Marketing Expert's Corner
This is a "greatest hits" collection from a series written in 2001 through 2003. As I wrote about Marketing Best Practices in every early issue, this collection is long -- a "double CD" collection if you will. Although some of the references and data are old, it's gratifying to see that the underlying logic and advice still hold.
Marketing Best Practices
A couple of tools have become very useful lately. First, a web site that started out as a sarcastic joke is now a business (see attachment) and is quite a resource. It's www.fuckedcompany.com, a great source of rumor and fact (my favorite is the "happy fun slander zone")...very helpful in figuring out who would make a good customer, partner, or reference... and who wouldn't.
Another decent source of info from the VC space is Technologic Partners' VentureWire and VC Buzz daily reports. Although these email newsletters are a lot smaller than they used to be (mirroring Red Herring), they do provide useful data and context for what boards are thinking about.
Finally, there are five free tools that have proved immensely valuable in positioning and competitive work. The Kartoo meta-search engine (www.kartoo.com) doesn't give you search results per se: it gives you a set of topic maps (slices of ontologies) that help you understand how search engines see things. Then there's Alexa's Wayback Machine, that let you see web sites as they were at given points in time. Then there's Alexa's Snapshot, that provides a good indication of who a site's "competitors" are. There's Google's AdWords, which -- as a free by-product of lead generation -- provides amazingly detailed statistics on keyword effectiveness and relevance. Don't know about these things? Spend a few hours playing with them, and you'll appreciate their power. And finally, there's LinkedIN, a professional networking service that is incredibly useful for finding people who know stuff about topic areas. Trying to understand the effectiveness of a competitor's positioning? Find a friend-of-a-friend who knows something about the area, offer to buy them a nice goodie if they give you 20 minutes on the phone. Incredibly useful, and much faster than finding knowledgeable people the old fashioned way.
Reference Marketing Matters
In a recent Wall Street Journal article, the author made the case (very strongly, IMHO) that the only business statistic you need to follow is customer referrals. Since repeat customers are, by definition, the most profitable customers, it's hard to argue with the premise. For a marketer, there's another twist: the most powerful force in the marketplace is word of mouth., You can't fight it, and you kill to get it. Reference marketing is the only thing that will get you ink these days, and it's the fastest way to turn around a deal that's in trouble.
For the last year or so, marketing has centered around minimalism: very low cost, moderate effort, and immediate lead/prospect potential. Early stage companies just don't have the money to invest in big lead generation programs, and most have come around to the view that tradeshows are almost pointless. What DOES work now more than ever:
- ROI marketing: a value calculator, a case study, anything that shows hard cost savings and payback in a few months. Infrastructure and unquantifiable "strategic advantage" are tough to market in this environment.
- Reference marketing: any customer, paying or not, is your most valuable and credible asset. Nobody believes your marketing message unless it comes from another customer. Forget the glossy brochures and testimonials: you just need intimate knowledge of how your customers succeed.
- Pilot marketing: don't charge for the software up front, offer prospects use of the product for 100 days for $1 after they pay for the consulting needed to properly implement it on their site and train their people. This is "internal reference" marketing. In this environment where any software P.O. is heavily scrutinized, this can be your only route to customer deployments.
The tactics that work relate to customer success: ROI calculators, try-then-buy with solid tutorials, pay-for-results pricing models, and customer deployment references. The most important thing for marketers right now is to get involved with customers and be closer to sales. It's also a really good idea for Marketers to be active users of SFA systems and participants in account reviews.
Aligning Sales and Marketing in High Tech Companies
Software marketers often make the mistake of overemphasizing technology. Product Managers and Product Marketers tend to flog features and arcane differentiators without making sure that a customer really cares. They work on deliverables that are irrelevant to a sales rep.
All too often, a Marketing person have enough domain knowledge to make a solution-sell work: what is the customer pain? what is the business terminology the customer uses? who does the customer want to emulate? how do you actually convince and sell the customer? Even some vertical marketing managers have trouble with these. So the Marketer works with what he knows: the product feature set.
Meanwhile, the sales reps are trying to sell high -- avoiding the speeds- and-feeds product-level competition. They are trying to focus on business issues and solution selling. To make a deal happen, they work in a world of politics, emotion and relationships. So the last thing the sales rep wants is more abstract product information.
