Marketing Memos

I’m starting an Internet wide office pool – pick the date and place a dollar ante on when antitrust will be filed against Oracle.

Seriously, Larry is all but begging for it.

With the integration of Sun into Oracle, many executives – including Ellison – said that Oracle was the IBM of the new millennia.  They waxed techno-poetically about how Oracle, and only Oracle, could provide complete iron-to-apps IT, that they owned the middle of the datacenter.  They claimed their ability to cross-integrate every element of the stack provided Oracle power that no other vendor could offer.

Those statements were followed by amused FTC lawyers grunting.

IBM was the original and last computing monolith.  As Ellison’s Archangels echoed, the IBM of the 1960’s provided everything a customer could want and that IBM’s floor-to-ceiling solution sets created impenetrable barriers to competition.  That is precisely why the federal government sued IBM, and for thirteen bone-grinding years prosecuted Big Blue for allegedly violating the Sherman Act by attempting to monopolize the general purpose business computer system market.  Indeed, the only reason litigation was abandoned was that the market, IBM and computing technology all changed over thirteen years, and IBM was no longer in monopoly mode (though some people slightly less cynical than me believe Ronald Reagan simply ordered a halt to the Federal Lawyer Full Employment Act).

Would we believe today’s FTC and Justice Department would not view Oracle with the same suspicions?   Even under more business-friendly administrations, Oracle faced government intervention when they swallowed PeopleSoft and JD Edwards in a single gulp.  Back then rather feeble justifications, citing SAP as a major competitor, were offered.  With stagnant net profits and leadership changes at SAP, this argument rapidly vanishes.  Toss in Oracle aiding and abetting NetApps (which is positioned to handle the SMB market while Oracle dominates the high-end) and the temptation for the government to intervene will simply grow too great.

It is not a matter of if but when the government decides that Oracle is indeed the IBM of the new millennia.  They will pick a fight, though it is unclear if Larry would lose.  If nothing else, the PeopleSoft acquisition shows Ellison knows how to stand-up to government regulators and win.  The question for the rest of us is when to buy and when to bail out of Oracle stock.  Left alone, Oracle stands to make major money given their dominance.  But like IBM, a decade of litigation will weaken them and their share price.

Me?  I’m going to get rich on my Internet office pool.

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BMW and Enzyte may have too much in common.

While reviewing course materials for the CEO Marketing Boot Camp, I got a case of giggles. In the class we mention how BMW does branding. BMW has a legendary brand that was anything but accidental. In fact most readers can recite the BMW slogan from memory and yet never question it. That is how good BMW is at defining and communicating their brand – they have us all educated and convinced.

The BMW slogan is interesting to marketing experts because it never mentions automobiles or technology (and BMWs are technology products). BMW claims to provide the “ultimate driving experience.” Ultimate means the best. Driving is a largely male oriented passion. Experiences are what we live for. So BMW offers a greatly enhanced male life, just like Enzyte claims.

I’m sure the people at BMW are not happy about this comparison because the rest of the jokes write themselves.

BMW’s branding is only part of their marketing success, which is matched by their automotive engineering success. BMW’s marketing and innovation are well paired. Peter Drucker, the father of modern management once said “Business has only two basic functions – marketing and innovation.” Everything else is administrative work. In Silicon Valley, we have more innovators per square inch than we have square inches to spare, and most innovators fail. They only have half of the success equation.

Having sat-in on too many funding pitches, the absence of marketing expertise among founders (the innovators) is often painfully obvious, and has been the reason for many funding rejections. This is an endemic aspect of start-ups – that visionaries lack go-to-market strategy skills. This is not in and of itself fatal if the founders can recruit good marketing people or otherwise find sage advice, and then follow it. However, visionaries are blinded by vision. Their initial observations about market opportunities keep them from examining the full scope of go-to-market issues or unpleasant market realities. Founders are often reluctant to release control over the marketing function yet do not possess enough marketing strategy savvy to guide their organization.

The end result is fairly predictable. These visionary-led start-ups find initial traction with early-adopters, who are also visionaries and risk takers. After that initial success, the start-up stalls. Revenues plateau or decline, the company burns through what little cash it has, and the visionary solution vanishes or is cloned by someone else. If the start-up is funded, investors will often insert members of their cabal into the organization and attempt to instill marketing strategy discipline from above. In desperate circumstances VC’s find ways to eject the founding visionary.

