Marketing Expert's Corner
This article written in 2007
As I wrote last year, market timing can be a make-or-break issue for products and companies.
But there are a lot of layers to the issue of timing, pacing, and breakthrough results, and overall market timing is just the outer layer of this particular onion.
Timing isn't magic, and it's not an accident. It comes from planning. Great timing -- whether in comedy, theater, or business -- comes from really understanding your audience, planning, and practicing to the point that the execution is
natural and is in rhythm with the expectations of the audience.
I hate to sound all New Age, but marketing successes come from a series of rhythms that run through your business and interact with the customers' timing. Of course, if you have a crummy product it doesn't matter when you introduce it. But when trying to optimize your sales, you can't ignore several levels of customer timing and pacing.
The Simple Stuff
Within any manufacturing business, there are two key rhythms:
- The rhythm of Sales and Finance, which is the quarterly cycle. For the sales rep worried about not making his numbers, the world ends at quarter-end. This is one reason why sales often doesn't get along with marketing -- they're running on different calendars.
- The rhythm of Marketing and Engineering, which is the product development/launch cycle. Bringing (the next version of) a product to market can be 6-18 months, and product launches rarely happen at the quarter end.
For maximum effectiveness, marketers should find ways to feed the Sales team what they want when they can actually use it. For example, don't bother producing leads in weeks 10-13 of the quarter, as they'll be cold by the time the reps can put quality time into them. But during the closing weeks of the quarter, do everything you can to produce customer case studies, testimonials, and credibility-building press releases to aid the sales cycles that need to close. Marketers need to do much, much better at this issue of pacing their work so that it's noticed, used, and valued by the field.
I need to tip my hat to Freakonomics as I develop these next two sections. "Synchronomics" is the art of synchronizing your business to the rhythm of the customer.
The Subtle Stuff
Micro-synchronomics is about synchronizing the two cycles that happen in any sale. Vendors only think about their sales cycle, and usually ignore the fact that the customer is going through an
entirely separate cycle: the purchase cycle, which has very
different objectives, drivers, and milestones.
The vendor is trying to run the AIDA drill: the evolution from awareness to interest to decision to action. Vendors focus on managing their lead pipeline, qualifying the prospects, verifying that the reps are working with the decision makers, ensuring that the prospect has enough budget, helping the customer make the internal business case, proving that their solution is better, and pushing negotiations and paperwork through the system to make the quarter-end close.
Meanwhile, customers are working on a set of issues that might seem almost unrelated. They're working through the purchase cycle: the evolution from dissatisfaction to research to selection to negotiation. They are trying to figure out: if there really is a problem; if the problem has high enough priority to justify the cost and pain of solving it at all; if they have even understood the problem correctly; what the alternatives are; why they shouldn't just cobble together a band-aid; what political issues they need to align themselves with; which political crosscurrents they should avoid; what are the solution's requirements and priorities; what are related problems that can be positively/negatively impacted; what products might fit; who are the relevant competitors; what competitive knock-offs can be used to gain concessions; which vendors are actually up to the task; what vendors are acceptable to the purchasing department; how to focus the sense of urgency to get the budget; whom to steal the budget from, what internal battles need to be waged to drive the decision; and how to get enough vendor concessions to make the CFO happy.
Notice that the vendor has a very different sense of time than the customer does. The vendor has a hard deadline. The customer has a lot more steps to work though, and they may have been thinking through their early steps for months before the first sales call. They may have registered themselves as a lead with the vendors at the very first hint of the purchase cycle, but the vendor sales rep probably gave up after a cursory email exchange, thinking -- correctly -- that no deal could happen in the quarter. If the marketing folks make the same customer-synchronicity mistake, they won't continue to send marketing materials and invitations to the prospect, and that vendor will have all but disqualified themselves from participating in the deal that does come down later.
Lack of micro-synchronicity has other side effects. Sales reps have real problems judging when a deal will close because they are focused only on their cycle and deadline. The customer almost never has a real need to close a decision on the 31st of the month. The real reason that the deal "fell out" of the quarter is that the customer never was in the quarter in the first place. Essentially, the vendor created a fiction that the deal would close on a date.
