular application and then there are four similar applications. The challenge is that there is very little in terms of barriers to entry for the competitors. The first mover can get a very limited runway to market themselves with a unique offering before the market is established. The subsequent buyers cannot really differentiate in quality. The only barrier to entry for later entrants is the number of users of an application (popularity) which provides a small advantage for the first mover.

Now, a first mover can take advantage of the web to solidify a lead if they can combine entry barriers with exit barriers. If I can get into the market before others, create a differentiation that is hard to duplicate, and find a way to make it even harder to switch (for cost or niches), then you can build upon the lead.

First mover advantage, even in that situation, is not absolute as there are large numbers of examples where later entrants, with deep pockets and brand equity, were able to catch up to the first mover. The reasoning is pretty simple. you are the market leader with a large percentage of the market, but only sell to 5% of the available market. The competitor buys 80% of the next 10% of the available market that actually buys & they all of a sudden they can catch you and become the market leader.

Here is the lesson for early stage technology companies & the tie back to the title.

  • Because the internet allows you to communicate cost effectively to large number of people, this means you have a relatively low barrier to entry into a market.
  • At this point, a potential buyer will not be able to differentiate the quality of your offering or the credibility of your firm.
  • If you pioneer a market and prove successful, you have validated the market for potential entrants.
  • If those entrants have an existing customer base & available dollars for marketing to the market, you do not have a very sustainable barrier to entry.
  • Hence, you will have to spend more of your dollars as you grow to obtain customers because the market will be more competitive & the economics of scaling communications on the internet. It is exponentially harder to get 1000 people to listen to you versus 100, and exponentially harder to get 100,000 versus 1000. Economies of scale work against you on the internet due to the messaging noise.

Ok, so if you are introducing a new product, how do you protect your advantage?

  1. Word-of-Mouth Marketing = Lower Customer Acquisition Costs – You have to drive an effective referral program over the web. Social media allows you to do that if you can get a core set of evangelists. This is fundamental to lowering your AVERAGE customer acquisition costs. Free referrals balance your costly marketing and sales costs. Don’t count on word-of-mouth marketing, though, very few companies get homeruns. Hope for the homeruns, but be prepared to manufacture runs to stay in the game until you see the right pitch.
  2. Offering Value = Adoption – you have to meet & exceed the customers expectations around the value of the offering with something they cannot get anywhere else easily. That means you cannot satisfy everyone, so target an audience who will appreciate your offering. Make sure you get them to be raving fans. This gives you a core group of evangelists. Provide features and functionality that are must-haves, not nice-to-haves. This will involve a great deal of market research to understand the difference. This means investment in technology, automation of processes, unique approaches, patents, etc. Differentiation is not absolute, but it the starting place….
  3. Pricing & Packaging = Competitve Positioning – Assume that you will have competition and that they will be strong. You need to plan on an aggressive pricing and packaging strategy that creates both barriers to entry for competitors and barriers to exit for your customers.
  4. Partnerships = Distribution – the right “big brother” partner can enable you to leverage their customer base and brand marketing power to lower your average customer acquisition costs. Partnerships are difficult to build and are time consuming to manage. If done right, you will seed the market for the partner, provide them with sufficient channel support, and assume that you will have to do most of the heavy lifting in terms of closing sales until they see success.
  5. Creating Long Term Relationships = Barriers to Exit – This is the tricky one as there is a fine line between providing customer value & building in barriers to exit; ie. contracts, location, ability to export data, feature breadth, etc. Barriers to Exit can be perceived by customers as barriers to entry with a vendor. My belief is that companies should strive to be “easy to do business with” and they should focus less on building artifical barriers to exit, but rather more on the true barrier to exit for a customer which are value-based pricing, planned commoditization, continual innovation & service. At the end of the day, if a company can provide competitive pricing for the basics, unique differentiated functionality, and provides world-class service; why would anyone switch?