This “investor patch” is notoriously ineffective. Founders fail to follow advice or control because their vision is limited to the set of circumstances that lead them to invent. They cannot see the forest of marketing strategy because they are climbing the tree they originally discovered. It is a little like love. Try explaining to a child what being in love is like and you will create a bored or confused kid. But once they grow up and experience love, they understand the broader and more detailed aspects. Visionary founders are like these confused kids – they do not have enough perspective to comprehend what they need to do.

This is the visionary entrepreneur’s handicap. Successful founders either have significant (albeit high-level) grasp on the major functions of marketing strategy, or they have the guts to recruit and trust experts. Most founders don’t do either, and thus most start-ups fail. I find this state of Silicon Valley affairs to be perplexing. Technology innovators are not ignorant people. They have worked long and hard to achieve deep understanding of their technologies, yet rarely labor at understanding marketing strategy. They may read one of the Chasm books and proclaim themselves well prepared. This is akin to reading a book on the basic mechanics of a parachute and then lobbing yourself out of an airplane. The results are amazingly similar either way.

Peter Drucker was right – an organization must innovate and market. In a start-up, where early decisions define survivability, and where the money to hire full-time strategists simply does not exist, the marketing savvy of founders is critical. Venture capitalists know this, and VCs send portfolio CEOs to school to assure that daily marketing disciplines are being lead from the top. VC’s are happy when one-in-ten of their investments pays off – but they would be happier if ten-in-ten did. Hedging their bets by building better CEOs is the primary path to achieving better investment odds.

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Many clients have come to me complaining that they hit a plateau – that sales and profits had quit growing. We have helped many of our clients identify the barriers they faced and navigate to new levels of success.

Others remained stuck, mainly because they were too stubborn to listen.

It is common for start-ups to hit seemingly invisible plateaus. Like a rock climber on a virgin cliff, they cannot see their way around outcroppings and boulders, and they aren’t agile enough to dodge eagle droppings hurtling in their direction. In nearly every case, these plateaus are artificial and solvable, though the very genius that launched the company is often the plateau itself.

I offer as example one client we initially engaged six years ago. Silicon Strategies Marketing performed some primary (and I dare say groundbreaking) research into the psychology of their targeted buyers. Throughout the research, one variable was clearly a game changer – a clear path to recruit new customers, both within divisions of existing clients and within new enterprises.

Six years later they still have not executed on those findings and are at about the same revenue level (the fact that the recession has not materially reduced their revenues indicates that our rebranding effort worked well for them).

Start-ups plateau for a number of common reasons, all of which can be fixed but often are not. The main plateau points are:

Visionary blindness: Often it is the company founder, CEO and president who are the biggest impediments. The boss was the original visionary, and (s)he perceived the product and the market in one specific way. Indeed, their company’s early success may be attributed to their specific market vision. The problem is that once they have met the limited market/product vision the founder had, he retards or restricts expansion. New segments, competitive threats and key trends may well go unanalyzed because they fall outside of the visionary’s view. When a CEO shoots down every staff recommendation because of his “experience”, he is the problem.

Segment saturation: Despite common wisdom and endless preaching, many start-ups never segment their markets wisely. Start-ups routinely wander into one segment, accidentally growing a whole product solution for that segment alone. They never exploit adjoining segments, much less carefully plan the necessary steps to do so. People and companies enjoy comfort, and expanding into unfamiliar territory is uncomfortable. Too often organizations will try to grow their already saturated segment. Competitors who do know how to map and invade segments will eventually create permanent plateaus for the original innovator.

Marketing myopia: Products, competitors and markets change. Continuing to market to the same people in the same way over time is deadly. Like humans, marketing people get lazy. They lose the drive to take chances and innovate their campaigns. There is a long history of companies that kept innovating products but quit innovating marketing, and thus never even expanded even their installed base.

SuSE Linux in North America had flat revenues when Silicon Strategies Marketing began advising them on marketing strategy. In the late 1990s, having flat revenues in the Linux business was preposterous. Red Hat was growing at quantum speed in North America, and SuSE was doing well in Europe. But in North America, SuSE sales were stagnant. They had plateaued in a high growth market.

SuSE’s suffering came from their inability to understand their regional market position and how to work around it. In both Europe and North America, techies were dragging Linux into the enterprise. In North America, Red Hat had the commanding respect and loyalty of the techie caste. For years SuSE had attempted to tempt North American techies as they had in Europe, and with zero success. Red Hat’s lead in mindshare was too steep and SuSE’s management could not see past their original, techie-focused strategy.

