# Execution

How We Raised $177,226 on Kickstarter – and Got in Men’s Health

ty of marketing strategies, weaving them together in a way that gets people excited to give you money. In August 2017, we launched a Kickstarter campaign for the world’s first foldable pull up bar, and raised $177,226 in funding. We also sold an additional $16,000 in product upsells. Throughout the process, we tried a bunch of different marketing tactics, including: Facebook Ads Email Marketing Paid Influencers Press and PR Hiring an agency In this guide, I’ll walk you through all the strategies we used. We’ll talk about what worked, what didn’t work, and how you can take these ideas and use them in your product launches as well. By the end of our Kickstarter campaign, we even got featured in … Although launched our product on Kickstarter, these strategies can really apply to any type of product launch. You can use them on IndieGoGo, GoFundMe, or other crowdfunding sites. You can also use these strategies for non-crowdfunding product launches, such as launches on your own website. So, grab a cup of coffee and take a seat. Let’s chat about how to take a new product to market. Before we get into the marketing, let’s talk … About Your New Product Before we get into the nitty-gritty marketing tactics, let’s touch base on the product itself. The #1 most important thing in having a successful Kickstarter campaign is having a great product that serves an unmet need. The job of marketing is to make more people aware of your product and offer. Great marketing can't make up for a product that doesn't resonate with an audience. For this guide, we'll assume you have a product that people already want - and just need a "push" to make the purchase. Also, note that certain product categories do better on Kickstarter than others. Bags, board games, new technology, and kitchen gear all tend to do really well. Intangible products – iPhone apps, software, seminars – tend to not do so well. Okay – so, assuming you’ve got an awesome new product, in a category that does well in crowdfunding, how do we start generating sales? The “Holy Crap, I Gotta Buy This” Effect Having an emotionally compelling sales video and a detailed product page is essential. I’ll show you all the marketing tactics we used to bring people to our page, but your Kickstarter page has to do the heavy lifting of actually convincing your visitors to buy. Some of the most important things to have on the page include: A Video that Evokes Emotion. You must have a video. NEVER do a text-only campaign. These statistically perform far worse than campaigns with video. Your video is what emotionally convinces people to buy. The rest of your page really just fills in the logistical details for their logical mind.  Invest in hiring a great videographer. Do not - do not - iPhone your Kickstarter video. Backers will assume the quality of your video reflects the quality of your product. A well designed, “infographic style” product page. If you look at all the top performing campaigns, you’ll find that they all have a “long form” style product page. That means a ton of detail and a ton of images. It “feels” like you walked into an Apple Store.These pages often have product photos, dimensions, technical details, FAQs, pricing info, and all kinds of other stuff.Note: getting these graphics done is a $5/hr task, so don’t do it yourself. Hire a designer or two on Upwork.com and have them create infographics, demos, showcases, etc. of your product. Focus on the important stuff and leave the design to the professionals (unless you’re a designer.) Early Birds & Scarcity. Having a few early bird rewards will help you get early traction and sales. This was a big part of the reason our campaign was successful. While some Kickstarter creators don’t recommend early bird discounts – because they create winners and losers – we found that the power of having early birds outweighs the cost. Clear shipping times and costs. Logistics are going to be one of the most common questions people have, so make sure it’s addressed in your product page. Spend some time on Google and Kickstarter, exploring what goes into a good Kickstarter video and product page. There are a lot of other resources on this already, so I'm not going to go too deep into it. I’m going to focus on the strategies you can’t learn in other places – the tactics that really helped us generate sales. And that is … Prelaunch Promotions: It Will Make or Break Your Campaign One part of our marketing generated a much higher impact for our time and energy than any other marketing strategy we used. That strategy is pre-launch marketing. This was by far the most effective and impactful thing we did. Remember – we started this launch with no brand and no email list. By using these pre-launch strategies, we were able to generate $32,756 in sales in the first 24 hours. So, the question is: how do you get hundreds of buyers to stand by, wait for the moment you launch your product, and buy immediately? Our #1 Strategy: Use Facebook Ads to Build a Pre-Launch List “The best persuaders become the best through pre-suasion – the process of arranging recipients to be receptive to a message before they encounter it.” – Robert Cialdini, Author of Influence & presuasion Prior to our pre-launch marketing, we had no email list. So, we did the same thing Nike, Eminem, and Jon Stewart do when they want to get the word out about a new product: We advertised. We spent $9,257 on Facebook Ads before we launched, and got 4,624 leads. Our ads sent users to an email capture page. The email capture page asked users to put in their email, in exchange for a discount on the product when it launched. It cost us about $2 per lead. How to Use Facebook Ads for Crowdfunding Of the $177,226 we raised, over $100,000 in sales were directly attributable to Facebook Ads. This is including our pre-launch marketing and marketing during the campaign. It was, by far, our most effective and highest volume channel. Facebook Ads is, in my opinion, essential for just about any crowdfunding campaign or product launch. Their detailed targeting abilities will let you get your product in front of your ideal audience. So how you go about building Facebook Ads for Kickstarter? You have two main options: 1. You can do it yourself. If you have experience with Facebook Ads, I would absolutely recommend doing it yourself. We did our pre-launch ads ourselves. Alternatively, 2. You can hire someone to do it. If you haven't done Facebook Ads before, it's unlikely that you’ll be able to learn it fast enough to do it for Kickstarter. Upwork.com – the world’s largest freelancer marketplace – is a good place to start looking. GrowthGeeks.com is another resource to look into. Here are a few things you should know about running Facebook Ads for crowdfunding. A) Target the Intersection of Kickstarter and Your Interests Use the “Narrow Audience” targeting to target people who are both interested in your product type and are interested in crowdfunding. The type of person who gives money on a crowdfunding page is a very particular kind of person. They’re early adopters, and people who like to help product creators succeed. Your goal is to find the people who are both early adopters and interested in your product. The majority of our backers had already backed other projects on Kickstarter. Instead of trying to convince people who've never backed on Kickstarter to back for the first time, you should instead try to convince people who've already backed Kickstarter campaigns to back your campaign. B) Target Direct and Indirect Interests There are targeting options that are obvious, and options that might surprise you. While you definitely want to do direct targeting, it’s also important to try the less obvious options. For example, with our foldable pull up bar, we targeted things like “pull ups,” “bodyweight workouts” and “P90X” (a home workout system.) But, we also targeted : Rock climbers, because rock climbers need to train their arms. People who lived in crowded cities (New York, SF, London) who might want to save space. Management consultants, because they travel frequently, workout, and have money. Some of these – management consultants – didn’t convert for us at all. But rock climbers and people in crowded cities became some of our best converting ad sets. We would have never tested those if we had just stuck to “people who do pull ups.” C) Test, Test, Test, Test It took a lot of testing for us to get our cost per email down to a reasonable level. Our first few email leads cost us about $8 dollars each. By the end of our campaign, we were paying about $1.50 per lead. To lower your lead costs, test. Come up with an idea, test it, look at the results, figure out what you learned, and repeat. Repeat this process several times a day. Here are a few of the things we tested: Different background colors on our landing pages. Result: Negligible difference Different animated GIFs at the top of the page. Result: 30% reduction in cost per email for the winner. Different types of ads (image, video, carousel.) Result: Still image performed better than all other types. 25%+ improvement. Different images and headlines in the ad itself. Result: Substantial differences, 25%+ improvement in cost per email. Remove the Kickstarter video from the landing page. People had to enter their email address to see the video, instead of seeing it right away. Result: Cost per lead dropped by 50%. Massive improvement. Various different groups of interests and targeting. Result: Improvements were big, depending on the targeting group. As you can see, none of our tests were “home run” per se (except for moving the video to after they give us their email.) It was more incremental. When you add up a 20% boost on the ad, a 20% boost on the targeting, and a 20% boost on the landing page, the compounded improvement means you've almost doubled the performance of your campaign. Since you’re very limited on time in your pre-launch – I'd start pre-launch marketing about 14 days before you launch - you have to swing for big tests. Don’t test things that might only swing the needle 2-5%; instead go for massive changes that will either flop or make a big difference. Once You Have Their Email Address … What Should You Send Them? Your backers are not just buying your product. They’re buying you. You're asking them to trust you. You’re asking them to give you money today, so that they can receive a product 6-12 months later. You're asking them to take a big risk. That’s why it’s important to not just instill the desire for people to buy your product – but to build a sense of trust, rapport and connection. To do this, we wrote a series of emails that told our story. We shared the story of how the product was invented, who the inventors are, what the manufacturing process is like, etc. We used vivid imagery and painted a picture for our readers, so they felt like they knew us. That way, when we asked for their money, we’re not just two random dudes on the internet. We ended each email with the same call to action. We worded in different ways, but each time we covered the same 3 main points: Be online at 11am on July 11. There are only 500 units available at a discount. This email is going out to thousands of people. Make sure you’re one of the first to get the discount by signing on at 11am. We repeated this message so often that – on the day we launched – we had several hundred buyers ready to purchase. We sold $10,000 in the first 25 minutes, and $32,700 in the first 24 hours. Prove That Scarcity is Real by Demonstrating it in Public Scarcity is a tactic often used by marketers to try and get people to take action. Unfortunately, it’s so often overused that it sets off people’s BS radars. Phrases like … Limited quantity! Limited time! Only X available! etc. … often elicit an eye roll more than a purchase. That’s why we wanted to do things a bit differently when we launched Flexr. We did have genuine scarcity because we were limiting the number of early birds available, but we needed to make sure that our customers believed in the scarcity of the discounts. We did this by creating a Facebook group. Whenever someone joined our email list, they were taken to a page that asked them to join our Facebook Group. We also asked people in our first email to join the group, and invited them one more time later on. We asked people to post about why they were interested in the Flexr. This resulted in a steady stream of dozens of people posting about why they wanted to buy our product. As a result, anyone who joined the Facebook group would see messages in their Facebook feed from other people who were excited to buy. This helped reinforce the message that they need to be online at 11am to buy the product right away - or they would miss out on the discounts. As a result of this marketing campaign, we had hundreds of buyers hitting refresh at exactly 11am, which allowed us to sell $32,000 in the first 24 hours, and helping us quickly rank on Page 1 in Kickstarter's search engine algorithm. Getting Press: Ladder Up to “Tier 1” Publications Like Men’s Health Getting PR is awesome. For one, PR drove over $40,000 in sales for our Kickstarter campaign. Uncrate drove the most sales, followed by Men’s Health. More than that though, being able to say that our product was featured on Men’s Health is a big credibility builder – especially in conversations with retailers, partners, etc. So how did we do it? Well, we did do PR outreach. And later, when we hired our marketing agency, they did some outreach for us as well. But none of the news outlets we reached out to wrote about us. All of the outlets that eventually wrote about us did so on their own. Without us contacting them. We often didn’t even know about it when the articles went up. We only found out by looking at our Google Analytics, or when a friend tagged us in the publication’s post. That said, there were three things that helped us a lot with PR. Kickbooster. Kickbooster is an affiliate network for Kickstarter campaigns. Kickbooster actually reached out to AskMen and BroBible for us, and collected a commission on the sales generated by those news sources. As a result, we were able to put “as seen in AskMen & BroBible” on our Kickstarter page early on. Uncrate and Men’s Health were uncommissioned, but getting the commissioned news placements early – which didn’t drive many sales – helped us build the credibility that let us get the larger publications later on. Press Kit. We had a press kit with all our images, a pre-written article, and all the information on the product that news outlets could download with one click. We put all these files in a dropbox link and put it on our Kickstarter page. This let journalists write about us quickly, without having to contact us first. A strong pre-launch campaign. At the end of the day, journalists are interested in writing about interesting things. While our $9,200 investment in pre-launch promotions generated the first $50,000 or so, I think the impact was actually much bigger. The strong launch got us to front page of Kickstarter, which put us in front of Uncrate’s writers – which got us the additional $20,000 that Uncrate brought in. That's why nailing the pre-launch marketing is so important. Note that some agencies will charge you extra for PR services. For example, you might have an agency that has a standard rate for Facebook Ads promotion, but charges an extra $2,500 for PR services. Personally, I would just put that $2,500 into more ad spend. The more you can use ad spend to drive your campaign up the rankings, the more likely you are to get picked up by the press. Based on our experience, spending more money on generating more sales (via Facebook Ads) is a better use of money than hiring PR services. Cross Promotions & Partnerships There is a lively ecosystem of Kickstarter campaigns, all cross-promoting one another. Once your campaign passes $25,000 in backing, expect to get several messages every day from other campaigns asking to cross-promote with you. We also did a little bit of outreach ourselves. Cross promotions were moderately successful for us. In total, cross promotions drove about $5,000 in sales. It’s a fairly labor intensive channel, since you have to correspond with a bunch of other people and co-ordinate cross promos. Even after we had an agency take over, it was still fairly work intensive. That said, it’s free. So, why not. One partnership worth noting is that BackerKit featured us on their Staff Picks. This drove about $2,500 in sales for us. Hiring a Crowdfunding Agency After we raised our first $60,000, we started to stall out. We were riding on the coat tails of our successful launch, but we weren’t able to keep up the momentum. Our Facebook Ads, which converted well pre-launch, were not converting at a positive ROI for us. This is due to a few reasons: Facebook Pixel. Kickstarter doesn’t let you put a conversion pixel on the order confirmation page. That means your sole source of data is Google Analytics. So you have to UTM tag everything. This is a giant pain. (It probably also costs Kickstarter millions of dollars a year – they should really fix this.) We were over spending. We were spending $1,500/day going into the launch, and kept up our spend at $1,000/day after launch. In retrospect, we should have tested smaller. We should have started our campaign at $150/day and scaled up once we were converting. Targeting IndieGoGo & GoFundMe. It turns out that many of our backers were experienced Kickstarter users already. In our ads, we had targeted people who were interested in fitness AND Kickstarter, IndieGoGo, or GoFundMe. In retrospect, we should have just targeted the intersection of fitness and Kickstarter. Our audiences would have been smaller, but much more targeted and would have converted higher. I think that, given more time, we could have made it work on our own without hiring an agency. But given that we were on a clock – every single day mattered. We eventually decided to hire a marketing agency who specialized in crowdfunding. The agency helped us raise the next $100,000 or so. Their primary marketing channel was also Facebook Ads. They also managed our cross-promotions, press outreach, and emailed out to their internal email list. That said, 90%+ of the sales they generated were still from Facebook ads. A typical agency fee is $1000 – $3,500 upfront, plus 30% to 35% of the amounts they raise. These agencies pay for Facebook Ads out of their own pocket. Overall, I’d recommend a similar process for other Kickstarter founders. Focus on the pre-launch marketing, and come out of the gates swinging. Once your campaign is live, continue to do your ads yourself. If you can get it to positive ROI and scale, then don't hire an agency. Do it yourself and save the 30%. But if you’re stalling out and are having trouble continuing to generate sales, like we were, then hire an agency to take things from there. These were the agencies we spoke to. I’d recommend emailing and/or Skyping each of them to get a sense for which is the best match for you. Funded Today Jellop Eventys Backercamp Use Upsells & IndieGoGo to Earn an 15% After your crowdfunding campaign is complete, you can replicate your campaign across other platforms to boost your sales. Let’s touch on each of these. Product Upsells Once someone has bought from you once, it becomes much easier to get them to buy from you again. This is especially true if you can sell them products that compliment the product they just bought. In our case, we sold a carrying case, rings, bands, and gloves. This has the added bonus of helping you predict what other products might sell well in the future. Important: If this is your first physical products business, I would not recommend selling more than 1-2 additional products. Try to make your upsells digital instead. Manufacturing multiple products at the same time can be a nightmare for a first time founder. My co-founder and I have both manufactured in China and we felt confident we could deliver on our product selection; but if it’s your first product you should focus just on producing your Kickstarter product and nothing else. We used BackerKit to manage our upsells, as well as our backers’ addresses. IndieGoGo I generally wouldn’t recommend launching on IndieGoGo for Round 1 of your crowdfunding campaign, unless you’re in a category that Kickstarter doesn’t support. For example, if you’re doing a project for a charity, or a pre-prototype product, Kickstarter won’t let you use the platform, but IndieGoGo would. If you’re in a category that Kickstarter allows, I would strongly recommend starting on Kickstarter first. Kickstarter has more than double IndieGoGo’s traffic. More journalists browse Kickstarter, and there’s a stronger ecosystem as well (for cross-sells, agencies, etc.) That said, porting your campaign over to IndieGoGo after Kickstarter is easy. IndieGoGo can copy your Kickstarter campaign over to IndieGoGo in just a few clicks. I would recommend raising your prices so that your Kickstarter backers don’t get mad (they supported you early, so they should getting a better deal.) Kickstarter will let you place a button on your Kickstarter page that links to your IndieGoGo campaign. In other words, once Kickstarter stops accepting sales, you can start making sales on your IndieGoGo campaign right away. Combined, BackerKit and IndieGoGo should help you raise an additional 15%+ on your Kickstarter campaign. Honorable Mentions: Other Strategies That Worked There were two other things we did that were important. One, we used Excel to model out every possible cost we could think of, from payment processing fees to marketing expenses. Knowing your numbers is extremely important. Your margins are probably thinner than you'd expect. Second, we used Thunderclap. Thunderclap lets you coordinate your friends to help you share your campaign. Basically Thunderclap will connect with your friends’ Facebook accounts, and schedule a post for them the moment your campaign goes live. Thunderclap brought in around 30 sales for us. Not a large amount in the grand scheme of things. But it served a much more important function: it made our campaign spread like wildfire through our social networks. In other words, it was a great way to make sure all our friends - and all our friends' friends - knew about the product launch. This resulted in a lot of introductions – people seeing what we’re up to and tagging people we should meet, introducing us to influencers, potential investors reaching out, etc. It was a great network building tool. Your Turn That about wraps up our Kickstarter marketing strategy guide. To summarize, here are the most important points: Pre-Launch: This is the most important thing. Use Facebook Ads to quickly build a list. Email: Use email marketing to build trust and excitement. Get people to set reminders to buy right when the doors open. PR: Use Kickbooster to get early press, then use a press kit ready to go for larger publications. During Campaign: Focus on Facebook Ads. Get it to work yourself if you can, but if you can’t get it to work, hire an agency. Questions? Comments? Post in the comments below! Best of luck on your campaign.Continue reading