Industry analysts used to help bridge this gap by making customers more comfortable. A Gartner Group recommendation was akin to a papal blessing... but not any more. Analysts now provide account influence only as a disqualifier. While keeping analysts intrigued and convinced with your story is still important, analysts will never bring you a deal. An industry analyst note is no substitute for a more immediately relevant tool like a customer testimonial. So industry analyst work is important to sales only when it helps to avoid a negative.
Bridging the gap between Product and Deal-Making is the defining challenge for marketers: best practices are today measured by more effective, more repeatable sales cycles.
Market Definition Projects
In this environment, many companies are going through the exercise of market definition, targeting, or sizing to reassure VCs that their portfolio companies are pursuing solid opportunities. To be clear, the best practices in marketing involve disciplined research and analysis at the start of your company or new product line...before you miss your sales numbers. But no matter when you engage, there are many details to get right.
First, make sure everyone is talking about the same thing. An amazing amount of effort can be saved if you agree up front on:
- What business problem are you trying to solve? (is it product direction, or sales force effectiveness? is it positioning for the board, or designing call scripts for telesales?) if you're trying to solve two problems, separate them: do the project in phases.
- What decision are you going to drive, and what are the decision criteria? ("we'll use this project to shift the sales model, which must yield unambiguous results before May's funding round"). If you identify multiple decisions, be really clear about the order in which you'll make them -- sequencing effects can invalidate conclusions.
- How are you defining terms (what do you mean by "a market?" what constitutes a segment? what do you mean by a channel? what is "positioning" used for?) Write your definitions down!
- What data are you *not* going to take seriously (some people will discount IDC forecasts, others don't pay attention to market surveys because they aren't real)
Starting your project on a firm footing will make it easier for you to
interpret the data and make consistent priority calls. The whole reason for these projects is to determine where there is a market (a group of customers with similar needs and behaviors) and what is the achievable business volume. Your goal is to find repeatable patterns that can be turned into sales cycles -- but if you don't have a strong mental model of the marketplace you'll see a lot of mirages.
Red flags -- signs that indicate your market definition / sizing / targeting project is in trouble:
- You haven't been able to identify or interview more than a handful of target candidates. People aren't meeting with you because it's not that important to them.
- You can't seem to describe your product's advantages in a compelling way. You're not sure who will use your product or what they'll use it for.
- The way sales describes your value proposition has little to do with the way marketing or engineering talks about it.
- None of your customers fits in with your research conclusions.
- You are not finding any patterns in your interviews: every customer uses different terms, expresses different needs, or compares you with different competitors.
- If your company is smaller than $100 M, yet you have identified more than 3 segments (e.g., vertical, application type) that you must win to succeed.
- For most Enterprise software companies, you have identified ISVs or systems integrators as a channel.
- You believe your only competitor is "build-it-yourself."
- You've identified more than 10 close competitors.
- You're spending all your time reading analyst reports.
If you find yourself in the middle of a project with these signals, you might want to give us a call ;-)
Quote of the Quarter
"There is no way to market your way around a project failure or a product with zero ROI."
Grass Roots Marketing
In this environment, marketing must focus on its most basic function: helping make the product sell. For startups in general, particularly in enterprise software, much of the artier parts of marketing are painfully irrelevant at this stage.
Customer acquisition is the most costly and risky part of a high-tech business...so design the revenue engine right! It's all about leverage and selecting the most winnable targets.
Given the continuing budget constraints in Marketing, it is essential to show measurable results. Yet it is surprising how few companies have mastered the science (it's not an art) of "bottoms up" selling: using small initial deals and several incremental sales cycles rather than one year-long slog with no revenue along the way.
For effective bottoms-up selling, you focus on easy absorption, low-pain experiences for the customer, and direct feedback. It will cost less, and often speed things up, if no direct sales calls are involved before the initial sale.
Best practices for this strategy involve creation of documents, demos, and evaluation product versions that are designed for download and self-paced development of prospect interest. Few prospects will take action without some prodding and incentives, but a well-timed series of emails, promotional offers, and deadlines can push people to action.
Once a prospect has done a download, telemarketing cultivates the
interest and hands the qualified leads over to telesales. With the right
price points and packaging, telesales can close an initial pilot deal which
can later be upsold through the direct sales reps.
But none of this can start without a well-executed web site.
For any part of the IT business, there is simply no excuse for not having
your web site be the #1 continuous source of sales leads. In most cases,
the web can be the least expensive source as well. This means domain expertise, clear thinking and tight writing... not design, branding, or graphics.