My next post on this topic will be for companies who are entering an established market with a new, differentiated offering. How do you leverage the web to displace entrenched, but less capable competitors.

The Triple Crown of Web 2.0 & Online Application Development

From a product management perspective, the three major critical success factors for building online applications are Adoption, Distribution ,and Value. Notice that functionality is not on the list & I will explain why. Also, you may think I am having a product management conversation, but as with any good marketing, it has to be rooted in economics. More importantly, focusing on customer acquisition costs. 

Unless you have are building your online application as free-ware without a way to monetize the relationships (there are a good number of Silicon Valley garage & VC backed companies still doing this, also a good number of IPhone apps), then eventually you have to figure out how to make money from the application that you are building. Even if you are creating a free application to drive distribution, but you assume that at some point that you will sell something, upsell something, or advertise something; then you probably need to have thought though these issues.

1. Adoption – in a previous post, I discussed why adoption trumps functionality in Web 2.0 applications https://rosenhaft.wordpress.com/2009/05/21/in-web-2-0-software-adoption-trumps-functionality/ Bottom line is that without users, web 2.0 collaboration cannot occur. You can look at the ecosystem of twitter or facebook apps to get an idea, but it works on a micro-level, as well. If you don’t get a significant percentage of your available population to use your application, it isn’t very valuable. With near zero distribution costs on the internet, the real price is customer awareness. You have to capture their attention and interest; otherwise the value of collaborative applications is marginalized.

2. Distribution – If you are distributing your application, you would assume ubiquitous distribution, but the problem is that so does everyone else. I had coffee with a CEO recently who told me that there wasn’t a great deal of competition for their application, but when I went online to do research, I found at least 25 or so competing applications. The direct competitiveness was questionable, along with the quality, but even if you gave it away for free; it would be difficult to break through the noise without significant marketing $’s OR a partner that could distribute the application. In essense, you need a “big brother” partner to assist you in breaking through the noise so that you can overcome the barriers to market entry. The partner provides the ability to differentiate from the crowd, gain awareness, and creates an assumption of quality. This can be a technology platform vendor (Iphone, Facebook, Microsoft, Sony, etc) or it can be an industry brand that the customers already buy a complimentary offering. Giving away a free application to drive distribution is also a good strategy, as long as it is part of a larger strategy.

3. Value – you have to provide more value than the prospective user will give; whether its there time, money, attention, relationships, etc. This sounds simple, but when you take into account market segmentation, competitive factors, and other market noise, it isn’t as easy. Let’s assume that you are servicing a vertical market with a very cool web-based application that allows the customer to save 20% off their transaction costs & shave 2 hours per user a week on a particular process. No brainer, they should value this application at least $1,200 per user per month, we should charge them $600. We are done, let’s go to market…. right? Wrong!

Pricing the application is more complicated than that when you take into account the switching costs from things they are doing today, competitive offerings, customer acquisition costs, exist costs, etc.

  • You find out they are using an old windows application that they have been using for 12 years. 20% savings doesn’t really mean much to the people using it day-to-day.
  • The business owner has an annual contract for support that has another 9 months left on it so the 20% isn’t as attractive as you would think.
  • The legacy application does not have the ability to easily export the 12 years worth of data to your web application. So, even though you have used the latest technologies for creating your API, it requires professional services to transition them. Wipes out the 20% savings in the first year.

I could go on, but when you begin to think about how to launch a new web 2.0 application, even though it seems like a game-changer for the market, there are legacy issues that need to be thought through. “Build it and they will come syndrome” has tripped us a good many new improved software applications.

It is hard and costly to simplify the adoption, distribution, and value proposition, right? Yes and no. If you ask the market and potential customers, you will incur costs and time to understand and overcome the potential roadblocks, but the risk mitigation is priceless.