How We Got 60,000 Likes and Used Them to Boost Sales

While running my T-Shirt business, we used Facebook Like campaigns to generate tens of thousands of likes to our Facebook pages. Then we would routinely use those Facebook likes to predict what people would buy. Using that information, we’d create products (t-shirts, hoodies, etc.) and sell hundreds of thousands of dollars worth of products. Products we already knew people wanted, before we made it. Although the examples in this post will be from the t-shirt industry, the overall strategy can be used in just about any business. Almost every business can benefit from: Knowing exactly what your customers want to buy, Quickly getting more fans and followers, Being able to rapidly and cheaply test new ideas, before investing in creating new products, Using social media to get new customers, as well as get existing customers to buy more often. Here, I’ll walk you – step by step – through the entire process we used. I'll start by explaining how we got tens of thousands of Facebook likes, in multiple industries. Then I'll show you how to build a strong relationship with your fans, and finally how to use your fans to inform product decisions and generate more sales. Note: You should never buy fake likes. Fake likes hurt your engagement, and will hurt your social media marketing overall. All our likes either came in organically, or through Facebook's own “Like Campaigns”. How Facebook's “Like Campaign” Ads Work A Facebook Like Campaign is an ad campaign type within Facebook’s ad platform. The ad unit can be displayed on both mobile and desktop. The way it works is very similar to other ad types, except in this case people don’t click off of Facebook. Instead, the call to action on the ad is “Like Page”. When someone clicks on the like button, they’ll like your page. Clicking on the image or your page name takes them to your page, where they can learn more about your page and potentially like your page there. Here's a screenshot from our ad account, generating 63,000 likes in 3 months: In this guide, we’ll use our writer page for the majority of our examples. We've used a similar strategy in a lot of different industries, but using just one industry will help illustrate how this works. Our writer page currently has about 37,000 fans:  The way you setup a like campaign is identical to other ad types: First, you create a campaign in Ads Manager or Power Editor. Next, you create your targeting, just like any other ad. Retargeting audiences, lookalike audiences, or audiences you already know convert are great places to start. Finally, you upload your ad creative. Let's go through this with a real world example. How to Get Real Facebook Likes for $0.06 Cents Each The key to getting inexpensive likes is to create an ad that gets people in your audience to think: “That sounds great! I’d like to get that page's content in my newsfeed. Sign me up.” Here are a few things that’ll help: Don’t be a corporate page. It’s hard to get people to like United Airlines’ Facebook page. On the other hand, it’s much easier to get someone to like an “I Love to Travel” page. For brands – like United Airlines – many of these tactics should still work. Just expect like costs to be a bit higher. Use keyword in your page name if possible. Invented names like “Kaizeo” are harder to work with than “Writers United” (if you’re targeting writers.) Spell out what people will get if they like your page. For example, “get daily inspiration, how-tos & humor”. Don’t ask people to like just for the sake of liking your page. Users should feel like they’re getting value by liking your page, not doing you a favor by liking your page. Using images that stick out in the Facebook news feed. Your ad should break people out of their “news feed trance” and get them to pay attention to your ad. Test cartoons – cartoons have performed well for us across multiple industries. Test lots of different images. The images will make the biggest difference. The last one is the key. Our cost per like ranged from $0.74 each to $0.05 each. That’s a 1,480% difference. The way we get cheap likes is by testing many different images. Example: Here Are 5 Images We Tested Testing images is a big part of succeeding with Facebook like ads. In our writer example, we saw a range from $0.06 per like to $0.24 per like. Here are the images we tested. This ad generated likes at $0.13 each: This ad generated likes at $0.12 each: This ad generated likes at $0.14 each: This ad generated likes at $0.24 each: This ad generated likes at $0.06 each: Clearly, in this case the last image was the winner. We would typically start with just $10 a day on these ad campaigns. We’d quickly kill off the worst performing ads, and whittle it down until there’s one left standing. Then we’d slowly turn up the budget until we were spending about $30 per day. Using this process, we got our average lead cost to around 6 or 7 cents. At that pace, $1,200 gets us 20,000 likes. Now that you have a page with thousands of followers – how do you leverage that into actual sales and revenue? Cultivating a High Engagement Facebook Page You’ve probably heard that Facebook only shows your page posts to about 1% of your followers for any given post. While this is true on average, we found that we could often get over 70% of our like count in our post view counts. For example, if we had 20,000 likes, we’d frequently have posts that had 15,000 in views. Here’s the bottom line: if you create content that is engaging, Facebook will reward you by showing your posts to more of your audience. Even though the average page gets only 1% viewership, if your engagement is far above average, your viewership can be far above average as well. Which begs the question: what kind of content do people engage with? What kinds of content do people LOVE to comment on, like, and share? Content that does well: Image posts Funny, inspiring, witty Images that stand out Videos Text posts asking the community for input Content that does NOT do well: Purely promotional posts Posts about your company or products Text only posts Uninteresting or emotionless posts. Content that SOMETIMES works: Videos. We found the image posts outperformed for us in every market we were in. However, pages like Tasty have clearly shown that video-only posts can do really well. This is something you’ll have to test for yourself. Your page should be a place people look forward to visiting. When they see your page name in their feed, they should smile to themselves. Their reaction should not be “groan … what are they trying to sell me this time?” We scheduled five posts per day, seven days a week. That's 35 posts a week. Does that seem a bit excessive? Remember - Facebook only shows your posts to a small portion of your audience. If Facebook is showing your posts to 5% of your audience (which is already way above average) – that means that if you post 5x a day, only 25% of your audience is seeing your post that day. Another way to look at it is that everyone on your page sees a post once every four days. Of course, the distribution isn’t perfectly even. Some people will see 2-3 posts from you a day, and some won’t see any posts for weeks. But on average, if you post 5 times a day, your engagement will still be pretty high and you’ll maximize your chances of getting in front of your audience with your best content. Leverage Your Engagement for Sales and Revenue Okay, so now you’ve got a few thousand followers. And you’ve regularly posted content that gets your fans engaged. You’re showing up more and more in Facebook’s algorithm, and people are regularly liking, sharing and commenting on your posts. Now, how can you turn that social capital into … well, actual capital? The most valuable use of our Facebook pages came from insights that we turned into products. Our Facebook pages were never a big source of direct sales for us. Instead, we used the intel we got from our posts to direct our sales efforts. If we tried to sell directly to our audience by posting on Facebook, we'd generally make about 5 sales per post. That's not worth the cost and effort we had to put into generating our audience. If we only approached our fans as a direct sales channel, it wouldn't be worth doing like campaigns. Fortunately, the real value of having a highly engaged Facebook page comes in using the engagement to inform your products and your marketing. You can use it to predict what people want to buy, and how they want to be sold to - and launch marketing campaigns that you know will succeed before you even launch your campaign. Use Facebook Insights to Spot Outliers The easiest way to see what people strongly resonate with is by checking your Facebook Page’s Insights dashboard. Generally you’ll see that most of your posts have an “average” amount of reach and engagement. Then, every once in a while, one will be an outlier – something that gets a lot more engagement than the average. For example, on this page we consistently got around 4,000 reach on a post. But this outlier has 15,000 reach and a much higher engagement: That tells me something about that post strongly resonated with our audience. I can turn that into a Facebook Ad, product, or email campaign. Let's take a look at a real world example. Case Study: Using Our Engagement to Sell $37,000 of One T-Shirt Design Early on, when we’d just started our Facebook Page, we had a post get an unusually high amount of engagement. Almost 1,000 likes and 650+ shares. That told us that this message strongly resonated with the audience. So, we hired a designer on 99Designs.com and turned it into a t-shirt design. We ended up running the design three times, selling over $37,000 in a couple months. Furthermore, the ad itself we used to advertise the t-shirt got 46,000 likes and nearly 20,000 shares, which helped us get a lot more Facebook likes as well: You see the ad live on Facebook here. This in turn drove thousands of free likes for our Facebook page, further increasing our reach and giving us even more insights into our customers. Applying These Strategies to Any Industry Not every business can directly turn a Facebook post into a product. How can you use these strategies to help grow your company, if you can't directly turn a Facebook post into a product? Use this to create new marketing angles. If a post goes viral, it’s likely hit on an emotional nerve within your market. Identify product improvements. Identify new product ideas. These can even just be upsells. Reach out and have private conversations with customers. Turn them into testimonials or case studies. Find gaps in your brand and plug them. Know how you’re doing. Companies often think they’re doing great, until their customers tell them otherwise. Avoid costly product launches. Waterfall vs. Lean Methodology. Find inexpensive “Surprise and Delight” opportunities. These are just some of the many ways that having an ongoing two-way dialogue with your customers can help your company. You now know how to very quickly build up new Facebook pages, and get them to be extremely engaging with your followers. And you learned how to use those highly engaged fans to do market research, test new product ideas, and get feedback. What strategies have you found for quickly growing an audience?How are you leveraging your audiences in your company? Share in the comments below! Ian Luck Founder – MarketingStrategy.comContinue reading

10 Strategies for Boosting Amazon Sales

or wholesaling to Amazon, most of these strategies won’t apply. Without further ado, let’s jump right in. Strategy #1 - Add Additional, Related Keywords to Your Listings Most Amazon listings are under-optimized in terms of the keywords they’re targeting. For example, compare the two listings below. Focus on the headline. The first listing would only show up for a couple keywords: Wired Keyboard USB Keyboard Black Keyboard The headline is short, and doesn't have many keywords. Therefore, the product won't show up for many searches. The second listing on the other hand, would show up on a search for: iPad 9.7 Case Trifold iPad Case iPad 2017 Case iPad Hard Case Lightweight iPad Case iPad Smart case Etc. Keyword optimization is a big part of Amazon SEO. Don’t just go for your primary keywords. Find your tangential keywords and make sure to incorporate them into your listings. You can use two tools to generate your keywords. Tool #1: Google Keyword Tool To get access to the Google Keyword Tool, you first need an AdWords account. You can open one here. Once you have an AdWords account, go to Planning > Keyword Planner to access the Google Keyword Tool. It’s a free tool. Tool #2: Merchant Words Merchant Words is one of the few tools on the market that pulls Amazon specific data. Although Google’s keyword tool is free, the Google’s Data and Amazon’s data can often be very different. For example, someone who’s interested in smoother hair might type into Google “why is my hair frizzy?” That same person might type into Amazon “hair conditioner” or “biotin for hair”. Although Google’s keyword suggestions are useful, when you're doing Amazon SEO it's best to use the data directly from the source. The idea here is to build up a library of keywords that you’d want to show up for in Amazon. Once you have those keywords, add them to your listing. High priority keywords should be added to the title, while lower priority keywords can be added to your description or the keyword fields in your product details (these don't show up to customers, it's in your back end settings). Strategy #2 - Add a Bonus to Your Product One way to make your listing stand out is to include a bonus that nobody else is offering. This works especially well if you could include a bonus that has high perceived value, but doesn’t cost you very much. For example, the listing below includes a free stylus and a free protective screen. These are items that would both cost an extra $5 - $10 on Amazon, yet cost only a few pennies to manufacture. If a user were deciding between a couple different cases, this could be the added push that tips them in favor of this product. eBooks can be another great bonus. Once an eBook is written, there’s literally zero cost in producing another copy. Yet they’ll continue to help your marketing for years. Strategy #3 - Make Your Images Different Than Everyone Else Are all your competitors using the same style of image? In most industries, sellers tend to all go in one direction. When that’s the case, try to go in a different vein. When others zig, zag. For example, take a look at the image below. These are the results for “Dancing Shoes”. In a sea of shoe-only images, the image with a pair of legs clearly stands out. Despite having lower star rankings and fewer reviews than other shoes, this pair of shoes has higher rankings and higher sales volume than their competitors. Strategy #4 - Drive Sales Using the “Type In Search” Contest Amazon’s search engine is optimizing for one thing: sales. Every time a specific phrase is typed in, Amazon is hoping to put the products that consumers are most likely to buy in front of them. For example, let’s say I typed in “travel backpack.” Amazon then tracks every product - in terms of how many people click and how many people buy - and puts the products people tend to buy near the top. This maximizes Amazon’s income (they only make money when a sale happens) and also gives users exactly what they’re looking for. Which begs the question - how can give Amazon the experience of having more people type in a specific search phrase, select your product, and then buy it? There are two simple ways to do it. 1) You can ask friends, family, and staff to type in a specific search phrase that you want to rank for, find your product, and purchase it. Note that this is very different than giving them a direct link to the product and having them make a purchase. You want them to make a search, in order to for Amazon’s optimization algorithm to recognize your sale and boost you’re relevance for that specific search term. 2) You can host a contest or giveaway. Tell your customers to go to Amazon, search for a specific term - like “travel backpack” - and to make a purchase. Then, send you the receipt to receive a free bonus or to be entered into the contest. The free bonus should ideally be something that has high perceived value, but doesn’t cost a lot to make. For example, in the travel market this could be wool socks. They’re socks that rarely need to be washed - perfect for traveling. This can be a great way to use your existing list to boost your Amazon rankings. Strategy #5 - Use a Autoresponder to Ask Buyers to Leave a Review Do you have an email autoresponder setup to ask buyers to leave a review? If not, this is a simple and easy way to automate getting reviews. This alone can double your review rate. For example, this is an automated follow-up I received after purchasing a mouse: There are several different softwares you can use to send these emails. On my Amazon stores, I use Feedback Genius. Overall I’ve been pretty happy with it. Strategy #6 - Use Seller Ratings to Protect Yourself from Negative Reviews One common strategy for reducing negative reviews is to send customers to leave seller rating reviews instead of product reviews. Here’s how this works. When you email your customers to ask for a review, instead of sending them a link to leave you a product review, instead you ask them: Was there anything wrong with the item? If not, would you leave a review? Send them a link to a seller rating review. Customers will then write their comments into your seller ratings field. These can be accessed via Performance > Feedback in Seller Central. Now comes the manual part. Every day or two, go through your seller feedback ratings and ask anyone who left you a positive review to also leave you a positive product review. This is a manual outreach process - you’ll need to find their order and send them a message. Why do it this way instead of just asking for a product review in your follow up emails? Because getting a negative review is much worse than getting a positive review. By going through this process - sending customers to Seller Ratings first, and manually asking for a Product Review only if they're happy - you greatly reduce the chances of a negative product review. Your negative reviews will end up in your Seller Ratings rather than your product reviews, and your Seller Ratings are far less important. This will reduce your total number of product reviews, as there is an increased step for people to leave a review. But it'll increase your average star rating significantly. Strategy #7 - The "Gift Card Method" for Removing Bad Reviews Even a half point drop in a star rating can have a significant impact on sales. So, how can you remove negative reviews if someone does get through your “Seller Rating Filter”? One of the best strategies is to use the “Gift Card Method”. Here’s how it works. Regularly review your listings for customers who are unhappy. If you receive a review of 3 stars or less, send them an email with a sincere apology. Include a $10 Amazon gift card for their troubles. Offer to fix whatever the issue was (give them a replacement product, etc.) Don’t ask them to remove their review right away. Once you’ve fixed the problem, and they email back saying that they’re happy, then ask if they’d be willing to go and change their review. You won’t get 100% of reviewers to change their mind this way, but the success rate is a lot higher than if you just emailed them to ask them to remove a bad review. Strategy #8 - A/B Test Your Images and Headlines Did you know that you can A/B test your images and headlines? Many Amazon store owners make the mistake of simply changing images and headlines and using gut feel to figure out winners. Unfortunately, things like days of week, weather, holidays, and other factors can dramatically affect sales over time. The only way to truly know if a certain headline or image performs better is to perform a true A/B test. The best software for this is Splitly, an Amazon split testing tool. They’ll actually rotate various images, headlines, etc. for you and track the impact of variations. They’ll not only track conversion rates and sales, but also track how different headlines and images affect your rankings and organic traffic within Amazon. Strategy #9 - Use the “Automatic to Manual” Sponsored Listings Technique One of the most powerful ways to boost sales is to use sponsored listings. Sponsored listings can be quite complicated. Fortunately, there’s one way to do sponsored listings that’s actually quite simple. You can actually let Amazon do most of the work for you. Here’s how it works. In SellerCentral, go to Advertising > Campaign Manager and create a new campaign. When you’re asked to select the targeting type, select Automatic Targeting. Amazon will then put together a list of all the keywords they think you might be relevant for. This isn’t just based on your product page. It’s also based on the keywords people tend to type on to land on your page, the keywords your competitors are ranking for, and many other factors only Amazon knows about. There’s no additional setup required. Unlike AdWords, you don’t even have to write an ad. Amazon will just use your listing as the ad unit. They’ll also put together your keyword list for you. It’s plug and play. After 5-10 days, go back into the campaign and run a report. Then you’ll be able to see which keyword(s) converted best for you. You can now export those keywords into a separate campaign and target them with a manual bid. Strategy #10 - Use Facebook’s “Offline Events” Conversion to Run Ads Facebook Ads is one of the most profitable channels in eCommerce today. Yet people rarely use it for Amazon sales. Why? Because there’s no built-in way to track your Amazon conversions in Facebook Ads. If you test a dozen different groups of targeting - men vs women, 20s vs 30s, etc. - there was no way for you to figure out which group actually made a purchase. There was no way to improve your campaign performance over time. Fortunately, that’s changed now. You can actually track your conversions in Facebook Ads. That means running ads to your Amazon product pages can be very profitable. In fact, this is working fantastically well for a lot of Amazon sellers today. Setting up a Facebook Ads campaign is a more complex topic that’s outside the scope of this article. But the most important thing to realize is that the connection can be made now via the “Offline Events” conversion event in Facebook. To do this, go to Menu > Measure & Report > Offline Events. Then go through the on-screen signup process to register for offline events. Once complete, you’ll get to a window where you can upload a list of customer names, addresses and phone numbers into the offline events conversion tracking. This is all info that’s provided to you in Seller Central. Manage By Stats is a tool you can use to export all the data in bulk. Wrapping Up These are 11 strategies you can use to increase your Amazon sales. What’s worked best for you? Have you tested these strategies? If so, how did they go? Did we miss anything? What are your favorite tactics for boosting sales? Share in the comments below! Best wishes, Ian Luck Founder, MarketingStrategy.comContinue reading

11 Examples of Brilliant Facebook Video Ads

tch attention much more easily than with still images. You can convey more information quickly. You can demonstrate the product instantly, rather than explaining what the product does. So, what makes a good video ad? Generally, a good video ad should: Catch attention within the first 3 seconds. Clearly communicate what the product is. Be interesting and get viewers excited. Let's take a look at a few examples. #1 - A Serial Killer, Delivered to Your Door The Product: This is a subscription mystery box. Every month, you get a box containing clues to a mystery, which you help solve. It's basically a murder mystery delivered by mail. Price point: $27.50 per month Landing Page: Click Here to view What I love about this ad is how vividly it gets you to feel. The sense of mystery, creepiness, foreboding. For people who enjoy a good mystery book, I'd imagine this ad converted very well. Their website says they have over 17,500 subscribers. At $30 a month, that means they're generating at least $500,000 per month, not including upsells. They're doing very well using this style of advertising. The Video: Surrounding Ad Text: #2 - Anti-Theft Backpack The Product: A backpack with several anti-theft, anti-spill features. Price point: $49.99 Landing Page: Click Here to view This ad does a great job catching attention in the news feed. Within the first few seconds, the ad already manages to show off a few of its core features. The ad combines several animated product shots, with lifestyle shots of the product being used in the real world. They overlay it with text to show off the most important features. Overall a very well executed ad. The Video:   Surrounding Ad Text:   #3 - Use Still Images and Effects to Create Animation The Product: A phone case for Legend of Zelda fans (a video game.) Price point: $14.85 Landing Page: Click Here to view This ad is a great example of why you don't need expensive video shoots to create an effective video ad. This video looks like it's a real video, but if you look closely you'll see that it's really just still images plus a couple effects. Basically they're using images and using flashes plus image movements to create the illusion of it being a video. This ad likely performed very well for them. This video got about 950,000 views. At a CPM of $25, that means they probably spent about $24,000 on this ad. If they had a 3-to-1 return, that means this ad generated approximately $75,000 in sales. And that's only one video - it's likely they ran additional ads for the same product, using the same style. The Video: Surrounding Ad Text: #4 - Custom Vitamin Gummies The Product: A subscription for vitamin gummies. They let you customize your own package with different vitamins. They're selling a subscription package. Price point: $12 to $120 per month, based on quantity. Landing Page: Click Here to view I found this mixed-ad format quite interesting. This ad is basically broken into two parts: Part One: The company explains the product and how it works. Part Two: A mix between a video testimonial and a commercial. They have a customer explain how the product works. It was a little on the longer side, but I think it works for this product. The Video: Surrounding Ad Unit: #5 - Try the World The Product: A subscription snack box. Every month, you get a different box of snacks from a different country. Price point: $35 a month Landing Page: Try the World This stop-motion style ad definition catches attention. It stands out in the news feed, as most other videos are of people. This style of video is likely quite expensive - actually more difficult to produce than just filming a product video. That said, Try the World has been around for a while - so I imagine they've tested multiple styles of video. The fact that they continue to invest in this style of video means it's most likely working for them. The Video: Surrounding Ad Text: #6 - A Simple and Clear Product Demo The Product: A light that lets you project the ocean floor onto your bedroom walls. Price point: $39.95 Landing Page: Click Here to view Sometimes all you need to do is clearly show off what a product does. This is especially true if you have a very unique product, or a very unique offer. This video is simple and to the point. It tells you what the product does, and then shows you a few examples of it in action. The Video: Surrounding Ad Text:   #7 - Humor Sells The Product: A better pillow, made with higher quality materials. Price point: $99 Landing Page: Click Here to view Yes, this is a $99 pillow. And yes, it's selling very well. This ad does a lot right. For one, the attention catching headline above the video gets people curious. The first 5 seconds of the video are also weird and quirky, further drawing the viewer in to check out the video. The rest of the video balances humor and sassiness with actually explaining the benefits of the product. It's an infomercial that people would actually sit through with a smile. This style of ad can work very well (a similar ad launched the $1 billion dollar Dollar Shave Club.) That said, these ad types are very expensive and time consuming to produce.   The Video: Surrounding Ad Text: #8 - Create the Impression of Value The Product: A posture correcting device. Attach it to your upper back, and whenever you're slouching it will buzz you to remind you to straighten up. Price point: $99 Landing Page: Click Here to view This ad uses a combination of: Text and visual effects on the screen, Videos of people straightening up, Product shots. The ad creates the impression of being very high production value - which increases the perceived value of the product - yet probably didn't cost that much to film. Best of both worlds. The Video: Surrounding Ad Text: #9 - A Creative, Text-Only Ad The Product: A web analytics software. Price point: $49 per month Landing Page: Click Here to view This ad really breaks the mold. It's text only. And it starts off by addressing the fact that it's an ad. It made me really curious to see the ending. The key takeaway here isn't necessarily to do text only video ads. Instead, it's to try and come up with something that stands out. Something that gets people to stop in their news feed and say - "Hmm? That's interesting - let me stop and watch this." The Video: Surrounding Ad Text: #10 - The Best Thing Since Sliced Bread The Product: An icing squeezer that makes icing look like flowers. Price point: $27 Landing Page: Click Here to view This is another example of a simple, product-shot based video ad. All of these shots can be done in one single video shoot. Note that Facebook Ads do decrease in effectiveness fairly quickly, so it makes sense to shoot extra footage and turn it into multiple video ads. The Video: Surrounding Ad Unit: #11 - Simple Slideshows The Product: RX Bar sells snack bars, with the ingredients clearly labeled on the front. Price point: 12 Bars for $20 Landing Page: Click Here to view This ad is basically just a few photos of the product, one after another. A simple yet effective ad. This could easily have been taken on an iPhone camera. The Video: Surrounding Ad Unit: A Few Common Themes While some of these ads - such as Purple's ad - needed a lot of investment to create, many of them are also very simple ads. Before investing tens of thousands of dollars into video production, it could be a good idea to test using simple slideshows or iPhone videos. Verify that this is a medium that works well for your product or service, then invest more in higher quality videos. Do you have a favorite ad? Share it below! Ian Luck Founder, MarketingStrategy.comContinue reading