Ironically, customers know that they have the advantage of time: the vendor has a more compelling event that the customer. They control the dollars even though the reps think he controls the account. So purchasing agents and CFOs have a great time squeezing vendors at 10:30 PM on the last day.
The last-minute bargaining causes the hockey-stick effect on revenues: as much as 80% of a software vendor revenues close during the last week of the quarter. In hardware companies, hockey-stick order patterns cause huge issues of inventory and supply chain management.
How to avoid all this?
- Differential commissions, so that reps don't get as much for deals closed in the last month of the quarter.
- Bonuses for forecast accuracy -- both amount and timing.
- Sensitivity training (that New Age stuff creeping in again...), particularly around listening to and believing the customer more than yourself.
- Make sure your marketing team never drops a prospect from the "remarket" list until they explicitly ask to be dropped. Depending on the length of the customer's sales cycles (not yours), over half of lead conversions will happen long after the end of the quarter when the lead was discovered.
The Profound Stuff
Macro-Synchronomics is about focusing demand just as the product grows to fill the need. This is creating market timing. If you're the 800-lb gorilla, you can use brute force to freeze the market.
The art form here comes from companies that aren't in control of the market. The obvious example of this right now is Apple's iPhone. At the time of the product intro they were hardly a leader: this is Apple's first entrant into the phone market, they're battling companies 5 times their overall size, and the top three market-share players have been in place as leaders for over five years.
On top of that, nobody was really asking the industry to make a device like the iPhone. A phone, mp3 player, browser, camera, and videogame console is an unlikely combination -- and vendors have already made several attempts over the last couple of years. They didn't sell well. Yet with 6 months of the Apple hype machine, the iPhone is the must have device for all of 2007. A recent survey showed that 1/3 of people who have cell phones now want an iPhone. It's a very rare company that can do this.
The irony is that everyone knows that the first version of the iPhone (just like the first model of Mac, iPod, and Intel Mac) is a placeholder product missing a bunch of features and attributes (like battery life and data speed). But Apple is able to get the bellwether customers with that first version, and use them to reinforce the trend and the cool factor. Later, Apple will come out with an iPhone that is substantially better, and capture the later adopters with it.
How do you get this kind of a wave going? The details would fill a book, but here are some core ideas:
- Most of the time, innovation doesn't matter to customers (as always, I refer to The Innovator's Dilemma). It's not "what's new" -- it's the timing of what's new and the level of dissatisfaction with the status quo. You can only get this kind of wave going when people have tried what's out there, and truly yearn for something better. If you're not at one of those moments (and they don't come around often), forget about it: new entrant vendors cannot cause deep dissatisfaction in the customer base, they can only capitalize on it.
- To make a compelling Version 1 product, you have to make sure the things that are missing (and missing features are inevitable) are consistently thought out. Even with missing stuff, there must be a complete product for some important set of early adopters. If you don't have a tightly defined thesis about who this group is, and if you aren't true to the thesis, you'll end up with a fragmentary product -- a pile of features and holes that don't really work for anyone. You're looking for a balance of defects and features that are tuned to your first customers. And then, you need to pursue only those customers who will be quite satisfied with that first version. (Somebody once said, "you don't have a strategy until you can say 'no' to a customer.")
- It helps if you have an enthusiastic community that just loves your company. Not everyone can have the fanaticism shown for Apple or Harley-Davidson products, but a vendor can do a lot by behaving consistently, standing for something, and explicitly focusing on customer loyalty. This is the consequence of deep branding. You can use on-line communities of interest to bring the new product anticipation into focus, and to create a powerful echo-chamber effect.
- Get your best PR, analyst, and blog-squad to execute a series of carefully timed and well-executed leaks. Whether you call it a progressive reveal, a drum-beat, rolling thunder, or plain old strip-tease, the effect is the same.
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