Some simple advise to close on:

  • Go where customer is, not where you think they are… Customer perception is your reality…
  • It is easier to sell to companies that have money… don’t be afraid of competition or large markets, but do your homework. Smaller, niche markets also can produce more revenue is the pain is greater.
  • Customers buy from the company that is easiest to do business fromwith… registration, price, package, etc.
  • Distribution on the web is about finding relationships to reach likely customers in buying mode…
  • Value is identifying pain, “must have” versus “nice to have” – we are all overwhelmed with choices, where do we focus is prioritized based on our perceived needs. Even opportunities are based upon perceived pain.
  • Emotional connection play a large part in impulse, attention, switching costs, substitutions, opportunity, & empathy – all of which play a part in buyer behavior

The single biggest mistake I see companies make in launching new online applications is that they do not think through the factors outside of their immediate control. If you had enough warning that you were going to crash your car, you could change direction or avoid a potential wreck. Involving distribution partnerships and customers earlier in the product development cycle is exactly the way to identify potential “app killers” and allow you to make that “killer app”.

In Web 2.0 Software, Adoption Trumps Functionality

The last several years have seen the greater adoption of social media and other Web 2.0 software components. These component software tools provide users with a more interactive experience, personalization, with the ability to create their own content, links, tags, navigation, etc. Additionally, you are seeing the growth of the “connected web”; web services, RSS, embeddable code, ubiquitous meta-tagging, widgets, consumable data, etc.

The proliferation of these software applications has migrated to every sector; consumer, enterprise, SMB, etc. What used to take NDA’s, sharing and modification of API’s, and endless meetings now can be accomplished with a snippet of code.

As the web transitions to more semantic driven applications and less user-interface driven, you would think that functionality would become increasingly important in applications.

In my experience, the trend is towards the opposite and that ADOPTION trumps functionality. The challenge is that we have too many options on the internet; too much data, content, search results, websites, applications, etc. The word I hear over and over is “overwhelming”.

So, if you have a very limited window of attention from your audience, why would you throw extraneous “stuff” at them hoping something would stick. Instead, take advantage of the Web 2.0 technologies and provide them with a tailored experience with just-enough functionality.

More importantly, focus on what is their motivation and interests. Not all potential buyers are the same. Don’t provide a generic website experience that meets 80% of 80% of the visitors and satisfies none. Instead, focus on identifying what a 100% of a smaller audience that you know will buy and add additonal functionality to support additional segments over time. Customers provide unsolicited referrals when you exceed their expectations and provide them a WOW! experience. This is the heart of word-of-mouth marketing. EXCEED CUSTOMER EXPECTATIONS!

If you cannot exceeed the whole group, then focus on a small enough group that talks to each other and build from there. You see countless blogs and articles about how to launch products on the interet. This is the reasoning behind the axioms. You need a critical mass of associated happy customers that will tell others about it.

It is about numbers. If you satisfy 1% of a large group, that doesn’t make much of a market impact. If you satisfy 80% of a small group, you own the market. Bottom line, adoption of your solution is more critical than providing everything, including the kitchen sink.

Of course, the secret is prioritizing the “right” functionality to satisfy the customer which takes someone asking them….

Decoding Marketing: BtoB CMOs Integrating SM, SEO,Lead Gen, CRM, MCM, and M$trics for Success

What? Let me translate…

B-to-B = Business to Business

CMO = Chief Marketing Officer who has responsibility for Strategic Marketing, Product Management, Product Marketing, Channel Marketing, Marketing Communications, Lead Generation, & depending upon the nature of the company Customer Service.

SM = Social Marketing; both the external Social Media properties like FaceBook, Linkedin, Twitter, YouTube, etc, as well as, the branded online communities built as a part of the corporate website that leverage social media components and generate a ton of user content.

SEO = Organic Search. SEM is Search Engine Marketing whereby you pay-per-click for placement. SEO is better, but you have to be on the 1st page of organic search to really get placement. There are some really effective strategies leveraging online press releases, PR, cross-linking strategies, user generated content on your website, targeted meta-tagging, and more focused website content.