$100,000 a Year via AdWords: Marketing Lessons from the #1 Thai Language Course

that need very little management. I had the opportunity to sit down with Brett to learn a bit more about how he runs his business, and how he gets his customers. The system and the funnel are fairly simple and straightforward, and extremely effective. Let's take a look. How to Market an Online Language Learning Class Learn Thai from a White Guy uses several key marketing channels. We'll explore: Introduction, and SEO Google AdWords Google Display Network Facebook Ads Getting email addresses from visitors Autoresponder series Using a quiz to increase conversion rate Marketing benchmarks and metrics Getting Started Before we go jump into the marketing, let's take a quick look at the back story behind Learn Thai from a White Guy. Brett first moved to Thailand in 2003. He started off teaching English, and quickly picked up Thai as well. By 2006, he was teaching private Thai lessons to westerners. Before long, he decided to package his classes into a digital version, and started selling them online. He started by launching a blog, which got him to his first $500 a month. Then, once he started adding the marketing a few other marketing channels, his site quickly grew to six figures. With that brief backstory covered, let's take a look at how Brett was able to grow so quickly. AdWords: The Most Effective Marketing Channel The highest converting, highest volume, and highest ROI channel for Learn Thai From a White Guy is Google AdWords. This makes sense: AdWords is the best way to find people with intent. In Thailand, the vast majority of foreigners aren't interested in learning the local language. Most are just there to - well, travel or hang out. His AdWords ads look something like this: Improving ROI: Countries, Keywords, AdGroups I asked Brett about the growth of his AdWords campaigns. What were they like when they were first launched started? Were they profitable right away? What did he test, and how did things improve over time? It turns out, AdWords wasn't profitable right out of the gate. Paid traffic seldom is. Instead, it was a process of iteration that gradually grew more and more profitable over time. From Day 1 it was clear that it would generate revenue; it just took some time before the revenue exceeded the ad spend. Today their return on ad spend (ROAS) is over 60% - an extremely high return. Here were a few of the major changes that helped him improve his CTR and Conversion Rate: Single Keyword Ad Groups (SKAGs). Ad Groups with just one keyword and just one match type. So a phrase match and an exact match for the same keyword would be broken out into separate ad groups. Starting with highly targeted keywords first. Avoiding "Learn Thai" and bidding on "Learn Thai Online" instead for example. Bidding on fewer keywords, but the more targeted ones, initially. Then broadening out once the ad copy and funnel were converting well already. A Journey into Google Display network Once Brett had spent a few thousand dollars, a Google rep contacted him about adding Google Display Network (GDN) to his traffic mix. It wasn't an expensive test, so Brett went for it. GDN was very effective for him at first, and almost doubled his traffic, while giving him a strong ROI. Over the last few years this channel has started to return a worse return, and he's since then closed it down. Facebook Ads Facebook Ads is the new, cool kid on the block, but AdWords is still king. In 2016, Facebook Ads revenue brought in $27 billion vs AdWords' $79 billion. Don't get me wrong - I'm a big fan of Facebook Ads. But, in this case it seems like it hasn't worked all that well for Brett. With Facebook Ads, the only targeting Learn That from a White Guy could get is: Expats from a foreign country AND live in Thailand (or are interested in traveling to Thailand) AND are interested in language learning. Unfortunately, you can't target someone by their desire to learn a language. Facebook won't know if you've already learned Thai, if you want to learn Thai, or if you have no interest at all. In this case, having the ability to target by intent rather than by demographics makes all the difference. Facebook Ads did convert for Brett, but it was breakeven at best. A Simple and Effective Sales Funnel Here's the journey their average user goes through: First, users will land on the website through a paid traffic source, generally AdWords. They'll land on an email capture page. Once they have the email, they'll be entered into an email series with 20+ emails. If they buy, they're removed from the series and added to the customer list. Otherwise, they keep getting emailed until they purchase. Let's take a look at each of these steps in turn. Getting the Email Address The AdWords landing page is a standard, single-page above the fold email capture box: The email capture box has a simple offer: try 4 lessons for free. I love the "Get Lessons" call to action box. Overall the page "feels" very inviting, like your friendly neighborhood professor. It doesn't feel like a sales page. The box is both clear and simple, and converts well. The Email Series Most of Brett's customers will buy within the first two emails, but about 25% will take weeks or months to buy. The email follow up sequence helps build trust with customers over time. The email series starts by giving customers exactly what they were promised - 4 free lessons. Then, over the course of the next few days and weeks, he continues to give them free tips on learning Thai. The call to action in the email is to click the link to start learning. Using a Quiz to Sell Originally, the emails Brett sent would direct visitors to a text lesson. Over time, he instead developed an interactive quiz. After installing the quiz, conversion rates increased by about 10%. That's the nuts and bolts of the funnel. It's a pretty simple and straightforward AdWords funnel, which gathers a lead, and then converts that lead into a sale. Once the keywords, landing pages, and emails were tested and optimized, the marketing became fairly automated and hands-off. Marketing Benchmarks and Metrics Here were a few of the metrics Brett was able to share with us. How percent of your email subscribers would convert into buyers? 12% of email signups from AdWords end up purchasing. 2% of email signups from Facebook Ads end up purchasing. How long after the initial click before someone makes a purchase? 75% of the sales come within the first two emails. 25% of the sales come in the long tail, from email #3 to #40. What's a typical return on your ad spend? Average ROAS is 65% on AdWords. Facebook is about break even. Wrapup Brett has set up an ideal lifestyle business for himself. He's got automated marketing systems that requires very little maintenance. Every once in a while he tests new things - such as new Facebook Ads - but, for the most part it runs itself. What strategies have you found for "set it and forget it" marketing? Share in the comments below! Ian Luck Founder, MarketingStrategy.comContinue reading

Blue Apron’s Marketing Strategy: The $100m Plan

. They were early adopters in podcast advertising, created a truly unique referral program, and manage a powerful blend of online and offline marketing channels. So, what allowed Blue Apron to grow so quickly? How did they go from startup to revolutionizing the food industry? And, why is the company also struggling to turn a profit? Let's take a look at what we can learn from this behemoth's marketing stack. Introduction & Table of Contents Blue Apron is a master at scaling up. They're in dozens of different marketing channels, from the oldest of old media to the newest of new. We won't look into every channel Blue Apron's advertising in. Instead, we'll examine the most interesting things they're doing in their marketing. We'll skip paid search and social - although Blue Apron spends a lot in these channels, their strategy is fairly similar to other companies. Here's what we'll cover (clickable): The $35 Million Referral Program Digital: Podcast Ads YouTube Sponsorships Display Ads Sponsored Reviews via Native Ads Offline: TV Advertising Radio Ads Direct Mail A Deeper Look at the Metrics Customer Acquisition Cost Cancellations Lifetime Value The Big Picture The overall strategy looks something like this: use a wide range of different marketing channels to entice new customers. Measure the cost of acquiring customers, as well as the lifetime value of those customers, for each channel they're advertising in. Reduce ad spend in the channels that don't work, and scale up the ones that do. Some of their channels, such as podcasts, can be directly measured using custom links (i.e. BlueApron.com/NPR). Others, like their TV ad buys, likely need to be measured with a mix of sales metrics and brand metrics. The $35 Million Blue Apron Referral Program [sta_anchor id="referralprogram" /]Blue Apron spends a fortunate on referral marketing. In 2016, they spent $35 million on customer referrals. Source: Blue Apron S1 (IPO filing) How does their referral program work? The main idea is that their top customers most likely know people who are similar to themselves. If you're an upper middle class family who likes to cook, you probably know other upper middle class families who like to cook. Blue Apron is confident that if they can get those people to try their service, they'll stick around and be a customer for a long time. Well, what better way to get them to try it out than to send them a free box? That’s right - Blue Apron spends $35 million a year on giving away free food. And those free meals are some of the best marketing dollars Blue Apron spends. Of our Customers for the first quarter of 2017, 34% were acquired through our customer referral program, in which certain existing customers may invite others to receive a complimentary meal delivery.  -- Blue Apron S1 (IPO filings) In Q1 of 2017, referrals was 14.75% of marketing spend, but was responsible for 34% of their customers. Presumably, these customers most likely spend more and stay customers for longer as well. It’s entirely possible that half of Blue Apron’s revenues comes from referrals. A few ingredients go into the success of this strategy: Have a great product that people want to share. Give them a great offer that they'd feel good about inviting friends to. Make sure the customer value created is larger than the spend. Blue Apron isn’t alone in using this strategy, of course. Dropbox used a similar tactic to get to 4 million users in less than 2 years. Of course, it’s much easier to scale a referral program when you're selling software rather than food. Blue Apron's referral program is one of the most successful in the physical products industry. Online Marketing Channels[sta_anchor id="digitalchannels" /] Blue Apron's Podcast Advertising[sta_anchor id="podcastads" /] Podcast advertising today is like Facebook Ads 5 years ago. Response rates are high, costs are low, and few advertisers understand how the channel really works. It's a big opportunity right now that only a few companies have taken advantage of. Blue Apron was one of the first companies to really scale their podcast ads. They blanketed the airwaves (pod waves?) and have since scaled up to buying ads in just about every category. Here are a couple examples of Blue Apron’s podcast ads: Blue Apron's Podcast Ad - on the "No Sleep" Podcast: [audio mp3="https://marketingstra1.wpengine.com/wp-content/uploads/2017/12/Use-This-Blue_Apron_22__May2017__NoSleep.Podcast.mp3"][/audio] Transcript: Younger Cop: Do you really think the valentino brothers will show? Older Cop: They have to! If our intel is right, this is their base of operations. Younger Cop: Yeah, but we've been sitting in this squad car for hours. My legs are cramping up. Older Cop: This is your first stake out right? Eh, just sit there and be patient. Younger Cop: (Grumble) ugh I'm so hungry, didn't you bring snacks? Older Cop: That was your job, kid. Younger Cop: Ugh we're gonna starve to death. Hey is it true what they say about the oldest Valentino? They call him the surgeon because he decapitates his rivals and keeps their heads? Older Cop: Don't believe everything you hear. Look alive kid, this might be them. Younger Cop: Nope, its' a delivery truck. Oh! Blue Apron! Older Cop: Blue Apron? Younger Cop: Yeah, they're the #1 food delivery service in the country. I signed up a few months ago by going to BlueApron.com/nosleep. Their food is incredible. Their culinary team likes to surprise us with new recipes that aren't repeated for a year. Last night I gorged myself on seared steaks and peppercorn sauce, with roasted potatoes and green beans. Mmm, so good. Older Cop: (Grumble) Younger Cop: heh, looks like I'm not the only one who's hungry. Older Cop: Shut it, I didn't have breakfast. Younger Cop: Look at that box, sitting all alone on the door step. EAT ME it's saying, EAAT MEEE. Older Cop: Don't tempt me. Younger Cop: You know, not all ingredients are created equal. Their seafood is sourced sustainably, their beef, chicken, and pork come from responsibly raised animals, so you know it's going to be delicious. It'd be a shame to waste all that good will on the Valentino brothers. We could run over there real quickly and make supper. Older Cop: Even if I entertained the notion, we wouldn't have time to cook anything before the Valentinos got back. Younger Cop: Actually every meal can be prepared in 40 minutes or less with step by step recipe cards. They'll never know we were there! Older Cop: Ugh fine, don't make me regret this. Wow, there's exactly enough here for two people. I'm always buying too much and have to throw things out! So which recipe should we make? Younger Cop: The meatball with tomato sauce with asparagus and creamy rice sounds amazing. Older Cop: Whoa this would pair great with wine! Go see if there's any in the cellar will ya? Younger Cop: Hey remember that rumor about the decapitated heads? I found them ... and they're still breathing! Narrator: Check out this week's menu and get your first 3 meals free by going to BlueApron.com/NoSleep. Blue Apron, a better way to cook. This is a fantastic example of an ad that blends into the show's style (the show is a horror fiction show). Here's another example: Blue Apron's Ad on "You Are Not So Smart": [audio mp3="https://marketingstra1.wpengine.com/wp-content/uploads/2017/12/You-Are-Not-So-Smart-Blue-Apron-Podcast-Ad.mp3"][/audio] Blue Apron’s podcast ads are almost all read by the host of the podcast. They’re running ads across many different categories - from health podcasts to true crime and everything in between. Here are a few tips for podcast advertisers: Typical rates are $8 to $40 per thousand downloads (CPM). The rates vary based on the popularity of the podcast, as well as the category the podcast is in. The True Crime category might average around $10 CPM, while the tech or business category might average around $30 CPM. Then you have the really popular shows, which can command CPMs of up to $50. Always go for host read ads. Don’t submit a sound clip to have them insert into the podcast. One of the reasons podcast ads work so well is because you get to leverage the connection the host has to the audience. Don’t make it sound like a traditional ad - personalize it. Programmatically inserted ads usually don't perform well. Programmatically inserted ads mean you’re buying ads in a podcast for a certain amount of time. For example, for the month of June, when a listener downloads a podcast episode, your ad will be “inserted” into the ad slot as the customer downloads it. In July, your ads are removed and someone else’s ads will be inserted. These types of ads generally perform far worse than “hard coded” ads, where the ad is actually recorded into the episode rather than inserted via software. Blue Apron Sponsoring YouTube Channels: [sta_anchor id="sponsoryoutube" /]Brands often pay YouTube stars to create videos about their brand. You get to leverage the connection YouTubers have with their audience, and get a unique piece of content created. YouTubers have a well honed sense of showmanship, and can  create videos that really "wow" audiences. Depending on the agreement you have with the YouTuber, you might be able to use those content pieces in other places - your website, your Facebook Ads, etc. That said, this channel is harder to manage than many other channels. Instead of buying impressions through an ad platform, you’re making deals directly with various YouTube personalities. And, like doing business with the artistic, it can be a quirky experience. There are, of course, agencies who which specializes in managing that process for you. Typically they charge a 25% premium on top of what the YouTuber charges, and come with a a $25,000 minimum investment. Example: Blue Apron's Sponsored YouTube Video, "Cooking the Perfect Meal" This skit is short, funny, and really gets the Blue Apron value prop across. I'm a big fan - it's worth a watch: If you want to experiment with sponsoring YouTube videos, Famebit is the primary avenue for doing so. Famebit is a platform that connects YouTube influencers with advertisers who want to sponsor them. They were acquired by Google in 2016. For a more "done for you" approach, Grapevine is an agency that specializes in this. This channel only works for certain kinds of businesses. For businesses in fashion, food, or fitness YouTube sponsorships can work great. For businesses selling intangible products - software, consulting, etc - YouTube is not a very good channel. Basically, if there are a lot of people creating YouTube channels about your topic, then it could be a good channel. When paying for YouTube sponsorships, here are a few things to look for: Typical rates are between half a cent to 1 cent per subscriber. In other words, a channel with 100,000 subscribers should cost $500 to $1,000 for one sponsored video. A good view through rate is about 15%. In other words, a channel with 100,000 subscribers should get around 15,000 views per video they release. The size of channels you advertise in should be between 100k to 500k subscribers. Channels with less than 100k subscribers are usually hobbyists, who might not take the video seriously. Over 500k channels often have agents and demand higher CPMs. Between 100k and 500k is the sweet spot.   Blue Apron’s Display Advertising Prowess [sta_anchor id="displayads" /]Blue Apron's display ads are gorgeous. Their copy is witty. Overall, they do a great job. That said, according to SimilarWeb, display is a very small percentage of Blue Apron's traffic: Of all their marketing channels, display is likely the least effective. I've also usually found display to perform worse than most other channels. It works for retargeting. It can work great for retargeting. But for bringing in new customers, I’ve generally found display to be much worse than most other channels. All that said, I do love the photography and copy that Blue Apron’s got going. They know how to make some pretty great ads. Blue Apron's Sponsored Reviews via Native Ads [sta_anchor id="nativeads" /]Blue Apron is a big advertiser on native ads. Native ads are those annoying ad units at the bottom of most news sites. They tend to blend in with the news style of the site, using attention catching headlines and photos to try and entice a click. The three most common native advertising networks are Outbrain, Taboola, and Yahoo Gemini. Typically advertisers send readers to a “pre-sale page”, rather than a product page, which is designed to introduce people to their product. In this case, Blue Apron introduces people to the idea via a “We Tried Blue Apron: Here’s What Happened” ad. This directs visitors to a page where the writer shares their experience with Blue Apron. This ad then takes you to a page like this: Native Ads work best when combined with retargeting. Since most customers aren’t necessarily in the mood to buy right now, retargeting becomes even more important with Native Ads. Native Ads generally convert worse than Facebook, Podcasts, or paid search, but offers more scale. It’s best to get a couple other channels to work first, before scaling up by adding native ads. Offline Marketing Channels[sta_anchor id="offline" /] Blue Apron TV Advertising [sta_anchor id="tv" unsan="TV" /]TV is an interesting choice for Blue Apron. Traditionally, TV ads are bought by advertisers looking to buy mind share. They’re looking to increase awareness of their brand, and associate more positive emotions to their brand, so that when someone’s considering a purchase, that brand comes to mind. Colgate buys TV ads so that when you’re in front of a the tooth paste section at the grocery store, you’ll buy Colgate instead of Crest. Blue Apron is different. They’re trying to generate sales directly. There is never a moment where you're standing in a grocery store, choosing between Blue Apron, Hello Fresh, and Plated. Instead, they have to get people to think "oh, that's a product I want to try - let me go online and buy that." Blue Apron is a bit of a pioneer in this aspect. Although “infomercial style” commercials have worked in the past, those usually come at the cost of bad branding. Blue Apron's TV ads are beautifully branded, and aim at driving sales. It’s a kind of hybrid between a direct response ad and a branding ad. I don’t have any data about how these ads performed for Blue Apron, but if I had to guess, I’d bet that they performed worse (from an ROI perspective) than many of their other channels. TV is a blunt instrument - your targeting capabilities are very limited. For example, you can target left-leaning women from age 25 to 45. But you can’t target married women with 2 kids, who eat Paleo, and also shop at Whole Foods. Compared to channels like Facebook Ads, podcast ads, and YouTube, TV’s targeting capabilities are clearly inferior. However, TV has massive scale. It’s impossible to spend $10 million on podcast ads or YouTube influencers in an effective way. It’s very easy to spend $30 million on TV. At a certain point, scaling up becomes more important than getting the best ROI out of your marketing dollars - especially if you have venture capitalists or Wall Street to please. But then again, spending money on marketing that doesn’t pay off is a big part of why Blue Apron’s struggling to get profitable. Blue Apron Radio Advertising [sta_anchor id="radioads" /]Blue Apron spent $293,000 in 2015 and $2.41 million in 2016. Radio is much more scalable than podcast ads. Since radio has been around for so long, many agencies already have the knowledge and connections to buy ads at scale. Podcasts are still a bit of a Wild Wild West compared to radio. And podcasts don't have the scale. Geico alone is estimated to spend more on radio ads than all of podcast ads combined. For brands that need scale, podcast is not replacing radio anytime soon. Yes, podcasts are growing very quickly, but radio is still where the eyeballs (ear drums?) are. Typical CPMs are $10 to $20, or about half of podcast rates. Here’s an example of a Blue Apron's radio ad: [audio mp3="https://marketingstra1.wpengine.com/wp-content/uploads/2017/12/Blue-Apron-Radio-Spot.mp3"][/audio] Just like their podcast ads, this is a host-read ad, integrated into the style of the show itself. They've basically taken podcast-style ads and turned them into radio ads. Blue Apron Direct Mail [sta_anchor id="directmail" /]Blue Apron is a big advertiser in direct mail. Direct mail's one of the oldest and most proven channels for direct response marketing. Blue Apron often participates in what's called co-op marketing. Essentially the way it works is this: Companies enter into the co-op by submitting their customers' names and addresses. The names and addresses, along with purchase data, create a database that's shared among everyone else in the co-op. Once you upload your customers, you'll be able to access everyone else's customers as well. Using your customers as a baseline, an algorithm can find other people in the database who are similar to your customers. You can market to those people to try and get them to buy. This is very similar to Facebook's lookalike audiences, except applied to direct mail. It generally yields higher returns than any other direct mail strategy. Other strategies include zip code mailing, mailing based on magazine subscriptions, and mailing based on people who've purchased certain products. The trade-off for co-ops is around privacy. More details on how co-ops work can be found here. Example Blue Apron Direct Mail Piece: Although Blue Apron often uses co-ops, they probably test different kinds of mailing lists as well. In addition to the different groups of people they mail to, they also test the format and messaging of their mail pieces. Above is a three-section dropdown format. They also send postcard format, in an envelope format, and several more elaborate formats as well. Understanding Blue Apron’s Marketing Metrics [sta_anchor id="metrics" /]Blue Apron's marketing team did a lot of things right. They took a new concept and introduced it to millions of people. In a way, they are a smashing success. Unfortunately, there's a lot of problems with their core metrics. Let's take a look. Blue Apron Customer Acquisition Cost [sta_anchor id="cac" /]Blue Apron’s customer acquisition cost is a mix of their marketing spend, as well as the discount they give to initial customers. They typically give away some number of free meals on a customer’s first order, which is included in their acquisition cost. Blue Apron tells us their acquisition cost is $94 between 2014-2016. That's an average, which most likely hides a rising acquisition cost. Fortunately, using data from Blue Apron's public filings, several analysts have calculated their current acquisition cost to be between $150 and $400 per customer. Cancellations of Blue Apron [sta_anchor id="churn" /]Blue Apron also doesn’t provide any data on cancellation rates. Fortunately, a third party company called Second Measure does. Second Measure buys data from credit card and loyalty card companies. By aggregating data from thousands of credit card statements, they can figure out how often people stay subscribed to various companies. By the 3 month mark, Blue Apron loses more than half of their customers. Within 1 year, Blue Apron loses about 80% of their customers. In other words, Blue Apron is great at getting new customers. Keeping customers? Not so much. Blue Apron Lifetime Value [sta_anchor id="ltv" /]Lifetime value is how much a customer is worth, over the lifetime of their relationship with the business. Blue Apron's LTV is not that hard to figure out. Their gross profit margin is about 22%. Their average order value is $58. That means they're making around $12.50 per order. In other words, if they're spending $150 to acquire a customer, they'd need customers to stick around for 1 year to break even. Unfortunately, by 1 year they've already lost 80% of their customers. The Big Picture [sta_anchor id="bigpicture" /]Blue Apron - while brilliant in many of their acquisition strategies - is losing money. When they first went public, they were worth $1.9 billion. Today, they're worth $500 million. That's about 25% of their IPO value. Most of this is because their marketing metrics don’t work out. This doesn’t mean Blue Apron can’t be a viable business. It just might be a smaller business than investors expected. It’s entirely possible that they can scale down their marketing spend to just the most efficient channels, and have a business that grows slowly and runs profitably. Of course, a slowly growing but profitable company is not what Wall Street wants. Whether Blue Apron will make it is still to be seen. But, one thing's for certain - they've pioneered a lot of marketing strategies we can all learn from. From their massive buys in podcast ads, to their $35 million referral program, to their hilarious YouTube videos, there's a lot in their marketing mix we can all learn from. What are your thoughts on Blue Apron's marketing? Share in the comments below! Ian Luck Founder, MarketingStrategy.comContinue reading