In surveying several sites, however, I discovered practices that guarantee lousy results. Here's what you need to do right on your site:
- Every page on your site should be populated with meta-tags ("description" and "keyword") that correspond to the content of the page. You should have no more than 20 keywords, and each page's keyword list should be as unique as possible.
- Submit your site to Yahoo and the Mozilla Directory Project under the two most relevant product categories. If you don't show up in these directories, you'll score poorly in Google.
- Get partners and customers to put links to your site on theirs. The links don't have to be prominent, they simply have to exist to raise your Google score.
- Understand your target audience and where they hang out on the web. What search engine do they use? What vocabulary do they use? What are their favorite discussion groups? This information helps you select where you appear, and how you'll be perceived.
- Issue non-press press releases. When properly constructed, these can increase your ranking on several search engines and cost you less than $150 a time.
- If you advertise or sponsor a web site, make sure your ad is absolutely tuned to the interests of your audience. Use exactly the right words to get click-throughs.
- Each ad needs to link to a unique entry point in your site. Make sure your web analyzer engine is set up to actually measure each of these phantom entry points. Make sure that the entry points link to precisely the topic that the click-through'er was expecting.
A tight web site and a dynamite telesales team can lead to faster (albeit smaller) sales cycles. But in this environment, most companies would be happy to have more customers in the bag regardless of size.
Grabbing Those First Customers
While many Best Practices are about the blocking-and-tackling of execution, I want to focus here on the Big Picture of building an early customer base. The key issue is your value proposition and the sales strategy that goes with it.
A value proposition is not the same thing as a marketing message or a positioning statement. Of course messaging, positioning, and visibility are essential, but they start sales cycles, not close them. What customers pay for is the value you bring to their work. No customer ever saved a project
or boosted their career because of a vendor's tag line.
The great deals are done because of the perception that the vendor will add value to the customer's business. Strong value propositions for B2B products / services / solutions must relate to money or time, and link to an ROI.
There are two major directions you can take:
1. Improving your customer's rate of customer capture or business
innovation, promising to:
* increase their revenue (make them money)
* shorten their schedule / time to market / cycle time
2. Improving the customer's efficiency / effectiveness, promising to:
* lower their costs (save them money)
* decrease risk / uncertainty / insecurity
These two directions can't be mixed, and sales cycles that try to mix them just won't close. But all strong B2B value propositions must be linked to one of these directions.
According to recent work by McKinsey, AMR Research, and UBS Securities,the only thing that will sell right now to an Enterprise customer is cost reduction and efficiency. Almost nobody is buying the "increase revenue" promise, and few companies are very concerned about shortening schedules at
the moment. For the next year or so, Enterprises measure IT procurements on their ability to lower costs.
"There's a change in leadership going on in corporate America: we're seeing corporate managements move from being the risk takes of the 1990s to the risk controllers of this decade." -- UBS
"IT professionals are expected to pursue pragmatic strategies to get the most out of the systems they already possess. In 2003, a smarter, more cautious buyer will return to the market...(seeking) higher return on capital, lower overhead cost, higher sales and marketing productivity, and greater customer retention." -- AMR
Selling a cost reduction value proposition must be done in the functional organization (e.g., IT, Finance) -- you will have very little luck selling "cost reduction" to most business units. Aim your marketing and sales efforts to the director or VP levels, and you may even want to visit the prospect's CFO. The initial point of entry for a Cost Reduction value proposition needs to be at least the first-level manager, as the individual contributor won't want to hear about lower costs. The individual contributor may end up being the cost that's reduced, and they have neither the span of control nor the direct incentive to be focused on efficiency.
To be effective, marketing the cost reduction / efficiency value proposition requires solid evidence for pragmatists, such as:
- Cost comparison studies or spreadsheets
- ROI models that the customer can adjust for internal use
- How-to guides, videos, or webex seminars
- Case studies
- Best Practices white papers
- Domain-expert reports (gurus, not the usual industry analyst)
and, most importantly:
- Customer References
The challenge with this strategy is overcoming its un-sexiness for investors and executives. Cost reduction is rarely the basis for hypergrowth. It's also hard to create Compelling Events for buyers when the value proposition is based on process efficiency.
But these the market realities we are in. And overcoming those challenges is what real marketing is all about.
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