Lead Gen = Lead Generation, meaning the qualified stuff, not the “IP address 123.345.128 visited your page at 12:35am”. I mean the stuff sales organizations appreciate; qualified, interested, and clearly identified, preferrably educated, but ideally a referral. Inbound leads are a reflection of your outbound activities. If you are scatter-shotting your marketing activities, throwing stuff up against the wall, without a clearly coordinated call to action, you will have trouble with leads. Good marketing aircover involves multi-channel, clear value communications, and targeted to potential buyers where they buy. As a friend said the other day, “one message is ok, a campaign is better, a relationship is the best”. Relationships take time, multiple interactions, and can’t just be about the transaction….

CRM = heard about a new company doing Social CRM which brings all of your online social media contacts from multiple sites into your CRM. COOL! Now, take it one step further and find a way to bring those contacts into a dialogue on your website about attributes of your offering that is of interest to them… priceless…

MCM = Multi-channel communications, an essential tool in today’s world. Not the end-all, but a significant, important tool to managing your outbound marketing. The ability to coordinate marketing communications, target market specific interactions, and tie all of that into your CRM system is a strong foundation. I am talking with a leading Multi-channel Marketing firm this afternoon to find out there strategies for integration social media components into their lead scoring systems.

M$trics – A cute way of saying metrics. Marketing cannot get quantitative enough in my opinion. We need to make sure that we have clear ways to measure the impact on the business; whether through a direct ROI or the ability to affect the conversion from one stage of the sales process to the next. At the end of the day, Branding disconnected from the Business is hard to justify.

Success = Integrated marketing strategy that helps position the company & the product above the competition, drives awareness in the market, generated leads, and help position the company to get referrals and repeat purchases.

Plan = Without a destination, it is hard to figure out if you will arrive….

You Can’t Have a Relationship with a System

A fundamental flaw with CRM and the reason that CRM has never reached the level of value that it was touted to provide is that you cannot have a relationship with a system.

CRM does have its place, though. Fundamentally, organizations need to manage the “data” side of customer relationships. Having a centralized place to manage the transactional data is one of the key foundations for the growth and scale of business. CRM systems along with data warehousing systems and others provide a fundamental foudation for providing clear information about running the business.

The challenge is that the systems are business-centric & not customer-centric. We design and build our business systems to run our business, but we don’t necessarily put the customer in the middle. In many larger organizations, with lots of products, markets, segments, etc.; the customer is left to cobble together their own customer experience.

I like the concept of “customer experience management” a great deal. My work in social media is a definitely parallel to the pioneering work done to bring the business closer to the customer. I also like what the folks in email marketing are doing to become multi-channel communications platforms. At the end of the day, the closer you can come to meeting the individual customers needs throughout the customer lifecycle, the better. Even better, integrating the customer touchpoints into a cohesive single point of contact.

To me the analogy to golf works. Most companies, by definition, provide mediocre customer experience. Analogous to landing in the rough. The companies that work on trying to improve customer experience through automation are getting the ball in the fairway. The companies that can figure out how to get their employees, partners, customers, and prospects to interact in a more organic way, putting the customer experience at the heart of the customer lifecycle have a better chance to get it on the green.

The best companies that are getting closer to the pin leverage business intelligence, multi-channel communications platforms, online communities, semantic technologies, and Web 2.0 technologies in conjunction with their current infrastuctures to bring a better customer experience to the table. If you can put a more usable front end to the half-dozen to the Enterprise Content Management systems that are common in a larger organization, you could really assist the organization to bridge across the multiple departments that touch a customer, as an example.

Let’s face it, the company that provides me a better “user interface”, is easier to do business with, provides better targeted recommendations, educates me without asking for a sale, provides access to information and other buyers to assist in my decision making, is transparent in their billing and packaging, connects me to a competent customer service person, and delivers value beyond the price of the product gets my loyalty.

None of this is difficult to strategize, but if it was easy, every company would do it. The challenge is prioritizing in a limited resource environment. At the end of the day, customer experience management is not a destination, but a journey.