The 18 Highest ROI Marketing Channels – and When to Use Them

n droves of customers for one company might be complete flop for another. The key to making marketing work is to pinpoint the best marketing channels for your product and your audience. Then, test quickly to find out what works, and scale up the channels that do the best. With that in mind, let's take a look at the 18 highest ROI marketing channels. For each channel, I'll give a brief overview of how it works, as well as its pros and cons, and a description of which type(s) of businesses should or shouldn't use it.   Cold Email Outreach Believe it or not, cold outreach works. It's actually extremely effective. For a detailed example, Predictable Revenue is a book that outlines how Salesforce added $100 million a year in recurring revenue using this strategy. Here's how it works. You use a database provider like Data.com to find prospects. You can get pretty detailed with this. For example, you can target retailers with at least $10m in revenue, or people with the title "VP of Product" in tech companies with at least 50 people. Alternatively, you can pay someone to find email addresses for you. For example, you can scrape Yelp for all the Irish pubs in New York. One of the best tools is to use hunter.io to find email addresses on a website (free tool.) Once you have the email addresses, you can use an automated tool like Quickmail.io to send emails out to the list of people who match your criteria. About 1% of your cold emails should turn into warm leads, contacts, and product demos. Who Should Use This Channel? Best For: This channel should only be used when selling to businesses. Typically this works best for businesses that are selling higher ticket products, usually with a $5,000+ lifetime customer value. This channel only works when combined with a salesperson, so you need to take into account both the cost of both generating the lead, as well as hiring the sales team. Not For: This channel shouldn't be used for selling to consumers. For one, it's illegal to email consumers without permission, because of CAN SPAM laws. It's also not worth the time and effort to make a $30 sale. Google AdWords Google generates over $60 billion a year in advertising revenue for one simple reason: their ads work. They make businesses money, so more and more businesses spend money with them. AdWords works by letting you bid on keywords. Your text ads then show up for the keywords you're bidding on. Who Should Use This Channel? Best For: This channel works best for locating people with buying intent. If someone is searching for pearl jewelry, they're probably looking to buy pearl jewelry. AdWords works for a very wide range of businesses, and most startups should at least experiment with AdWords to see if it works for them. Not For: Products with low search volume, especially if there's a large group of prospects that aren't necessarily searching for that product. For example, let's say you're selling funny t-shirts for people who love their dogs. Every month, only about 3,000 search for "dog shirts" in Google. However, there are millions of dog lovers in the country. They might not know to search for a dog shirt, but if they saw a funny one, they might buy. In this case, another channel that lets you target by interest (dogs) rather than by buying intent might work better. You'll have to create buying intent rather than find buying intent, but instead of advertising to 3,000 people you can advertise to millions. Facebook Advertising Facebook has a better interest targeting platform than anyone else on the planet. Unlike banner ads, these ads are in locations people are trained to pay attention to: the newsfeed. This results in much higher click through and conversion rates. Facebook's targeting works very differently than AdWords. Instead of targeting based on keywords, you target based on interest. Instead of targeting based on what people are looking for, you target them based on what they're interested in. Who Should Use This Channel? Best For: Facebook works best when you have a message or product that can appeal to an entire group of people. For example, anyone who loves cooking, or software business owners, or women who like to cycle. Like AdWords, Facebook is a channel that most businesses should experiment with at some point. Not For: Products that can only be purchased at a specific point in time. For example, let's say you love to play ping pong (table tennis.) Even though you're a diehard fan, the reality is you're only going to buy a ping pong table once every few years. So even if a ping pong table company showed ads to you, you won't buy - because you'd only purchase at a specific point in time. It would be better for them to bid on AdWords and wait for you to search for a ping pong table, rather than try and get you to buy one now. Facebook Ads is also not good for brand awareness and brand lift campaigns. The ad rates are much higher than other channels like TV, and the impact on brand is traditionally lower per dollar spent than more traditional channels. Search Engine Optimization SEO is one of the go-to marketing channels for most business owners when they're first getting started. But the truth is, SEO only works for a very small subset of companies. While successful SEO can bring in a ton of free traffic, succeeding in SEO is difficult. There's only one #1 position for any given keyword, so you're competing with every company in the world for that particular keyword. While it's possible to win this fight, it's not a fight new companies should pick. SEO should generally be tackled by established companies, once they've already made a few other marketing channels work. Who Should Use This Channel? Best For: Businesses that publish a lot of written content. Also best for businesses with other marketing channels. SEO tends to work best for businesses with substantial marketing budgets, and entrepreneurs with existing marketing experience. Worst For: Businesses that don't have content, or for whom writing content doesn't make sense. For example, if you sell cheap iPhone cases, people don't necessarily want to read about the iPhone case - they just want to buy one. Don't bet the company on SEO, especially in the beginning. SEO takes time and money to develop. Work on your SEO as you also build out other channels, so faster acting channels can bring in revenue while you slowly increase your rankings. Google Display Network Google Display Network, or GDN for short, is the world's largest platform for purchasing display ads. Using GDN, you can place banner ads on any website that's making money using Google AdSense. Unlike AdWords, the targeting for GDN is based on the content of the web page. If you're advertising home furniture, your ads will most likely show up on home furniture sites. You can use keyword targeting, interest targeting, or specific website targeting to run your ads. Who Should Use This Channel? Best For: This channel is best thought of as a scaling channel. Scale up to GDN once other channels are profitable, but typically Facebook Ads will convert better for display ads than GDN. Retargeting also tends to do well on GDN. Not For: Not for testing new ad campaigns or offers. If you're launching a new product or offer, and it doesn't work on GDN, it'll be difficult to say whether it's an issue with your product or an issue with the channel. Google Shopping Ads Google Shopping is one of the most effective channels for selling physical products. If you're selling a physical product, you should be on Google Shopping. Google Shopping ads are the ad units with rows and rows of product images. These ads convert very well. The only downside to Google Shopping is that it's difficult to setup. You have to turn your products into a product feed, which can be quite technical. Most shopping carts - Shopify, Magento, etc. - have plugins that do most of the work. Even so, it's still not as easy as AdWords or Facebook Ads. Who Should Use This Channel? Best For: If you sell physical products, especially low to mid priced, this channel should work well. Not For: Digital products or services, or any product that's not physical. It's also difficult but not impossible to sell $5,000+ products via Google Shopping. Generally speaking, higher ticket items work better through other channels. Private Lead Brokers Lead and click brokers can be a very good source of clients, especially in established industries. For lawyers, Avvo.com can be a great source of leads. For B2B software, Capterra.com is a popular lead gen site. For real estate agents, Trulia and Zillow are both well known lead sellers. The downside to buying leads is that there are a lot of low quality lead sellers as well. Marketers should enter this market with skepticism. In the beginning, it’s best to only do business with the Top 3 brokers in your industry. If you’re in real estate for example, buy leads from Trulia and Zillow first. This will allow you to benchmark their performance. Then, if you venture outside of the Top 3, you can use your conversion and ROI metrics from the Top 3 to compare against less established lead brokers. Working with new brokers can be a great source of leads, as there's often less competition for those leads. Just don't start with them, as it's entirely possible their leads won't pan out. Who Should Use This Channel? Best For: industries where lead brokers consistently deliver results. A lot of industries don't have lead brokers, so this strategy won't work in every industry. Worst For: Industries with no benchmarks. A real estate agent for example can use Google to figure out what percentage of their leads should turn into demos, and what percentage of demos should turn into sales. If you're the first one in your industry using purchased leads, and you have to benchmark from scratch, it will be difficult to figure out if you're on track.   Strategic Partnerships One big strategic partnership can drive a massive amount of business. A strategic partnership is a win-win deal between two companies that results in increased revenue for both parties. There's no cookie-cutter type deal with these partnerships. Usually it involves leveraging the unique strengths behind both companies. Here are a few examples of strategic partnerships: Google lets people order Lyfts directly from Google Maps. Lyft gets to take advantage of Google Maps’ massive user base. Delta gives away NatureBox snack bars for free on their flights. This gives NatureBox massive free exposure to Delta's audience, some percentage of whom may become customers. Spotify gives students free access to Hulu. Hulu, of course, is hoping that students will get hooked on Hulu, so when they leave school they'll decide to become a paying member. Postmates, a food delivery company in New York, partnered with a local pie shop to deliver free pies on Pi Day, driving exposure and press for both companies. Who Should Use This Channel? Best For: Companies with larger budgets. Often times arranging a partnership is a full time job, so you need to be able to afford a Head of Partnership role. In cities like New York, this is often a $60,000+ salary; so this strategy is often reserved for larger businesses. That said, a founder can definitely reach out and structure these kinds of win-win deals - just expect it to take a lot of time and attention. Not For: “Unsexy” businesses. A janitorial service, for example, might have difficulty doing a strategic partnership. Direct Mail Yes, direct mail works, even in the 21st century. It works very well in fact - to the tune of $10 billion a year. Direct Mail comes in many forms. Some companies send low quality prints, on newspaper-style paper, going for cheap scale. Others send high quality prints to carefully selected addresses. Both approaches work. The key to direct mail is math. For example: The cost for printing, including the paper, is $0.40 The price of the envelope and postage is another $0.40. The cost of the address itself, from an address broker, is $0.05 each. The total cost to send a letter is $0.85 each. After doing a test mailing, you find that the response rate is 1 out of 100, or 1%. That means your customer acquisition cost is $85. Your average customer lifetime value is $170, so you make a 50% ROI on the spend. Who Should Use This Channel? Best For: Products with higher lifetime value. It's difficult to make a $3 product work via direct mail. This also works best in "major" industries, as you'll have more address lists to work with. A good rule of thumb is the Magazine Rule: if there are at least 2 magazines in the bookstore catered to an audience you can sell to, then direct mail could work. Not For: Niche industries that don’t have address lists you can buy. For example, life coaches probably shouldn’t use direct mail, as you can’t buy a list of people who’re looking for a life coach. Press and PR Press is one of the most common marketing channels businesses tend to go for. In addition to the traffic, there's a lot of prestige that comes from being featured. PR is a “feast or famine” channel. If you can get into one or two publications, getting into another 5-10 is quite easy. But getting the first few writeups can be challenging. Generally I’d recommend most companies not to chase PR unless it comes to you first. Once you’re doing something that’s naturally attracting PR, then it makes sense to go out and solicit more. But spending money on PR agencies before you have a marketable story can be a big drain on cash, time, and energy. Instead, focus on using other channels to generate your initial sales. Then, once you have enough traction that bloggers and journalists start writing about you on their own, put together a strategy to increase the flow of press. Who Should Use This Channel? Best For: Products that are very unique and head turning. It’s  difficult to get a newspaper to write about a new hair salon, but very easy to get them to write about the world’s first artificially intelligent teddy bear. Not For: Businesses or products that are similar to a lot of other products on the market. Affiliate Marketing Affiliate marketing is like hiring an army of commissioned salespeople to sell your product. Usually, you start by listing your product on one of the affiliate marketing exchanges. The largest ones are Pepperjam and Commission Junction. Then, affiliate marketers who're on the platform find your product and promote it to their audience. When they make a sale, you pay them a commission. The whole transaction is tracked by the affiliate management software. Who Should Use This Channel? Best For: Markets where there are a lot of existing websites with large audiences. For example, weight loss, dating, marketing, fashion. Also, this tends to work for existing businesses - affiliate marketing shouldn't be used as your first channel. Not for: Markets without existing audiences. For example, if you’re selling dance inspired keychains, it’s unlikely that there are many people with large dance audiences on affiliate networks. Instead, you’re better off targeting dancers on Facebook Ads. Refer a Friend Campaigns Refer a friend campaigns can be extremely powerful. In fact, Blue Apron, a $500 million food company, gets almost half their revenue via refer a friend campaigns. The idea is simple: create an incentive for people to refer their friends to your business. Make sure it's a win-win for both them and their friends, as nobody wants to feel like they're "selling out" their friends for profit. Who Should Use This Channel? Best For: When you can give away something that “feels” highly valuable. For example, Dropbox lets you give your friends 16 GB of free storage space. Blue Apron lets you give friends a free meal delivered to their door. Not For: Businesses that have a “boring” product, or have a hard time giving away free product. It’s hard to give away a free Xerox machine. Content Marketing Content marketing means using content to both generate trust and bring in more traffic. Content marketing can be used to increase conversion rates by building trust, as well as to increase traffic via SEO and social media. MarketingStrategy.com is a content marketing business. Who Should Use This Channel? Best For: Products or problems that people are passionate about. Home beer brewing, digital marketing, and dating tips are all things people can spend hours a day on. Not For: Products people don’t want to think about. For example, if you sell ballpoint pens, people don’t want to think about ballpoint pens - they just want to pick up a pack of 20 at Staples. Native Advertising Native advertising has two definitions: 1 - Integrated Marketing Paying for advertising on a website, in the same format that the website is in. The ad is “native” to the website experience. For example, this article, "12 Foods You Had No Idea Have This Much Protein,” is actually an ad paid for by Boca. The article features Boca’s veggie burger as part of the article. Since the ad format fits into the site’s format, this is one style of native advertising. Pros: Very good for branding. Cons: Negotiating these deals is a very manual process. CPMs are typically much higher than other ad platforms as well. It’s much harder to evaluate, negotiate, and sign five $10,000 deals than to just spend $50,000 on Facebook or AdWords. 2 - Native Ad Networks The ad carousels on the bottom of news articles are also called Native Ads. These are typically brokered through ad platforms. The three main ones are Outbrain, Taboola, and Yahoo Gemini. Pros: Massive scale. If you can get a campaign to work, it can generate a lot of revenue. Cons: It's very difficult to get ROI positive. A lot of testing is required. Also, these types of ads need a multi-step funnel and generally can’t go direct to product. So it’s a lot of work to make it work. For most companies, it's best to start on Facebook or Google, then scale to native ads once other channels are working already. Podcast Advertising Podcasts are like radio, but on your phone. And you can listen to it at any time. Unlike radio, shows can be much more “laser targeted.” Instead of having a radio for talk shows or love songs, podcasts can be very niche. There are podcasts for digital entrepreneurs, for crossfit enthusiasts, and for people who love their dogs. Podcast ads let you get in front of a very passionate group of people. And you often get to leverage the connection hosts have with the audience - because the hosts are actually reading your ads for you. Who Should Use This Channel? Best For: Products that have a higher lifetime value. Most products that are successful in podcast ads are relatively high LTV. These include subscriptions, such as SquareSpace, or high ticket items, like Casper. Not For: Low priced items, and single purchase business models. For example, if you sell a $20 iPhone case, it’s very difficult to make the economics of podcast ads work. Also, products that hosts don't want to associate with their brand can be difficult to sell, because everything has to be approved by the host first. Social Media Marketing Social is both a powerful marketing channel, and a very misunderstood one. Newer businesses especially often get in trouble by only relying on social. Social is generally not a new lead generator. Instead, social is a way to build relationships with your existing audience. You’ll get some traffic from people in your audience sharing with their networks, but it’s usually not a large amount. Most startups should initially focus on one of the other more scalable marketing channels - Facebook ads, AdWords, etc. Then use social to amplify their efforts later down the line. But “we’ll do social media” is not a viable marketing strategy by itself. Who Should Use This Channel? Best For: Companies that post “share worthy content”. This is content that generates emotional reactions: “wow!” “aww,” “wtf” “yum” and so on. Not For: Companies with everyday products. It’s hard for a company selling signage to make share worthy content. YouTube Video Ads YouTube video ads are very cheap relatively to Facebook Ads. While Facebook’s CPMs rose by 171% in 2017, YouTube’s ad rates have stayed relatively flat. Also, YouTube doesn’t charge you for ads if people skip before 10 seconds, while Facebook charges you for every impression. In other words, YouTube ads are cheaper than Facebook. Which means the ROI can often be higher, as long as the CTR and conversion rates are similar. Who Should Use This Channel? Best For: B2C products, or lower market B2B products. For most products below $500, YouTube can be a good channel. Especially if it’s visual. You can sell physical goods, software, and services through YouTube ads. Not For: Higher ticket sales. It’s difficult to sell a $1,000+ product via YouTube ads. YouTube ads are also not good if you need to target a very specific audience of people. YouTube’s ad targeting is much worse than Facebook’s. So if you need to target heavy machine operators in Iowa, use Facebook. If you need to people who love dogs, both platforms would work. YouTube Sponsorships Want a funny, interesting, and high converting video, done without you having to do any video work? Look no further than YouTube. Thousands of YouTube personalities have already built up a large audience, and are looking for additional ways to turn that audience into money. Although YouTubers can make money from the ads Google shows on their videos, it's a small paycheck for the amount of traffic they get. So, they're often interested - excited even - to do sponsorships for brands. Who Should Use This Channel? Best For: Brands in fashion, food, health, or any other industry that has a lot of YouTube personalities. Not For: "Dry" products, products that don't have a strong "wow!" factor. Also, keep in mind YouTube tends to be a younger audience, so typically businesses with a younger demographic do better. Selling on Marketplaces (Amazon, uDemy, etc.) You don’t always have to build your own traffic from scratch. Instead, you can leverage existing marketplaces to jump start your sales. If you’re selling a physical product, Amazon can bring in a lot of revenue. If you’re selling software, consider the Apple App store. If you’re selling a training course, listing your program with uDemy or Lynda can get you a lot of exposure. There are marketplaces in almost every industry. These are sites with a high volume of existing traffic that you can take advantage of. Instead of having to get customers from scratch, you can instead focus on increasing your rankings within these marketplaces. Usually this comes down to reviews, keywords and sales. Make sure to study up on how your specific marketplace works before listing. For example, Google “how to improve Etsy rankings” and study everything you can about how the ranking algorithm works before you start selling products there. Who Should Use This Channel? Pros: Allows you to tap into a large base of existing buyers. Cons: Typically margins are much lower. You’ll be forced into price competition with other sellers on the marketplace. Also, you don’t own the direct customer relationship, which could cause problems for your business later down the line. Marketplaces are usually a good jumpstart, but long term you'll want to build your own relationships with customers. Choosing Your Marketing Channel Which marketing channel would work best for your business?Hopefully, this article gave you some ideas as to where to start looking. It's impossible to say without testing which would work best. A good approach is to pick 2-3 that you think make sense for your business, and start testing. Take the one that worked best and scale it up. What's your favorite marketing channel? Share your thoughts in the comments below! Ian Luck Founder, MarketingStrategy.comContinue reading

When and How Much Should a Startup Invest in Branding?

n fancy commercials, they often think that's what they should do as well. More specifically, even without copying the marketing budget, they try to copy the mindset. The underlying assumption is this: “I should spend money to get my brand out there, and to build ‘good feelings’ about my brand name.” So they embark on a pared-down version of brand building. Instead of spending millions on TV ads, they hire a PR firm, build up their Instagram channel, and buy banner ads. A year later, they find that their marketing has resulted in few sales and many thousands of dollars in wasted cash. Why do these strategies work for larger brands, but not for startups? The difference comes down to ...   Mindshare vs. Marketshare Most large brands invest in buying “mind share.” In other words, they’re buying brand awareness and brand affinity. When you think of a particular product category - tooth paste for example - Colgate is buying a small segment of your mind. When you think of tooth paste, you think Colgate.   But for this approach to be successful, there has to be a pre-existing method for you to turn "mindshare" into sales. Mindshare has to be turned into marketshare at some point in time. For Colgate, that happens in supermarkets, when you're standing in the toothpaste row considering which one to buy. The millions of dollars they invested in building that "mildly warm and trustworthy" feeling translates into someone picking up that toothpaste and making a purchase. In other words, branding works best when there's an existing point of purchase. Consumers are choosing which option to select. Investing in mindshare helps win that battle to be the option consumers choose. Unfortunately, in the beginning, most startups don’t have any distribution channels. Which means that, as good as it would feel to have a stronger brand, a stronger brand won’t necessarily result in stronger sales. Startups can’t really afford to spend money on marketing that doesn't boost sales. Does that mean startups shouldn't invest in branding at all? There is a certain kind of branding startups should invest in. To explain ...   Let’s Deconstruct Branding into Two Parts: Identity and Media People often mean very different things when they say the word “branding.” It can often be broken into two separate parts: brand identity and media spend. Brand identity are things like: Clarifying your core message, beliefs, and customer base. Getting clear about the brand voice and style. Coming up with the right name. Getting the right domain name. Having a stellar design, including logo and user experience. Having a great website. Figuring out your brand color and fonts. Writing copy that makes people smile. Brand identity is a foundational piece of a startup's marketing. If a company doesn't have a clear identity, it won't "feel" consistent to customers. The message will be convoluted, and difficult to spread. Startups should, absolutely, invest in brand identity. Media spend, on the other hand, is what people often refer to when they think of brand. Media spend is when you’re actively pushing your brand out into the world. These include things like: TV, radio, or billboard advertising Developing a social media following, Paying influencers to post on social media, Sponsoring conferences or athletes, Investing in SEO Hiring a PR firm These strategies work great for building mindshare. Unfortunately, it’s entirely possible to build mindshare and not have it result in market share. Pets.com spent millions on a SuperBowl ad, and promptly went out of business a few months later. A Startup’s #1 Marketing Goal A new business's first marketing goal should to find its first scalable, repeatable customer acquisition engine. The engine might be something simple, such as a Facebook Ads to product page funnel: Or, it could be something much more complex. For example, you might use paid spend to generate a lead, nurture the lead, then do a sales call. You'll often need a lot of testing before finding a funnel that works. You'll know you've succeeded when you can predictably get a customer using a specific series of steps. Those series of steps usually start off with a scalable traffic source at the top. That can be AdWords, Facebook Ads, cold email, or any number of other traffic sources. The key is that it’s predictable. Once you have a predictable traffic source, the next challenge becomes to scale up. But getting that first one is the most challenging. Bottom Line: New Companies Should Focus on Sales, Until ... New companies should focus on sales, and let branding be a byproduct. Remember that even as you’re generating sales, thousands of people are being exposed to your brand and product. If you’re running ads, thousands of people are already seeing your brand. Generating revenue is what will allow you to purchase more ads and drive more sales - as well as branding. In the beginning, put most of your energy into marketing spend that generates sales. Eventually, you'll want to invest in brand building media spend - just not in the beginning. Focus on building a predictable and repeatable engines for generating sales. Once you have extra cashflow being generated from the business, then set aside a portion of it for brand building. Ian Luck Founder, MarketingStrategy.comContinue reading

Lifetime Value: Understanding The Metric That Drives All Marketing

t Lifetime Value, or LTV. It's one of the most important metrics to understand in almost any type of marketing. It affects just about every area of your business - and yet, it’s one of the most frequently misunderstood metrics. In this article, we’ll take a deeper look at lifetime value. We’ll start by defining LTV, then we’ll take a deeper look at how it can impact your business and your marketing. The Basics of Lifetime Value Lifetime value is, simply put, the amount of money a customer will spend with you over the course of their lifetime. Typically LTV is an educated guess. While companies can look back in time and analyze their historical LTV, but that doesn’t necessarily mean their LTV will the the same moving forward. For newer companies - companies that are less than 3 years old - most LTV numbers are mostly approximations. Even so, these educated guesses can be very useful. Having a rough sense of your LTV will let you estimate how much you can spend to acquire a customer. Understanding LTV allows you to compare the amount you’re spending to acquire a customer, against how much you expect to earn from them over the course their lifetimes. For planning marketing spend, this is far better than comparing cash out and cash in. Cash In, Cash Out vs. Lifetime Value Why is measuring LTV better than measuring cashflow? Because generally when you acquire a customer, you’ll be cashflow negative. For example, let’s say you have a $100 LTV. Your revenue might come in like this: Acquisition Cost: 45 Week 1: Free Trial Month 1: $20 Month 2: $20 Month 3: $20 Month 4: $20 Month 5: $20 If you’re only looking at cash in and cash out, a $45 customer acquisition cost might look like a failure by month 2. But over the lifecycle of the customer, it’s actually a very successful campaign. Measuring Lifetime Value So how do you actually measure lifetime value? The formula for calculating lifetime value is fairly simple: Transaction Value x Number of Transactions x Profit Margin Or, for subscription businesses: Monthly Revenue x Number of Months x Profit Margin Although calculating LTV is relatively simple, actually measuring and gathering all the data can be rather complicated. For one, actually linking purchases to a buyer can be tricky. People often have multiple email addresses, especially if they're splitting orders between work and home. They might be purchasing items as gifts, or can move residences. You might also have the option to checkout as guest, in which case tying transactions back to individuals is even trickier. There are tools you can use to help you her this data. Even Google Analytics can help provide some of this data. Unfortunately, part of the art of marketing is also working with incomplete data. Instead of waiting until you have a perfect set of LTV data, you often have to work with what you have, discard certain segments, and make inferences. For example, you might exclude people who checkout as guest entirely from your LTV calculations. Using people who have longstanding accounts, you can baseline a rough LTV estimate, and apply that across your customer base. What’s a “Good” Lifetime Value? A typical rule of thumb is that you want your lifetime value to be 3 to 5 times your customer acquisition costs. In other words, your gross profit should be 3 to 5 times what it costs you to get a new customer. This 3-5x rule of thumb gives you room to hire staff, pay for the office, phone bills, etc and still have enough margin left over to make a decent profit. For example, a eCommerce site might calculate their LTV-to-CAC ratio like this: Revenue: $50 Cost of Goods: $20 Gross Margin: $30 Customer Acquisition Cost: $10 Average # of orders per customer: 1 LTV to CAC Ratio: $30 to $10 There are a lot of rules of thumb with LTV. While these rules of thumbs are useful, they’ll vary significantly from business to business. A grocery store with 7% margins needs to think about LTV very differently than a software business with 70% margins. Using Cohorts to Analyze Lifetime Value Your customers' lifetime value can change over time. As you improve your products, develop your brand, and test different marketing approaches, your customers’ behavior will change as well. Cohorts allows you to measure this change over time. Let's say you have a consistent marketing campaign running, from January to June. Although your marketing is the same, your product quality and your customer service have both improved. That means the number of transactions per customer should go up, while your returns should go down. Instead of just tracking LTV based on customer IDs, or based on marketing campaigns, cohorts let you compare customers by groups of time. Each customer is grouped by the time they made their first purchase - January, February, etc. These groups are called cohorts. In an ideal world, we'd be able to track the impact of every single variable - website changes, product changes, marketing changes, etc. In the real world, that's usually not possible. Instead, often the best we can do is to measure our LTV over time, based on when customers first purchased, to make sure our numbers are going in the right direction. Doing a cohort analysis will tell you a few things: Are new customers likely to make a repeat purchase, or less likely to make a repeat purchase, than other customers in the past? Are new customers spending more or less per transactions? Are your products and your marketing getting better or worse over time? How Much Can You Spend to Acquire a Customer? The #1 reason for figuring out your LTV, is so you can figure out how much you can afford to spend to acquire a customer. By taking the reverse of the 3-to-1 rule, we can say that typically you can spend up to 35% of your LTV to acquire a customer. If your customer LTV is $100, you can afford to spend $35 to acquire them. Again, these are based on averages, and will vary a lot by individual businesses and industries. Payback Periods One key thing is missing from the LTV-to-CAC calculation. The factor of time. Although a customer might spend $100 from you during their lifetime, we don't have their whole lifetime to recuperate our investment. A metric almost as important to LTV then is Payback Period. Payback Period is the amount of time necessary before you recuperate your customer acquisition costs. You can absolutely go out of business by spending $35 to acquire customers that earn you $1 a month for 100 months. Venture backed or angel backed businesses tend to be comfortable operating with payback periods of up to 2 years. Most bootstrapped businesses tend to operate on 3 - 6 month payback periods. Other Factors Building a business isn't always about hard dollars and cents. Especially in the early days of a company, or even in a new product launch, it can make sense to spend up to 100% of LTV to acquire customers. Why? Because you want to get as many people using your product as possible. You want word of mouth, brand, referrals, and network effects to start kicking in. You'll start the new product off with more momentum, as well as gather a lot more data about what's working and what's not. By having more customers, you'll also get more feedback on what's working and what to improve. You can't continually run a business by spending all your profits on acquiring customers. But it can be a powerful way to get a new product off the ground. Using LTV to Determine Your Cost Per Click If you know how much you're willing to spend on acquiring a customer, you easily figure out how much you can afford to pay per click (CPC) to your website. Based on that CPC, you can figure out which marketing channels you can test. For example, let's say you have a LTV of $200. You're willing to spend up to $60 to acquire this customer. Your website conversion rate is 2%. Which means it takes 50 clicks to get a conversion. Another way to look at it, is each click is worth $1.20 to you ($60 per sale / 50 clicks per sale.) Now you know that as a rough rule of thumb you can afford to spend $1.20 per click. Marketing channels that cost substantially more than that should be avoided. Expanding LTV = More Marketing Channels Increasing your LTV is one of the best things you could do for your marketing. Increasing your LTV does not mean a linear increase in traffic. A 40% increase in LTV doesn't mean a 40% increase in revenue - it could mean a 400% or even 4,000% increase in revenue. This is because increasing your LTV lets you open up new marketing channels that you wouldn't have been able to make profitable on the old LTV. For example, let's say your business was profitable at $200 LTV. Then, by improving your product and marketing, you increase this to $300. Now, AdWords and podcast ads are working, doubling your revenue. A year later your LTV is $600. Now you can afford to buy ads on TV, pre-roll video, and display ads, which drives your revenue another five times higher than before. In other words, an increasing LTV has an exponential impact on the entire business. Not only does it increase profitability, it unlocks entirely new marketing channels. Lifetime Value is Not Evenly Distributed Most companies use an average LTV to calculate the amount they can spend on acquiring customers. Unfortunately, taking the "average" LTV is often not the best idea. Using an average LTV to make marketing decisions gives the impression that LTV distribution looks something like this: When in reality, LTV usually plays out something like this: In truth, using an average LTV is deceptive. Customer values can vary widely, and often follow a power law distribution. 10% or 20% of your customer can account for 80% of your revenues. The bottom line is, a small portion of your customers are often responsible for the vast majority of your revenues. This means that taking a simple average is often not the most useful number. Using an Average vs Segmenting Customers When you take an average of all customers and use that to calculate LTV, you're essentially treating all customers as equal. Unfortunately, doing so often results in lower ROI and less effective marketing. If some customers are worth $5 and others are worth $70, it doesn't make sense to spend money evenly to acquire an "average customer" in hopes of getting more high value customers. Instead, your marketing will be more effective if you separate customers into different buckets, and identify the behaviors and traits that highlight a high value customer. So, how do you go about finding high value customers? Finding the Patterns of High Value Buyers Identifying your high value buyers, and then finding more of them, first starts with diving into the data. Ask yourself: Is there a difference in demographics between our high value and low value buyers? Do high value buyers tend to purchase different kinds of products? Do certain traffic sources tend to bring in more high value buyers? Do certain messages or marketing funnels tend to bring in higher value buyers? Etc Note: You can export a list of your high value buyers and upload it to Facebook's Audience Insights. That'll give you a lot more information about their demographics and interests. Once you've identified the buyers that tend to spend the most money, adjust your marketing accordingly. For example: Use an email list of only your highest value buyers to create a Facebook Lookalike Audience, and run Facebook Ads to them. Identify the demographics of your high value buyers, and use those demographics when you're doing your ad targeting. Feature the products that tend to attract high value buyers in your ads. Create referral programs to incentivize higher value buyers to refer more of their friends, who are also likely high value buyers. Most businesses have an uneven distribution of LTV. That said,  there are exceptions. For example, gas stations and locksmiths both most likely have a fairly even distribution of customer values. The first step in determining your approach to LTV is to figure out if your distribution of profits is even or uneven. Once you know that, you'll know whether you should focus on tailoring your marketing to high LTV customers, or to focus on the average LTV-to-CAC ratio. Dealing with Uncertainty As much as marketing managers love to put definite numbers in powerpoint slides - me included - the truth is, LTV is a fuzzy number. Most companies don't know their LTV, and the true LTV number is almost impossible to know. Instead, we learn to use our best guesstimates to make decisions. We might not know if our LTV is $231.3 or $191, but we can estimate that it's around $200. We can tell if certain groups are more valuable than others. And we can use that data to inform our marketing efforts. How do you and your team think about LTV? Share your ideas in the comments below! Ian luck Founder, MarketingStrategy.comContinue reading

55th anniversary of this classic

B-School, and make a point of re-reading it every couple of years. The lessons persist Though the industry examples given by Levitt are not current, the lessons they teach ring true today. Consider the evolution in the computer industry: from mainframes to minis, client-server, PCs, mobile devices, and now the IoT (Internet of Things) … from clunky on-premises software, to distributed apps, downloadable smart device apps, and the cloud. Early success and hyper growth lead companies to believe that they are indomitable rock stars whose gaze increasingly slips away from the audience, and becomes confined to the stage. Convinced their “product” has no equals they act like monopolies … until the day that customers see the value shining from another star. Failure to innovate is an eventual death sentence. Do yourself a favor: read the article Warning: at 6,000 words Marketing Myopia does not fit neatly into our 140-character world. Yet, be assured: the time spent reading it will be some of the best time you will have spent this month. Find the HBR online version here. Find the original typeset version here. Yet, if the thought of digesting 6,000 words is daunting, following summary may help The Reader’s Digest version Punchline: customer-focused companies tend to prosper better than product-focused companies. Why once-successful companies fail: in a word, hubris. More systemically put, a failure to innovate and continue to satisfy customers. A belief that the industry will continue to expand, more buyers will enter the market, scale will confer economic cost advantage, and that the likelihood of competing substitutes is low. All of which leads to …. Complacency. Evidence Look no further than the Fortune 500. In the sixty years since it was first published in 1955, only 71 of the original 500 firms remain on the list. Technology-related examples: DEC, Sun Microsystems, Borders Books, Xerox, Kodak, MySpace, Blackberry, Blockbuster. Bottom Line Marketing is a way of thinking about strategy. “Make what you can sell; don’t merely sell what you can make” is as true today as it was in 1960.Continue reading

How to create effective business strategies

is a complex affair comprised of many moving parts and subtleties. This post can only highlight a few key principles. What is “business strategy”? Strategy is a commonly used word that nonetheless can bind people up in knots when they are asked to explain it. By and large, managers correctly have the sense that strategy is committing resources to a long-term course of action in order to achieve a goal better than rivals can. But, asked to drill down to the core of what comprises business strategy, the question leaves most of us resembling deer in the headlights. Here’s a short definition I’ve presented before. In combination with a general definition of strategy (the italicized phrase in the paragraph above) it provides the essence of business strategy. The good news: it can all be stated in less than 50 words. The bad news: definitions alone do not make effective strategies. Four principles of business strategy However, by combining this definition with four principles, the core requirements for an effective business strategy become clearer. Big goal oriented.Strategy is a high stakes game. The big enchilada: winning wars; getting into medical school; retiring with sufficient assets; winning the league championship; achieving market share; being in business 50 years later. Commit resources long-term. Strategies aren’t fleeting whims. Nor are they little bets. They are Texas Hold’em played for keeps. They take effort and, as Sun CEO Scott McNealy was fond of saying, require “putting all the wood behind one arrow.” Anything less leads to diffusion of effort and risk of failure – if for no other reason than that some competitor is bound to wager all of its chips. Choose a course of action. Strategic “plans” do not achieve goals. Strategies are brought to life by the activities that flow from them. Activities that are thoughtfully and artfully chosen, and uniquelyconfigured and arranged to achieve a goal. Activities that are different from, or performed differently than, those of competitors are the underpinning of competitive advantage. Establish two resulting positions. This is the “special sauce” of business strategies: Market position. Activities (pricing, offering itself, availability, financing, selling, and hundreds of others) must combine in a way to create perceptible market value, i.e. value in the eyes of buyers. g. If you seek to: Be #1 in your industry, then your market position must attract the largest number of buyers. Dominate a niche, then the activities that combine to create value must be dominant among the buyers in that niche. Command a high profit margin, then your activities must combine to offer the high value to those buyers willing to pay a price premium Competitive position. The same deliberately chosen activities must separate and distinguish you from your competitors. E.g. Branding activities account for the competitive advantage achieved by Foster Farms chicken, and most top tier personal care products Tom’s of Maine has carved out a niche in personal care products by being distinguished from much larger competitors as “natural” What makes a strategy effective? Two fundamental ingredients: Unique activities – different from, or performed differently than, those of competitors Unique market and competitive positions A strategy founded on the four principles listed above forms the basis of good business strategy. A strategy based on performing unique activities that combine to achieve unique market value and competitive advantage form the basis of effective business strategy. Effective strategies force looking outside in In years working with businesses to formulate, improve or modify strategies, two truisms rise to the surface: Strategy usually starts on the inside and proceed outwards Effective strategies are those that end up working there way outside in The failure of most business strategies lies in stopping at the assumptions about the market and competition. Successful strategies I have seen vigorously test those assumptions by playing the role of buyer and competitor. Otherwise intellectually appealing strategies can fall apart when tested from the viewpoint of buyer and competitor. The reason? There is a natural tendency to view strategy as a battle of two rivals – football, bridge, war – each seeking to “win”. Yet, business is typically a battle of multiple rivals, each of whom has goals that may or may not be similar to your own (see graphic below). Competitors with non-competing goals can often co-exist. It’s only competitors with overlapping goals that compete intensely. Choosing effective strategies in business is not about win-lose in the bilateral sense. It is about staking out an advantageous market and competitive positions that achieve goals. The final arbiter of a successful strategy is the customer. Bottom line Effective business strategy is based on four principles that culminate in the ability to choose and achieve an advantageous market and competitive position. That can only be done by knowing your market and your competition extremely well.Continue reading

The two reasons why tech companies fail (Part 1)

rt product life cycles and even shorter market attention spans. A misstep in another industry can often lead to a business fatality in the technology sector. There are only two reasons for tech failures Consider every situation that comes to mind – fallout among founders, lack of funding, price slashing by a large competitor, patent claims, sales turnover, customer churn, an economic downturn, or dozens of others. These, and anything else you can think of, can be grouped under two headings: Inferior strategy Inferior implementation I’ve yet to find an exception – a third category. Viewing every situation as an issue of either inferior strategy or inferior implementation makes for clear-headed analysis, identification of root causes and, importantly, effective solutions. A word about “inferior” Inferior is a relative term that implies a ranking compared to something else – as in “inferior to …”. The implied comparator here is competition. Buyers have choice. The enabler of choice is competition. As experienced strategists know, development of line-of-sight strategies that involve only the company and its potential customers is flawed. For better or worse, competitors level the playing field – and often dominate it. Viewing strategy through a competitive lens Thirty years after it was first published, Michael Porter’s Competitive Advantage is still the gold standard. The jewel in its crown is Porter’s simple premise: formulating strategy (and its implementation) cannot be done in isolation from competition. The picnic is always a party of three: Company, Customer and Competitor. The book’s core thesis (At 536 pages it is a daunting read in a 140-character world – yet one I highly recommend) is the simplicity of a company’s three strategic choices – vis a vis those available to competitors – that it describes: Cost leadership: being the low-cost leader in an industry of segment. Broad market differentiation: being unique in buyer-valued ways that competitors cannot easily match. Focus upon a market niche: serving a niche so well that it is not profitable for either competitive cost leaders or differentiators to pursue. (Of Porter’s three competitive strategies this is the difficult one to understand. To help, for “cost” niche, think of a retailer like Marshalls. For differentiator niche, think of an online A/V specialty retailer like Crutchfield.) The overarching learning from my experience helping dozens of tech firms define or refine their strategies is this: strategies developed in the context of the 3 Cs – Company, Customer, Competitor – yield more effective and durable go-to-market plans. Competitive advantage coupled with marketing strategy This is where – at least for someone like me – a fine Bordeaux is paired with an exquisitely prepared chateaubriand. Like the meal, this is not easy to do. It requires subtlety, mastery of the craft, and a fine appreciation for the quality of ingredients and preparation that goes into it. A sound and durable marketing strategy cannot be developed without regard for competition. Blending the two frameworks together – Porter’s and marketing – serves as the foundation for creating the kind of competitive moat that Warren Buffett searches for in his investment targets. Strategies born of thoughtful and rigorous consideration of the 3 Cs – Company, Customers, Competitors – are far more likely to be superior strategies. Strategy coupled with implementation This is a topic that is rich enough in detail and texture to be handled in the next post – Part 2. Bottom Line No approach to developing strategy for a tech business is bullet proof. Yet, firms which from the get-go develop their strategies with a vigorous and in-depth assessment of the competitive landscape are the ones who view the “also-rans’ in their rear view mirrors.Continue reading

The two reasons why tech companies fail (Part 2)

ble outcomes. The model illustrated in Part 1 (Michael Porter’s 3 generic competitive strategies coupled with a customer-driven marketing approach) provides a useful framework. Read Part 1 here. Good business strategies are hard to design Military and competitive sport strategies are generally easy to grasp: one rival against another rival, winner takes all. (Progressive elimination – in professional sport and poker tournaments – always make the final contest a battle of two rivals.) They are convenient bilateral contests that, though they can be complex to wage, make score keeping easy. Business strategy is not as straightforward. There are three groups at the table: Company – yours, perhaps Competitors – rivals that can easily number in the hundreds or thousands, be small or large, formidable or merely a nuisance. Customers – they are both the prize (winning their purchase dollars) and scorekeeper (their spending choices determine winners and losers) Importantly, there is not one winner or loser – they are several of both (see table below). Of special note is the notion of what makes a ‘winner’ and a ‘loser’ among a Company and its Competitors. The answer: it depends on chosen goals. Though market capitalization and market share may be popular measures of success among the largest tech rivals in an industry or segment There is a vital point about business strategy that cannot be overstated or unduly emphasized: business strategy is the performance of activities either different from or different than those of competitors. Implementation is the companion to strategy The notion of performing activities is important. The value of an effective strategy does not lie in formulating a strategic plan, but in implementing the plan. Business strategies on paper do nothing. It is the performance of activities that adhere faithfully to a business plan that delivers customer value, confers competitive value, and can achieve a company’s goals. In the technology sector, product differentiation that creates significant and sustainable buyer value is rare. Out-implementing one’s competitors usually wins the day. Businesses – especially technology businesses that operate under conditions of a rapidly moving clock and continuous emergence of other new and potentially disruptive technologies – cannot fair well on the basis of effective and durable strategies alone. Superior implementation derives from: Creating innovative practices (differentiation) Adopting best practices of competitors (parity) Managing all practices and activities better (superiority) Here is a suitable overarching framework for managing and monitoring implementation, using the example of a B2C software company. Bottom Line High performing technology businesses win on the merits of having both effective and durable strategies and accompanying implementation. Focusing on both, through frameworks based on sound fundamentals, is the best recipe for producing pleasing outcomes.Continue reading

Marketing extends well beyond the marketing department

for Marketing, not merely a framework for the marketing department. The marketing performed by Apple, Amazon and American Express is not limited to the activities within its marketing department. This post should help clarify. First, however, it is important to take three principles into account. (Capitalized ‘Marketing’ refers to the discipline of marketing, as opposed to the tasks typically performed by a marketing department.) Marketing is a philosophy of business.To paraphrase Peter Drucker, Marketing starts on the outside – with the customer – and works its way in, defining the nature of the offerings, and everything that touches a customer and constitutes value. “The purpose of a business,” Drucker wrote, “is to create a customer.” A marketing-oriented organization, then, views everything it does in the context of creating and retaining customers. Its marketing is not limited to the tasks by its marketing department Marketing strategy is inseparable from business strategy. Choosing activities that, executed in a particular manner, create a unique, valuable and sustainable market position from which to achieve goals, defines a business strategy. A marketing-oriented approach relies upon principles of Marketing to plan and execute the organization’s strategy. It is an integral part of an overall business strategy, not some aspect of it. li>The marketing department does not call the shots. A marketing-oriented approach does not mean ceding control of the business to the marketing department, nor does it diminish the importance of finance, sales, customer support, HR and the other business functions. Rather, it shapes the nature, tasks and objectives of the entire organization. The CMO is responsible for those tasks best housed within the marketing organization. Yet, the fortunes of the firm are neither won or lost based solely on its performance. How a Marketing-driven organization might look A marketing framework can – and indeed does – tie directly into an organization’s go-to-market framework (see illustration below). In this illustration, the go-to-market tactics (shown in green) are typical of those used by B2B enterprise software firms. With a few modifications the tactical go-to-market areas can be adapted to represent a B2C firm, cloud offerings, a device firm, and so on. The bottom portion of the illustration shows examples of how two firms – one, an international B2B firm selling enterprise software, and a B2C firm developing and deploying web-based applications – could be organized. The examples are admittedly high level. The key: a marketing-oriented approach to business strategy embeds a marketing-driven approach across the entire organization, and not just within the marketing and sales organizations. Bottom Line Organizations that operate in competitive markets, and sustain enviable business results tend to adopt a marketing-oriented approach that extends both up and down, and across the entire organization. Both the marketing and go-to-market frameworks are integrated within the entire organization, not isolated within the marketing department alone.Continue reading

The “4 Ps” of marketing laid to rest

ing a marketing strategy. Fifty-five years later, however, the 4Ps framework can no longer do the heavy lifting. In its place is a new framework, better suited to the realities of a networked market. Why the 4P framework worked The 4P framework (graphic below) worked for three reasons Its mantra is marketing – Make what you can sell; don’t merely sell what you can make. It embraced the true notion of the value proposition – not the fifty-words-or-less pithy summary that value proposition workshops focus upon, but the nature of how a buyer perceives value: attributes of an offering; its price and terms; where, when and how it is made available; and the complex – and expensive – methods by which it is made known, its image cemented, and its value conveyed to target buyers. Memorable frameworks have no more than 7 components – the maximum that humans deal well with. It’s a simple model for a marketing strategy: five controllable components – a target market(s), and the mix of the 4Ps to address it – and an operating context of six uncontrollable factors. Why the 4P framework doesn’t work today The internet and mobile devices are the new normal: Promotion is no longer the purview of big media and salespeople. The task of product communications has shifted from salespeople to online-savvy buyers: specs, competitive alternatives, references and buyer ratings are available for the asking. Seller-buyer interaction is now a given, not an exception. It is real-time and visible to all, having evolved into Interaction, Communication and Engagement. Service and brand reputation are uncompromising table stakes. For service, look no further than Yelp and Amazon ratings. The swift response of Amazon, Wal-mart, EBay and others to remove confederate flag merchandise in response to the church shootings in South Carolina attests to the power of brand. “Place” is no longer bricks-and-mortar, and mail-order. Desktops and mobile devices are where and how we buy, and how we consume value, e.g. Netflix. The reality is Physical and Online distribution. A new marketing model A contemporary view of marketing – not just what the marketing department does, but how the firm aligns with buyers – is built on one theme: value. Whereas fifty years ago marketing strategy could be constructed on a foundation of four tactical components, the work of crafting suitable strategies today demands seven: the “7 Ts” of marketing strategy: Product: the offering itself, be it shoes or user data from a social site. Service: the expectation of near-continuous availability of use Brand: reputation, and the solemn promise of adherence to its values Interaction, Communication and Engagement (ICE): the means by which buyers become aware, learn, evaluate, contribute and shape the nature – and value – of the offering. (Communication for short) Physical and Online Distribution (POD): the methods by which the offering reaches buyers and can be consumed. (Distribution for short) Price: what is exchanged (usually money) in return for value Incentives: tactics that create a new purchase, increase purchase frequency, or lead to a higher price-value purchase An illustration Below are two general examples of combined go-to-market and management frameworks. The “7 Ts” of marketing strategy are shown in green. This is a go-to-marketing framework developed for a B2B client that relies heavily on the use of personal selling and VARs. Its customers number in the hundreds, with average selling price topping $100K. Note the emphasis on lead generation and physical selling. This illustration depicts a go-to-market strategy for a B2C firm offering subscription software and devices to tens of thousands of customers, with average selling price under $300. Social media and retail/e-tail merchandising are dominant here. Bottom Line Limitations of the “4Ps of marketing” have put the classic framework on the back shelf. An expanded view, which extends the 4Ps to a framework of 7 Ts is better suited to planning strategies for an online, interactive and real-time world.Continue reading

Closing the gap between Sales and Marketing

is a symptom of a more basic problem. Though mismanagement is frequently suspected, the real issue more often lies in misalignment between the Sales and Marketing functions. Small differences in objectives, priorities and activities can put the alignment of these revenue functions a chasm apart once those differences are brought to life in the field. The cost – missed revenue and the real expense of misapplied resources – can be high. An opportunity “vision test” While CRM and marketing automation software may help improve effectiveness and productivity, they cannot repair alignment issues. A better starting point is to first answer the question: do Sales and Marketing each see the same market opportunity, and in the same way? It’s a safe bet they don’t. And, those differences magnify as they make their way through the organization. Fortunately, there are straightforward methods that ensure that both Sales and Marketing not only see market opportunity similarly, but also apply their respective resources to effectively and efficiently go after it. One such alignment method is the RDA (aka RAD) sales and marketing coverage model. Retain-Develop-Acquire (RDA) Coverage Model A coverage model describes how a company organizes and matches its selling and marketing resources to identified market opportunity. Visualizing, sizing, valuing and scoping market opportunity in the same way aligns not only viewpoints, but also the deployment and utilization of resources. A coverage model jointly developed and agreed by both Sales and Marketing gives a firm a huge advantage: a shared view of market opportunity coupled with an integrated approach to tackle it. The RDA coverage model views the universe of customers – both existing and potential – along two parameters: Potential Revenue (typically measured annually) and Share of Wallet (SOW) typically measured as a percentage of total customer budget. Breaking the market universe into logical segments (a 3 x 3 matrix is typical) yields: A quantifiable view of revenue opportunity by account size, say, Small, Medium or Large. A view of appropriate tactics based on account penetration, i.e. acquire new accounts, develop established but marginally penetrated accounts, and retain established and well-entrenched accounts. The following graphic illustrates the concepts. The RDA model has five strengths It provides an at-a-glance view of revenue potential compared to account penetration (SOW), grouping accounts into meaningful segments. It places buyers in one of three groups, each requiring a different focus: New accounts to acquire Existing accounts to develop and grow New accounts to acquire Existing accounts to retain and protect from the competition It forces Sales and Marketing to choose: segments to pursue, and associated tactics and resources to deploy them It requires a concrete declaration of resource coverage and tactical coverage to be applied to each segment It is scalable. The RDA coverage model can be used at global, country and regional levels, as well as applied to industry and vertical market views Applying the RDA Coverage Model First, gather and map the data. You already have the transactional data on your own customers. Third party sources, sales records, and predictive analytics can help pull together the data you don’t have, i.e. building a census of who the buyers in your market and how much they spend on offerings like yours. Second, insist that Marketing and Sales leadership agree to two the fundamentals of coverage, and document their agreement in writing: The segments to pursue. Unless your firm deals in the billions of dollars not all segments can be covered. Segments must be selected, and equivalent weight assigned to choices, to assure alignment. The resources and tactics to apply to each segment. Determine the investment to make in each segment (largely personnel for Sales, and personnel and discretionary dollars in Marketing), and the nature and frequency of tactics and programs that will be deployed. The process, properly done, is interdependent and iterative with lots of back and forth. Sales and Marketing must both agree to each other’s plan, and commit to fulfill their respective obligations under it. Finally, execute and monitor progress. Example The first graphic below indicates two decisions that Sales and Marketing have agreed upon: First, to invest no resources to acquire, develop and retain small accounts (the vertical band to the left), i.e. neither will provide coverage. Priority 1: invest heavily to ACQUIRE medium and large accounts Priority 2: RETAIN medium and large accounts (currently $1.4B) Priority 3: DEVELOP and grow existing business (currently $600M) The second graphic below illustrates how resources could be apportioned across these segments by both the sales and marketing functions (expressed as a percentage of headcount and discretionary spending): Marketing may, for example, devote 65% of its budget to account acquisition, with 40 points of that targeted at generating new accounts in the mid-market Sales my devote the majority of its selling resources (55% in this example) to activities aimed at retaining the $1.4 billion it currently garners from established accounts, whereas 20% of the marketing budget may be sufficient for these segments Bottom Line Properly aligning Sales and Marketing is not a one-time event, but a continuous process that requires patience and effort. The going is easier when a fundamental point of alignment is addressed: coverage, i.e. the opportunities each will pursue, together with the means and extent to which each will be targeted.Continue reading

Seven steps that assure success in entering the U.S. market

pen field big enough for all, right? Yet, there’s another couple of sobering statistics that companies that evaluate U.S. market entry overlook: 110,000 software companies operated in America in 2013; only 37% of IT companies are still in operation after 4 years. Menacingly competitive, the huge open field is teeming with hungry wildlife. It takes more than a keen eye We’ve dealt with dozens of firms wanting to enter the U.S. market. Though eyes widen at the opportunity, eyes are not always wide open when it comes to preparation. But it should – and can – be different! You can shift the odds in your favor The good news: though entering the U.S. market is no guarantee of success, there are seven steps that any firm can take to substantially increase the odds of success. And, they work! But they require work to do – sometimes a lot. There are no shortcuts. Yet, be assured, the payoff is well worth the effort. Seven “must do” steps for U.S. market entry Do your homework in advance. A back-of-envelope analysis may be a good starting point, but it’s a wildly risky end point. While hopping on a plane and visiting people in key cities (like the pilgrimage to Silicon Valley, the spawning ground of billionaires) can be useful, it is no substitute for digging into the data. Hard and deep. Sizing markets and locating, assessing competitive concentrations, understanding industry practices, buying habits and preferences, etc. You can do much of this on your own and with knowledgeable in-market help. While it’s a lot of work (count on 3 – 4 months) you’ll know if now is the right time to enter the U.S., and build a well-informed 360-degree view of the landscape – both upsides and downsides. Hire a great lawyer and accountant. When one can incorporate in Nevada online for $300, and fly under the radar, who needs a lawyer? With 50 States and almost 40,000 local governments, the U.S. has the most complex legal system a firm will ever encounter. You need experienced and knowledgeable professionals – taxation, legal structure, and day-to-day compliance on things like payroll – to get off on the right foot. Knowing your home country (and its tax treaties with the U.S.) and your aspirations (e.g. raising capital, or hiring employees) they can explain your options and set everything up the right way, the first time. This can be done for about the cost of a business trip or two – and for much less than what you’ll shell out if you have to fix something after the fact. Bite off one chunk at a time. Just because the U.S. is comprised of 50 states doesn’t mean you should go after the whole enchilada. Depending on the nature of your product (a device, software, cloud app) you should focus your resources – and minimize spend – by concentrating on a city(s), a state, or a region. If you do exceedingly well, the rest of the U.S. will wait. There is much to be said for focus in the short term. Adapt your value proposition and positioning. No matter your offering – or how well it has prospered at home – you will need to adapt the value delivery for the U.S. At least in some small ways. Value lies in more than the physical or operating nature of your offering – price, quality, availability, training, warranty, ease of understanding, image, credit terms, and thousands of other potential factors. What works at home may not work in the U.S., and what may not work at home may be ideal in the U.S. Evaluate distribution options. It is difficult, costly and time-consuming to tackle a market this size entirely on your own. Especially if your product is a complex sell, or requires installation or support. Not even mighty Apple relies exclusively on its own website and stores to move its products from manufacture to final buyer. The very act of examining and learning about distribution will if nothing else provide valuable insights into U.S. ecosystem for products like yours. Build compelling digital content. The U.S. is increasingly an online market. Buyers find products, compare and kick tires, and check prices and reputation online. Sales people have not disappeared, but their roles have changed. You need to build digital assets – product listings, comparisons, demos, pricing, use cases, success stories, white papers, and so on. If you are diligent and shrewd in approaching this, digital assets can become strategic selling assets. Look and act American. This does not mean abandoning your heritage, nor does it mean wearing a New York Yankees jersey and feigning an American accent. What it does mean is conducting your business in culturally familiar and acceptable ways. American ways. As simple as “letter size” PDF formats on your website. As critical as sales contract governed under a recognizable American jurisdiction. The bottom line Is time and effort required? Yes. Is this rocket science? No. The payoff? Significantly improved odds of a successful U.S. market entry, and a softer landing.Continue reading

Understanding and using TAM, SAM and SOM

s is the seeming complexity of figuring market size, with mysterious acronyms like TAM and SAM. Yet, sizing markets does not require heady calculus. Though it requires effort, the end result is a well-informed view of market opportunity. Sorting out the acronyms   Potential Available Market (PAM): the economic size of an overall market, say, the worldwide market for software. It is useful for large enterprises to know. Total Available Market (TAM): the potential (in $ or units) within your market. Defining the “scope” of your market is important to make the estimate practical. For example, if you sell ERP software in the Northeast U.S. then estimates should be limited to ERP potential in the Northeast. Served Addressable Market (SAM): the market potential accessible by you and your competitors. For example, the potential for cloud-based ERP software is a subset of all ERP software. Further, if the ERP software has been developed for pharmaceutical industry, then the addressable market is limited to the potential within that one industry. Serviceable and Obtainable Market (SOM) – (aka Share of Market): an estimate of the maximum potential for an offering given the economic reach and resources of a firm. For example, the SOM for a firm with a staff of 20 selling cloud-based ERP developed for the pharmaceutical industry is substantially less than for a competitor with 200 staff. For all intents and purposes SOM = your business plan. Available, Addressable and Obtainable mean different things Available: represents an upper limit of market opportunity – what you could aspire to pursue long-term if you had the breadth and depth of offerings and market coverage. Addressable: the potential of the market for you and your competitors. VCs care a lot about this as it represents the extent of the particular arena in which you compete. Obtainable: represents what is realistically within your reach given factors such as sales coverage, product attributes, competitive entrenchment, and resource limitations. Three Principles You must look outside. There is no way of estimating TAM, SAM or SOM without looking outside – at markets, competitors and market conditions. There are no shortcuts that lead to satisfactory conclusions. You must look inside, too. It is impossible to determine your SOM unless you make a thorough and honest appraisal of your capabilities. SOM = your business plan. Done properly (it is not difficult work, but it is hard work) the exercise effectively yields your business plan. The bottom line Understanding the principles of estimating market size is not difficult. Devoting the effort to do it thoroughly and effectively is the hard work. But the payoff is huge.Continue reading

Is strategy or performance the issue? How to tell.

ortunately, answering a few questions can help tell them apart. Defining the terms Strategy is the conscious choice of activities that, executed in a particular manner, create a uniquely valuable and sustainable market advantage. Operational Effectiveness is the ability to perform activities, better than rivals can, to derive a competitive advantage What Strategy means Determining strategy is a primary function of senior management – the ultimate responsibility of the CEO and the heads of business units. Strategic planning is the process of evaluating the landscape – internal and external – and then choosing the combination and arrangement of actions and tactics, the resources to support them, and the means for coordinating their implementation long-term. What Operational Effectiveness means Operational effectiveness is another primary function of management. It is both a process and an activity. Though a firm may perform thousands of activities, it is the performance of those particular activities that comprise a strategy that are critical to get right. An astutely chosen strategy employs activities that are either different from, or performed differently than, those of competitors. Performing activities better than rivals can is what confers competitive advantage. Why getting the distinction right matters In evaluating a situation, one of two conclusions must then be reached: The activities themselves no longer provide the market advantage they once did; therefore, the activities (or their combination and arrangement) must be altered. The choice, combination and arrangement of activities are fine; we are just not performing some – or all – of them as well as needed to be able to compete effectively. If market advantage is lost (i.e. the firm’s strategy no longer works as well) then ratcheting up performance will, at best, coax out short-term improvements until competitors catch up. If the problem lies in lost competitive advantage, then altering what might be a sound strategy risks making the outcome worse, and harder to recover. The questions to answer In the past 12 – 18 months: What changes have we made to improve our market advantage? To what extent are these changes meeting our objectives? How have changes in the landscape altered our market advantage? How do we know, and how have we responded to these changes? How effective has our response been? What are we now doing better or worse, and how do we know? What is working? What is not working? How do we know? Analytical tools like SWOT and Porter’s Five Forces can help to tackle them. (Going a step further, conducting such analyses regularly – say, every 6 to 12 months – is a worthwhile habit to develop). The bottom line Answering these questions – thoughtfully and thoroughly – inevitably points the compass needle towards strategy or performance as appropriate avenues of evaluation and treatment. Continue reading

What they couldn’t teach me about strategy in business school

and focused on particular interests of the professors who teach it. MBAs are taught the tools of strategy, but seldom the skills to implement and manage it. A former planner and operations expert, the colonel observed this first-hand when he subsequently joined the private sector. The disconnect between management and the “troops” could be substantial – misalignment, weak synchronization of priorities, and modest results to show for the effort. In response, the colonel adapted the principles of military command to those of business to create a blend of concrete, practical and effective management principles and methods. Here are five of those principles that you may find useful, too. Phase lines guide operating decisions. Phase lines are easily identifiable landmarks used by commanders to gauge and coordinate forward progress in battle. The next “phase” go-no go decision is made after assessing the amount of time, and battle resources remaining, to reach this point. The principle is readily adaptable to sales and marketing activities. E.g. If a marketing campaign fails to achieve a specified lead conversion rate within a defined time frame, it is overhauled. Management is the glue that binds strategy and tactics. Military planning has three levels of importance: (1) strategic (2) operational (3) tactical. Without effective operational know-how, individual tactics cannot effectively support strategy. Middle and senior line managers are crucial components. To function well, those roles must be properly defined, staffed, and given clear and relevant objectives. Strategies exist on two levels. The military distinguishes between military strategy (the use of military resources to achieve national policy aims) and grand strategy (the coupling of military and non-military resources – diplomatic, economic, financial, informational – to achieve a nation’s agenda). A business relies on many organizational practices to support its grand strategy – hiring and compensation, corporate social responsibility, management of public opinion, government affairs and lobbying. Yet, the organizations housing these functions may not play a direct role in its business strategy. Managers in well-managed companies know the role they perform. Differentiating outcomes and activities. In the military there is a clear distinction between coordinating and conducting the activities of battle, and achieving victory. Likewise, effective managers are those who ensure their people know the difference between the activities they perform, and the outcomes they are paid to achieve. There should never be confusion between the two. Execution is a three-legged stool. Campaigns are won when all three planning levels – strategic, operational, tactical – are skillfully and artfully coordinated. Execution is the “whole” that emerges from the sum of these parts. By extension, successful execution in business requires skill at all three levels.Continue reading

Why a small grocery chain is America’s most loved company

are companies we love, and companies we love to hate. Building a loyal base of satisfied customers is tough – even for the best. As the Harris Survey released in February 2015 illustrates, a company’s reputation is built by more than a customer’s experience with its product. Every CEO should take a good look at the Harris results, paying particular attention to slides 7 and 19. Wegmans– a grocery chain that operates in six Northeast states, and turns 100 next year – tops the Harris list. In fact, it is the only company to rank in the top 5 on all six dimensions of reputation that Harris measured. Wegmans is so highly regarded by its customers that they even write love letters to it. What Wegmans does well Until fifteen years ago a company’s reputation was largely determined by three factors: our personal experience; the experiences of friends and co-workers; public media. Reputations were easier to manage and, to some extent, capable of being manufactured. Today, the proliferation of the Internet and social media have given word-of-mouth velocity, reach and scale. In 2015, if the emperor has no clothes the world soon knows about it. Reputation and customer satisfaction must be earned, not manufactured. Requests to “like us on Facebook” and “write a review on Yelp” (typically only asked once the seller knows the buyer has had a favorable experience) are tactics substituted for what PR departments used to do. At best they are like makeup and good lighting – but eventually, every company has to step into the sunlight. Wegmans, and companies like it, that garner stellar customer reputations do three things better than average ones: They build their cultures on a belligerently unshakeable set of customer-centered values that permeates the entire organization, and forms the basis for hiring, training, advancement, evaluation and – when required – dismissals. There is no “opt in” to the culture; it is either “all in” or not at all. They build a deep and rich understanding of their target customer – beyond product attributes alone, extending into an understanding of the values that characterize their target. Their mission lies beyond transactions, stretching into providing value at all points of interaction. They identify the customers they are best able to serve, and do not permit themselves to be distracted by others whom they are not yet – or may never be – able to serve well. Everything they do is aimed at satisfying those target customers. They see beyond the immediate product and transaction through to the entire experience. Their aim is to build upon such experiences through every customer encounter. A Fortune 500 “Best Companies to Work For in 2015” recipient, Wegmans is built upon a set of values that not only permeates its dealings (customer and supplier alike) but mirrors the values of its customers. It stays “small” (within 6 states) by choice. Expanding further risks taking it into markets that it may not be able to serve to the standards it has set; it does not permit its ambitions to expand faster than its capacity to serve its customers extraordinarily well. The bottom line Building a strong and loyal customer base lies in a passionate belief in, and relentless focus upon, attracting a customer a company is capable of satisfying, then doing its all to achieve that objective. There are valuable lessons that can be learned by examining Wegmans closely.Continue reading

When a comedy of errors doesn’t get the laughs

header, I registered, then notified the Company A executive that I would attend. He replied that he would see me there. The next morning I received an email headed “Registration Pending”. It came from Company B. Reading it I learned that my registration was not on hold because the event was full. Rather, Company B was targeting a particular profile (not mine) and holding places open until it had first heard from everyone in that target group. If those seats could not be filled, I would be notified and could attend. Would you like to go to the prom (maybe)? Bemused and amazed at the audacity of the email, I replied that this was like Sally accepting Bill’s invitation to the prom, then being told by Bill not to buy a gown yet as he was still waiting to hear if Judy would accompany him instead. It’s hard to imagine Sally being amused. I quickly received an apology for “the misunderstanding” in another email that effectively offered that if Judy did not accept the invitation within 72 hours of the prom, then Sally could definitely attend the prom. It might have been funny if it were not so sad I shot an email off to Company A’s executive to let him know how “Bill” was handling those “By Invitation Only” offers he had made. He was grateful, annoyed and embarrassed. I could only imagine whom else Company A had specially invited, only to have Company B tell them to wait patiently by the phone along with the rest of the Sally’s. Company B saw a chagrined Sally as the price of doing business (I doubt it even knew whom Company A had invited) – a price it was prepared to pay rather than the price of having a second-tier prospect munching on ham and eggs at its (partial) expense. Yet, as I told the Company A executive, each and every Sally receiving such an email will remember one thing for certain: the name of the company that extended the back-handed invitation. That carries a price far greater than that of ham and eggs. Through a comedy of errors, I can imagine a few of Company A’s clients finding the episode off-putting. That is a negative and very real ROI that is unlikely to show up in the post-event stats. Great marketing is hard to do, but … I have been in marketing most of my life, managing campaigns in all parts of the world. Delivering a great marketing program in one satisfying stroke that pays off splendidly is hard to do. Really hard. The arrow only seldom finds the center of the bull’s eye. Yet, as much effort and pristine execution that might go into crafting great marketing, it requires little effort – and only a little common sense – to avoid doing silly and at times damaging marketing. Though Nordstrom targets a particular buyer profile, the retailer does not post lookouts by the door to steer suspected Sam’s Club cardholders towards the Walmart down the street. Nor does Tiffany’s ask if you carry a Platinum American Express Card, suspecting you might be better off shopping at Zales. One of the truisms of marketing is that, no matter how deftly a target is defined, nor how well-directed and well-executed the marketing towards that target it aimed, there are potential buyers – all of whom lie outside the target market profile – who will be attracted by the message. They will window shop. They may buy. Some will eventually become loyal, repeat customers. As an uncle once said … “Smile whenever people come through the door; you never know what they carry inside their wallets and purses.”Continue reading

Just what is strategy anyway?

skills of strategy is difficult, understanding the basics is not. Military roots, Greek origin The term was originally used to describe decisions and methods a general employed to arrange troops in a particular pattern or configuration (italics are important). Militarily, strategy has evolved to its present-day form to represent a nation’s use of all of its military resources to achieve long-term policy goals and ensure its security, e.g. U.S. policy. Sun Tzu and Carl von Clausewitz are early writers who have had great influence on the study of strategy. Generals use strategy to wage war; commanders use tactics to win battles. In simple terms, strategies are large scale and long-term methods to achieve goals, whereas tactics are the techniques and methods used on a smaller, more immediate scale to achieve specific objectives. Strategy in Business Business schools began teaching strategy in the 1960s. The attributes of military strategy – long-term, goal-directed, making the best use of limited resources, adversaries to contend with, an uncertain environment – coupled with its rich base of knowledge made it an ideal analogue for management theorists to apply to business. As military strategy has Sun Tzu and von Clausewitz, business strategy has its leading thinkers, too: Chandler, Henderson, Drucker, Mintzberg, Rumelt and Porter. While early work on business strategy emphasized positioning, differentiation, competitive maneuvering and patterns of decision-making, recent work – particularly that of Harvard’s Michael Porter and UCLA’s Richard Rumelt – views strategy holistically. A Definition of business strategy Strategy is the deliberate choice of activities that, executed in a particular manner, create a unique, valuable and sustainable market position from which to achieve goals. This definition is predicated upon four important principles: Activities must be different from – or performed in different ways than – those of rivals The particular combination and configuration of activities is what makes a strategy unique Value for the firm is created when a market willingly chooses its strategy, i.e. the value it delivers to them, over that of rivals, and pays a price greater than the cost of assembling its activities Sustainable advantage derives from the organization’s ability to evolve its strategy in the face of changing conditions to continuously maintain advantage over rivals Example: Apple Though the company performs many of the same activities as its competitors (supply sourcing, products offered, distribution) it combines them in a way that is uniquely Apple. Though what makes Apple’s offerings unique can be difficult for customers to articulate, the end result is unmistakably recognized as “Apple”. At least for the present time, Apple holds a market position that has made it the world’s most valuable company, and has achieved a price premium that yields superior financial results. As Warren Buffet might metaphorically put it, Apple is a wealthy castle surrounded by a formidable moat teeming with crocodiles. Operational Effectiveness is also key It is one to design a winning strategy; it is another to ensure it performs. Though the activities underpinning a strategy are inevitably similar to those of rivals, good strategies work those activities are performed better than its rivals perform them. This is the essence of operational effectiveness (OE) – a core responsibility and task of management. The most cleverly designed business strategy is destined to fail if the firm cannot marshal its resources and combine the necessary activities effectively. Likewise, a firm that is unusually effective operationally can, at best, hope to compete by achieving efficiencies. Operational effectiveness is not strategy! As Michael Porter has cautioned executives, however, operational effectiveness and strategy are not one in the same. It’s a common trap to fall into, yet an easy one to avoid. Strategy is about choosing, combining and arranging activities in a particular way to derive market advantage Operational effectiveness is about performing those activities better than rivals can to derive competitive advantage Execution The two-punch combination of strategy and operational effectiveness is what enables good businesses to become great long-term businesses. More on OE and Execution in future blogs Continue reading

Strategy and tactics are treated like champagne and two-buck-chuck

Here’s another safe bet: the majority of your connections – unless they happen to all be CEOs – in fact occupy tactical roles. Ironically, most of them don’t realize it. MBAs shun the “T” word In the five decades since business schools started teaching corporate strategy they have churned out MBAs who graduate imbued with the notion that they are its future vanguard. While most leave school without having a full appreciation of the concept there is one thing of which they are uniformly certain: strategy is where the big bucks lie. Ergo, tactics are for the rank and file. “Strategy” has become the Dom Perignon of the business lexicon, and “tactics” the two-buck-chuck that your neighbors drink. Phrases like “bosses do strategy; employees do tactics” and “strategy is performed from the shoulders up, tactics from the shoulders down” have not helped the situation. Over time managers have learned to sprinkle the S-word liberally throughout monthly reports, plans and annual budget submissions. Who among us does not have a planning slide with STRATEGY in 48-pt type displayed boldly in the header? A Happy Meal of Confusing Buzzwords Annual planning meetings, like the unveiling of next year’s new car models, are the rituals that shepherd in the latest strategies, accompanied by impressive goals and objectives, all tucked pleasingly into a Happy Meal box, each with its own surprise: same words, but different meanings. Some use “strategy” as a label, others use “game plan” or “action plan”. One presenter’s goal is another’s objective, with many opting to use “Goals and Objectives” to avoid having to explain the distinction between the two. In presentations “strategy” can represent everything from taking a product to market, expanding the sales force, refitting the plant, winning an account, and offering more vegan selections in the company cafeteria. “Tactics”, if the word appears at all, usually play host to a list of actions that could not find room on the strategy slides. It’s confusing to sort out to all but an experienced participant. No Enigma Machine at hand If you have sat through as many of these meetings as I have, you begin to wonder: how will the next layer of management and employees make sense of all this? The answer: they don’t. Annual employee surveys often bear this out. Employees may be able to recite the organization’s mission and its top goals, but fitting everything together is a Rubik’s Cube that few can solve. The number of goals, strategies, objectives, priorities and actions that flow from business units and departments can be overwhelming, defying any attempt to synthesize them into a coherent and uniform whole. While senior managers rely on an innate Rosetta Stone to decipher the different meanings that arise from the use – and misuse – of the same words, their know-fails to cascade down and across the organization on its own. Employees and middle managers, uncertain of how their roles contribute – be it five hundred, five thousand, or 100,000 of them – often disengage as they are unable to see the big picture hanging in the shadows on a distant wall. It shouldn’t be this hard. Making sense of strategy, tactics, goals and objectives While a blog cannot condense the knowledge of thousands of books about strategy and tactics (military, corporate, organizational, biological, political and chess, to name a few categories) the basic concepts and their interrelationships can be laid out in a simple framework. Distinguishing goals and objectives Though increasingly used interchangeably, the two terms in fact have quite different meanings. Goals are lofty, aspirational long-term (sometimes decades-long) aims. As they are often abstract, tracking progress towards their achievement can be difficult. Objectives are concrete, near-term, specific and well-focused aims. Properly chosen, they form stepping-stones along the path towards achieving a goal. Properly configured, progress towards them is observable and measurable. Achieving a goal is the sum total of achieving the objectives that lead to it. Without the support of relevant objectives, goals cannot be achieved. Objectives, in the absence of goals, are akin to running a race without any start or finish line: a lot of energy is expended with little to show for it. Strategy and Tactics both require mastery All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. — Sun Tzu, The Art of War Strategy is the means by which goals are accomplished. Applied to organizations, such as military and business, it is a complex activity that requires skill in both evaluating the environment for risk and opportunities, configuring resources and actions, and then implementing those decisions to achieve a goal. Like an iceberg, strategies are not readily visible – a lament to adversaries. Strategy is the centerpiece of business school education because it is the ultimate organizational bet: it commits the organization’s resources to a long-term course of action that is not easily or quickly altered. Big bets require skillful players to wage them as everything is on the line. Every CEO, by definition, makes those bets. Tactics are specific actions and methods by which to achieve an objective. The skillful assembly and use of tactics – those decided in advance, and those chosen in response to unexpected situations that arise along the way – are the building blocks of strategy. Generals develop strategy before battle. They use tactics during battle. Strategy is the big picture. Tactics are the brush strokes that turn paint into art. Strategies areimplemented. Tactics are deployed. Generally, strategy and tactics share three things in common: Theyseek to gain an advantage They involve choosing and executingactions They are always executed with expressedoutcomes in mind If finding treasure buried on one of fifty possible islands is the goal, then strategy is the means to find it. Correctly identifying the right island is a worthy objective; tactics are the means to identify it. The skill likes in crafting the right tactic. For example, choosing an island at random to dig is a tactic with 1-in-50 odds of achieving its objective the first time. However, devising a tactic that narrows the choice to one of five islands has a 20% chance of achieving its objective the first time, making it a more effective tactic. People who possess tactical mastery are in high demand. Tactics are performed “above the shoulders” Look no further than professional sports like football to understand the value of skillful tacticians. While the contribution of coaches is strategically importance their role is nonetheless tactical, though they may be skilled strategists as well. Winning games form the objectives. Devising plays, deciding which player to put in each position, what plays to run and how to counter an opponent’s moves are tactical decisions. Strategies are only as effective as the tactics upon which they are built. Similarly, creative engineers, marketers with social media know-how, treasurers who keep a watchful eye on share concentrations, and sales managers adept at assembling and deploying effective sales team are masterful tacticians – and paid well as a result. The Bottom Line Understanding the differences between goals and objectives, and strategy and tactics, is not difficult – the challenge lies in choosing and executing them. The clarity with which a proper understanding of these terms can be cascaded across and down an organization can, of itself, confer a strategic advantage.Continue reading

The 7 habits of successful firms entering the U.S. market

t to the paradox of a laid-back Dockers casualness behind which lay an intensely competitive and complex environment. Twenty years later, now working with offshore firms seeking to enter the U.S. TMT (tech, media, telecom) market, it is déjà vu. There are two common myths about the U.S. tech market that can lead to trouble if not understood. Fortunately, there are seven habits of successful firms that, if adopted, will tilt the odds in one’s favor. Two Myths about the U.S. tech market Myth #1: It’s more than big enough. Accounting for 55% of worldwide software expenditures in 2012 there is no doubt that the U.S. is the destination market for many software companies. Yet its ample size belies the belief that uncontested white space abounds as evidenced by another 2012 statistic: there were 110,000 software vendors – 10,000 in the San Francisco Bay Area itself – competing for a piece of the pie. Myth #2: It’s similar enough to our home market. Translating market-facing materials into American English is part of the ante for sure, but that is only the piece of the iceberg visible above the water line. What may seem like unimportant nuances can often represent make-or-break market decisions. That 63% of software firms operating in the U.S. fail within 4 years underscores an important lesson: neither the extent of competition nor the degree of adaptation required to succeed in the U.S. market should be underestimated. 7 habits of successful newcomers to Silicon Valley They relentlessly build their network. As opportunities to find customers, suppliers and go-to-market partners often stem indirectly from referrals and introductions – even from a neighbor – it pays to build a roster of contact. Whether exchanging business cards at industry events, sending LinkedIn invitations or getting to know the other parents at the Little League contacts are gold. Everyone from the CEO down makes it a point of broadly cultivating relationships. They distinguish between today’s and tomorrow’s opportunities. While attracted to the enormous market potential in the U.S. successful newcomers do not confuse short and long term. They realize that their real near term target market is a fraction of the overall market, and belligerently focus precious resources on what they can truly compete for short term. As success is achieved they widen the aperture, ensuring that their eyes are never bigger than their stomachs. They obsessively study their ecosystem. They realize that knowing the landscape in which they operate inside-out is crucial. CEOs and their staff make knowing the “who” and the “how” of key players and practices in their industry a daily ritual. They develop an intimate awareness of the channels, competitors, regulators, industry and financial analysts, writers and bloggers, thought leaders and influential buyers who operate within line of sight. The CEO is ultimately the Chief Revenue Officer. They recognize the importance of generating initial sales and making every customer a satisfied referral customer. Their CEOs know that the buck stops at their doorsteps. They may be assisted by a large sales staff, but they do not delegate the revenue accountability. Their visible presence, involvement in and commitment to making every early stage customer win a showcase win sets them apart. Newcomers leverage resources of others in a win-win way. Market entrants typically do not have either the financial muscle nor resource breadth and depth to execute the essentials on their own. Whether it is identifying a Sherpa skilled at finding routes to market, tapping into huge digital distribution networks, or hiring a great tax attorney they know that seeking out the expertise of others – and rewarding them appropriately – will multiply their reach and effectiveness. They constantly tune their value proposition. A value proposition is not merely a 50-word statement about their offering. It is the embodiment of everything they do to deliver on the promise of an expectation for buyers – from product, service, credit terms, price, support, and methods of market outreach to hours of operation. The CEOs intuitively realize that what works well at home may not be a fit in the U.S. market. They are happy to adapt and have the courage to re-think the value chain for their offerings without being deterred by the sound of bells ringing from sacred cows. They are pathologically persistent. Successful CEOs recognize the inevitability of setbacks and even failures, yet are neither deterred nor disheartened by them. In an ecosystem as intensely competitive and filled with very bright people as in Silicon Valley it is unlikely that outcomes will match – or exceed – the plans carefully laid out in Excel spreadsheet simulations. In a country where Stephen King’s first novel was rejected by 29 publishers in a row, Colonel Harlan Sanders did not sell his now-famous KFC recipe until knocking on the 1,009th restaurant door, and James Dyson had to test 5,127 prototypes to get his bagless vacuum cleaner right there is much to be said for sheer, dogged persistence. Being mindful of the myths of a market too big to fail and too easy to fit within, and adopting the seven habits of successful entrepreneurs coming to Silicon Valley, can establish the foundation for a successful enterprise.Continue reading

Content marketing is the great, painful new thing

le cost, leaving marketers on their back foot. The problem lies in the gap between expectation and reality. Content marketing is about delivering valuable and timely information to targeted buyers with the goal of driving a favorable outcome. While there are dozens of favorable outcomes that could be achieved, they all tend to fit into two buckets: enhancing the awareness and value of brand, and creating a purchase opportunity or lead. Given the choice a CEO will more often prefer leads. They are tangible, non-fluffy outcomes that any B2B selling organization would choose hands-down. Yet, therein lays the issue. I recently viewed an insightful webinar about challenge that marketers face in trying to get their content marketing to do some very heavy lifting. The problem is summarized well in this eMarketer article. It’s worth a 2-minute read.Continue reading

If the U.S. software market is “more than big enough” then why do sellers struggle?

.S. accounted for 55% of worldwide spend. Yet, to their dismay and sometimes horror, offshore software companies often find the U.S. not nearly as big as they thought. This is as true for SaaS companies as it is for servers-side offerings. Why the paradox? The answer: companies first see the scale of the opportunity, but overlook the scale of the competition. CEOs of offshore software companies will often brush aside the notion that any form of market evaluation and research is needed to enter the U.S. market. “It’s more than big enough for what we need”, is commonly heard. That would be the case if software companies selling in the U.S. were either the same in number or proportion as the home market. Yet, the law of supply and demand works tirelessly to maintain equilibrium in every market for software products as it does for kitchen pots and pans. Adding the phrase that in 2013 American companies bought $175 billion in software products and services from 110,000 sellers is more far-reaching than when the $175 billion figure stands magnificently on its own.. The opportunity in the U.S. market is more than big enough for a well-informed and well-executed entry strategy. But not for a a strategy based on whim or conjecture.Continue reading

Three tests to tell if there’s a perilous price-value gap

mething needs to be done. The obvious one: your product loses money. While there are arguably dozens of factors why a firm could be losing money, chief among them is the simple fact that the value proposition represented by its offering is not cutting it in the market. Plain and simple. No amount of price elasticity analysis, sales and promotions, or other short term tactical methods to stem the blood loss is going to matter a hill of beans. If the number of people that is willing to buy a product i.e. see its value, is less than the number required in the business plan to break even, then the problem cannot be cured through tactical means alone. A review of strategy is in order. Social thumbs down. Here’s a blessing courtesy of social media, and a great reason to track recommendation sites and chatter about the product. If the social conversation centers around, or is shifting towards, sentiments of “too expensive”, “better values elsewhere” and 2-star ratings then this may be a wakeup call. Value < price, and the market is letting everyone know. This is an early warning sign that the product strategy (go-to-market and all) is in need of serious and immediate review. It is little wonder that well-funded and social media conscious firms religiously track what the tom-toms are saying. The PR department issues price justifications. In an article about controlling email inboxes, the WSJ’s Joanna Stern wrote this paragraph regarding the price of Mailstrom: And at $5 a month (or $50 a year), it costs more than it should. I’d happily pay 10 bucks a year to do a deep clean every couple of months. Mailstrom CEO David Troy says the higher price is justified by the premium product and attests that many of its subscribers use the service daily to keep on top of large volumes of mail. If this is the only pricing issue to have arisen in the media, then Mailstrom may not have a value/price. Yet, if CEO Tory finds that his PR department is issuing media responses like this every few weeks or more frequently, then you can be sure that social media are picking up on it and amplifying it. The price-value equilibrium can be devilishly hard to maintain as gaps are hard to see until profits start falling through them. Fortunately, social and media chatter can be early warning signs that a gap may exist – especially when there is time to do something about it.Continue reading

If SaaS is such an easy way to enter the US market then why do firms struggle?

an make it difficult to do business, entering the U.S. seems as easy as a few mouse clicks – often a customer’s. It often seems like a no-brainer. Easy. Deceptively so. The U.S. and Canada together account for 55% of all software expenditures globally. That’s a tough number to ignore, and a fact that is seldom overlooked by any serious software player. Further, take a good look at the BSA (Software Alliance) report on the U.S. There are lots of pluses – like 85 million broadband subscribers (72% of households) and 233 active mobile users (75% of the population). As attractive as the market is, software vendors of all makes and descriptions find it a struggle to sell in the U.S. for four reasons. The extent of competition is underestimated (there are over 100 thousand software companies in the US). A firm’s well-differentiated advantage in their home country may bump up against several contenders who, to the buyer, are indistinguishable on the merits of the product. Unless a company wants to be a bit player flying below radar, one is going to have to abide by the rules set by the FCC, the FTC, the IRS, and potentially 50 State tax authorities). As a rule, American B2B buyers do not roll the dice by running their businesses sight unseen using the software of from offshore providers unless they pass muster. Lack of solid evidence of both on-the-ground support and the ability to stand behind promises and warranties, are the kiss of death for offshore software providers. Accountability is everything. Importantly, winning in the U.S. boils usually boils down to one thing: having a great value proposition, targeted at the right market. Always easier to say than to do. The firm that takes stock of these four factors, and intelligently provisions for them, will find that the struggles of others can turn into upsideContinue reading

When does it make sense to enter the U.S. market?

first addressing five questions. Why enter the U.S. market at all? There are plenty of reasons to expand into the U.S. market – growth, achieving economic scale, increasing enterprise value, access to specialized labor and strengthening the firm’s appeal to global customers. Yet, what might be a sound reason for one company may be a terrible reason for another. There is no one-size-fits-all rationale that universally applies. A company’s situation has to be examined, as well as its objectives in light of that, to determine if entering the U.S. is a sensible option. Why now? Why not two years from now … or five years? The much ballyhooed notion of a narrow window of opportunity is more a product of raising investment funds that it is a potential roadblock. Having sufficient cash to fund U.S. market entry carries considerably more weight than does market timing. How large is the opportunity for the company’s offering? “Big enough!” is a response we often hear – the belief that in a market so large that there is always room for one more at the party. That the U.S. market represents significant potential for almost any product or service is true. However, often overlooked are two biggies: competitors and the appeal of their offerings. Investing the time and effort to determine the addressable market in the U.S. for a company’s offering is a great way to determine if the market is genuinely “big enough”. Can you effectively compete in the U.S. and achieve our goals? Competitive capability is the flip side of the addressable market size coin. The two go hand in hand, for what might be a rock solid offering in a home market may not fare well in the U.S. Though Toyota and Nissan garner large U.S. market share today, initial entry was rocky. Others like Yugo, Lada, Rover, Peugeot and Renault never made the grade. Your product may be a unique fit in your market, but it is a choice to American buyers that is typically in a long lineup of competitive choices. Finally, can you devise and execute a go-to-market strategy in the U.S. that can profitably achieve your goals. Spreadsheets have an uncanny way of incorporating biases and false assumptions, yielding outcomes that fail to materialize in reality. In the next few blogs these questions will be dealt with individually.Continue reading

Six ways to win the attention of prospects and customers … if done carefully

automated direct mail response engine? Automated, demographic-segmented, behavior-driven, algorithm-brewed electronic and direct mail marketing has reached such a point of saturation that recipients either filter them out electronically, or ignore them. Here are some ways to stand out from the crowd … if sincerely and prudently used. Send personal well wishes through social media. Social media like LinkedIn and Facebook notify you of important events such as a birthday, promotion, work anniversary, publication of a blog, and so forth. While they often contain prescribed click-and-send notes (“Happy birthday, Roberta”, and “Congratulations, Alan!”) you’ll stand out from the rest of the click-and-send crowed by deleting them and writing your own short message. Prerequisite: you have to know the person well enough to be sending the note; otherwise it will appear as blatantly self-serving and do you more harm than good. Effort: low. Cost: zero. Send a personal letter in the mail – not a form letter, but a letter personally tailored to the receiver, and signed by you. You can, for example, include a copy of – or web address leading to – an article that your recipient may find of interest. Write it in ink, not pencil (you can’t go wrong with black or blue). Prerequisite: have something sensible and of merit to communicate, staying clear of sales pitches. Effort: modest (you can always use a text editor). Cost: under a dollar. Go one better, and send a handwritten letter which is signed by you. When was the last time you received a handwritten letter? Handwritten letters need to be carefully crafted, for both thought and penmanship (you can’t cross out mistakes and start over again). Prerequisite: your letter must be born of sincerity and good taste, staying well clear of sales overtures or self-serving asides, e.g. “Perhaps we can have lunch and discuss the merits of our product line.” Resist the urge to add in a data sheet or brochure. Effort: high. Cost: under a dollar. Go for the gusto, and send a handwritten letter on personal stationery – not company letterhead, but personal stationery with your name on it. Tastefully selected stationery sends as much a message about you as does what you say. In all likelihood your recipient has never received a handwritten letter on personalized stationery. Prerequisite: No matter how appropriate the stationery, or how much effort goes in to your handwriting, commercial entreaties will most certainly backfire. Effort: high. Cost: $3 to $8 depending on choice of stationery (higher if you find yourself discarding sheets and starting from scratch again). Send a personal greeting card – birthday, holiday, or promotion. Don’t send an e-card – not if you want to stand out from the crowd. You’ll either need to go to the store and purchase one, write a personal note, sign it and mail it. Or, if you have already splurged on personal stationery, you can also purchase pre-packaged occasion cards in bulk so that they are always handy. Prerequisite: common sense and good taste prevail. Do not send the increasingly popular, quantity-produced holiday greeting cards with a picture of your family with their heads poking through the cutouts of a winter snow scene or, worse, you wearing a pumpkin costume at Halloween. Effort: high. Cost: $2 – $5. Send a suitable gift as a thank you, or to commemorate an important occasion. This could either foster or kill the relationship with a customer or prospect, depending on what you choose to send. A “small token of appreciation” should be just that: something tasteful and thoughtful that is likely to be appreciated, and not perceived as an inducement (certainly not to a U.S. government employee where gift values cannot exceed $25). Prerequisite: The recipient should have some knowledge of who you are, and the nature and value of the gift should be appropriate and suitable to the occasion. Effort: high: Cost: $10 – $25. You need not test the waters by going over the top. Bottom line: it takes a combination of more time, effort and money to stand out from others. Yet, well-selected and tastefully crafted outreach can set you apart from the e-brigade.Continue reading

Diffusion of innovation and the internet of things

exams and case studies. I concluded there was one reason. Students had difficulty seeing situational marketing problems as a point in time, or snapshot, along an adoption curve. When presented with a table of numbers showing revenue heading up, or down – or both – over a period of years, few of them could ever make the connection that what they might be viewing is the natural flow and ebb of the principles of diffusion of innovations in the marketplace. Now, let’s switch to the internet of things (IoT). This is about as close to being “new” in a market as one can get. In a recently completed study by Edelman Berland for GE, business executives worldwide were polled on IoT: have you heard of it? And, if so, are you planning for it, or prepared for it? Here is what they found. If you look at the bars, it’s fairly easy to predict which industries are likely to adopt first and fastest, and which will be playing follow the leader. So what’s the big deal? The big deal is this: not all buyers enter the market at the same time, nor do all competitors. Further, one person’s notion of value can be vastly different from another. Microsoft was not first to market with an operating system for computers (Apple alone beat it by 3 years). Excite, AltaVista, Infoseek and Yahoo! Dominated the search engine market before Google was even conceived. And here, in Silicon Valley, Tesla Model S roadsters are a far more frequently seen electric car than were the GM EV1s that predated them by 16 years. Being first is not necessarily best. Figuring out how to be better usually is.Continue reading

Alliances, coalitions, collaboratives, combinations – the next big thing

me together to pull off something larger than any of them could do on their own. No matter what label you happen to prefer, the notion of independent groups coming together to work on a project – and form a business – is here. It may not be the way of the future, but it is certainly a way by which things are increasingly working. And here’s the interesting part: it’s been around for decades. Consider these business formations: General contractors (construction from small to large) Hollywood producers (actors, directors, grips, editors, sound and camera people coming together to make a movie) Promoters (concert events) System Integrators (assembling computer systems) Mission Impossible (Tom Cruise as Ethan Hunt, saving the world) Professional athletic leagues (athletes, agents and owners assembling for-profit teams) It is not simply a matter of hiring independent contractors. It is about engaging independent entities for fee and profit to function as if they were housed under a conventional business structure as managers and employees. One difference is that the lifespan of such entities is not indefinite. These formations last for quarters and years. Another difference is that each entity joining the party has a stake in the outcome – a share of the profits and rewards. Maintaining their independence so as not to be beholden to others, yet sharing in the proceeds of success on the projects upon which they collaborate is a pretty good deal. I read about this several years ago, and am seeing it in practice today. Right here in Silicon Valley. My sense: on a large scale it has the potential to be powerful, and to represent a way of competing with larger, organically organized and run enterprises. The challenge lies in achieving scale under such a business model. That Major League Baseball is approaching revenue of $9 billion annually, and that the San Francisco Bay Bridge can be built for over $6 billion under such a model, suggests that scale is achievable.Continue reading

The best day of the week to send email

s past week, Saturdays yielded both the highest open rates and transaction sizes. Experian also found that its outbound emails had the highest odds of being opened during the evening if sent between 8pm and 12am (although transaction size was a little lower). How big a difference does sending email at these times make? Not a lot, it turns out. While sending email on a Saturday earns an 18.3% open rate, an average order size of $201 and revenue per email sent of $0.12, the worst day of the week – Friday – isn’t all that bad. A 16.9% open rate, a $187 average order size and revenue per email of $0.10 does not smack of disaster for most marketers. It’s tempting to think that redirecting email campaigns to aim for Saturdays and avoid Fridays will make the line of sight to the pot of gold clearer. Unfortunately, it won’t. To online firm that sends millions of emails daily and with transaction volume in the hundreds of millions of dollars, such patterns hold significance. For the rest of us, it is hair spitting. So, just how does one improve the results from email marketing? Simple: A good product, accompanied by an attention-getting headline, containing both a compelling offer and clear statement of value, and directed at a well-targeted market has, and always will, win the day. It’s not what you wanted to hear: after all, it’s very hard to do. Yet, you’re apt to achieve success by focusing on the hard-to-do stuff rather than by choosing a day and time of week that works for the big players.Continue reading

The escalating threshold of making a connection

g, re-labeled this observable effect as the tyranny of choice. As recently as 1994, the choices that a consumer had knowledge of typically numbered no more than about 30,000: what was visible in stores, viewable through broadcast and print media, and observable in what others brought to, wore or talked about at your home or workplace. Today, Amazon carries an estimated 2 million SKUs. If every item that Amazon stocks – book, toaster, bottle of vitamins, garden hose and vacuum cleaner – moved along a conveyor belt every 5 seconds, it would take almost 116 continuous days to see all the items that Amazon sells. Add items like the crafts and curiosity pieces you might see at an Arts and Crafts show – or goods you encounter when you travel abroad – and the volume of choice becomes staggering. What becomes almost limitless choice for buyers becomes a daunting challenge for sellers: getting noticed on a buyer’s radar screen, let alone getting the buyer’s attention. Online distribution has drastically lowered the entry cost of reaching markets (for all intents and purposes, it is negligible) when a mere twenty years ago mail and telephone were the only true affordable options for most sellers. Today, a college student can start a business with worldwide distribution for just a few dollars (I know many entrepreneurs who started out exactly this way). With the decreasing cost of outreach in lockstep with the hyperbolic growth of choice, this issue is no longer about reaching potential buyers. It is about rising above the noise to establish a meaningful, durable and sustainable connection with buyers. There are no silver bullets, tricks or “secrets” to doing this. There only two things that matter. First, use a variety of sensible mechanisms to reach potential buyers – consistently and persistently. Second, connect at the center of value for a buyer by delivering a great product or service at a great price. Creating a satisfied buyer gives you a unique opportunity: having the customer connect to her colleagues and friends, and in turn connecting them to you.Continue reading

The importance of storytelling

ters to be storytellers – to find an authentic and memorable way to connect with an audience. In the past month I have met with perhaps 25 start-ups. Each has a story to tell. Yet, very few tell it. The narrative focuses on markets, volume, scale, resources, funding and strategy. All of this is necessary, but without the story that is supported there is no foundation upon which to evaluate it. As an entrepreneur your priority must be to find the story that your product narrates. It must be compelling and authentic, factual and real. But importantly, it must resonate with an inner drive, need or desire of a market large enough to carry your story on its back, and make you successful.Continue reading

There are only two revenue problems

It is a game of Snakes and Ladders often played on a global scale, and sometimes lacking any enjoyment whatsoever. Everything else – share capture, new product introductions, sales enablement, margin erosion, excessive churn, and hundreds of other descriptors – are variations on these two themes. Always. Without exception. The variations are important to be sure. Yet, the variations can make it difficult to clearly see the shortest pathway to opportunity or problem. What is harrowing is that one or the other can be masked, disguised as something it’s not, and confusing management at the expense of precious time. Is a technology leader that rapidly introduces new products or models on the growth path? If the aggregate revenue decline of existing products is greater than the upward slope of new ones, then it is in fact in freefall. Do declining revenues indicate a freefall, with no reserve parachute in sight? Tim Cook of Apple would tell you no. False positives and false negatives are not the norm, but they are not as uncommon an occurrence as one might think. When the CEO looks daily at the dashboard, increasingly similar to the complexity of a 747 cockpit, the most important question to answer is this: are we headed in the right direction? Speed matters, yes – but not nearly as much as the compass heading.Continue reading

Be known, wanted, valued and indispensable

n to others – what you do and what you offer, and why it matters to them. You and what you offer and can provide, must be wanted. Whether you are selling yourself as a potential mate, employee, designer or producer of things, deliverer of advice or services, healer or mentor, what you offer must stand out from the thousands of offers made to people daily. Yours must garner sufficient attention and interest to land on others’ radar screens. The value you deliver must justify your asking price. Your role as a mate must be worth the cost of living with you. Your product or service must be attractive enough to crowd out other choices. The price of your artwork must be outweighed by the pleasure of seeing it hanging on another’s wall. Your salary must be seen as enabling a business to grow and satisfy its customers. Finally, to be truly great, you must be indispensable to others – whether as a mate, an artist, a writer of crime fiction, a manufacturer of irrigation systems, a pediatrician or a conservator. Being indispensable to one other for a lifetime is a noble achievement for anyone. Being indispensable to millions of others for their lifetimes and yours is what great businesses are made of.Continue reading

Five must-answer questions to satisfy before seeing a VC

pond that they are going to have a difficult time raising funds until they can answer 5 questions. In a nutshell, what do you do that is unique and valuable enough to grab the attention of millions? If your idea does not appeal to a big crowd a VC cannot make a return. If your idea is not uniquely valuable you’ll never stand out in the crowd. Which – and how many – buyers are apt to benefit most from what you do? “Lots!” is not a good answer. Your ability to quantify the market is a great test of two things: (1) your ability to pinpoint your offering’s unique value and link it to an identifiable segment (2) the headroom to grow and achieve scale. What can you tell or show a buyer in under a minute that will cause them to want to take action? Buyers have notoriously short attention spans. If you need 30 minutes to explain and prove the value to a buyer, then your offering had better be priced in the $ thousands. Who is your competition and, if they all knew about you tomorrow, how can you be sure that you can compete against them successfully one year from tomorrow? Every offering has competition. For starters, you can either spend $1 or save it. Either door opens thousands of choices. Answering this question – validly and reliably – shows that you know the playing field, and that you have constructed and protected your offering in such a way as to make it difficult to copy. Why are you and your team indispensable to the success of this undertaking? If your smarts, drive, vision, tenacity, skills and aptitudes make you a tough act to follow then you and your team are going to prove to be a persistent, cagey and agile competitor. What VC would not want that hole card in its deck? It’s a competitive advantage in and of itself. It’s a competitive advantage in and of itself. Having answers to these five questions may not guarantee funding, but they are apt to get you serious attention.Continue reading

When should an entrepreneur throw in the towel?

hat is a 1 in 5,000 chance of being successful, it begs the question: when should an entrepreneur throw in the towel? Consider these situations: The manuscript for Carrie, author Stephen King’s first book, was rejected 30 times before finally being accepted by a publisher. King went on to sell 350 million books. Harlan Sanders, the founder of Kentucky Fried Chicken (KFC), made the first sales of his secret recipe to a restaurant after 1,008 failed attempts. Entrepreneur, author and blogger Seth Godin published his first book, Business Rules of Thumb in 1986. That was immediately followed by 900 rejections and 30 failed projects. Q: when should an entrepreneur throw in the towel? A: apparently, never.Continue reading