We changed SuSE’s strategy on two fronts: who they sold to and what they sold. More fundamental shifts in product marketing strategy could not be made. But the net effect is that sales went from flat to 5,000% growth in two years.

While Red Hat continued to promote to techies, SuSE switched gears and started courting IT executives (see Silicon Strategies Marketing premier paper from that era on what CxOs Think about Linux). Research told us that executives had intellectually bought into Linux as a strategic infrastructure element going forward. It was our job to convince CxOs that SuSE was the better choice.

Since executives are paid to think strategically, they were already thinking several years down the road. So instead of aping what Red Hat was saying (Linux saves money, and Open Source is better) we caused SuSE to talk about how Linux was part of IT’s long-term strategy, which included human resources issues, technology consolidation and commodity infrastructure. When SuSE demonstrated to CxOs that they knew what CxOs were thinking, those executives put SuSE on the short list. SuSE also sold IT execs on strategic partnerships, showing that major vendors like IBM and Oracle were our friends, which was a major selection criterion for CxOs.

The net effect was that if bitheads in an account could not convince executives of the technical superiority of Red Hat over SuSE (which did not exist) then the IT execs mandated SuSE. Red Hat continued to sell to the bottom. Recognizing that boulder, we maneuvered around it and sold from the top.

SuSE was lucky. At a critical juncture they found a new strategy (and also found a great PR firm whose media strategy complimented Silicon Strategies Marketing’s marketing strategy). Many start-ups are not so fortunate. They continue courting their original markets segments with their original product, using their original outbound marketing to fulfill the founder’s original vision.

And they die.

The marketing lesson is fairly simple. If your company has plateaued, then one or more people in your organization – perhaps your CEO – are seeing only the rocks in front of their faces, and not the chute that leads them further upwards. If you are stuck, get an outside opinion. It does not have to be an expert outfit like Silicon Strategies Marketing (though any other choice is obviously substandard), but it has to be a disinterested outsider who can look at markets, segments, buyer genotypes and promotions without the distortion of dangling from the same rope as your executives.

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Legendary are the disturbances between marketing and sales. Within the narrow geography of Silicon Valley, such interoffice disputes between the two camps have crippled businesses, caused collateral causalities and brought down small third-world governments.

And for no good reason.

I recently saw such a conflict up-close. With all my years in the game, this occurrence was nothing new and I could see the waters boiling long before other people did. The actors and stage setting were different, but the plot was the same as always. Groundhog Day with different dialogue.

To understand sales/marketing skirmishes, one has to understand the attitudes, perspectives and psychoses of either camp. Nobody is without sin, but there ain’t no saints either.

Perspective of importance

Though not unique, the sales director in the latest episode proclaimed in a mass inter-company email “Marketing exists to support sales.” Ignoring the utter arrogance of the individual, we can say that his notion is utter blather.

Both marketing and sales exist to meet the goals of the organization. One of executive management’s jobs is to keep corporate goals visible and to promote collaboration in the building of the company, not the building of empires and fiefdoms. Unilateral proclamations of hierarchical dominance are demented and dangerous.

More to the point, this sales director clearly does not understand marketing’s role. Marketing is responsible for defining products and then making them easy to buy. A great marketing executive will turn sales people into telephone order takers by driving up demand. In doing so the marketing department needs to get feedback from, then collaborate with sales and not just dictate to them. In shops where marketing is self-important and dictates down to the sales team is where you find collateral gathering dust on the shelves and the sales team inventing their own field marketing messages.

For all the naked arrogance shown by this sales director, marketing must admit to some as well. Marketing will always know the market better than sales. They will have keener insights into the intersections of segments, product features, genotype motivations and more. Yet this tells marketing nothing about the intimacy required in high context selling. Marketing strategy is a science. Selling is an art.

Perspective of time

Sales people, God bless their pointed little heads, have a one-fiscal-quarter perspective. Management ensures this by mandating quarterly quotas. Thus, anything involving the product, features and marketing that does not help sales achieve this quarter’s numbers is to salespeople a flaw. I once suffered a salesman screaming in a board room about how an insignificant feature – one that surveys showed was of little importance to customers – was killing all hope of sales success. When I questioned him – an act he took as an adversarial gesture – we discovered the feature in question was delaying one sale, and that if he could have landed that deal it would have made his numbers for that quarter.

Unlike sales, marketing thinks for the long-term. In mapping segment sequences and product feature roadmaps, marketing is not looking at the current quarter at all. Marketing looks one, five, ten years ahead. Marketing is looking at the forest, sales at the trees.

Frankly, marketing needs to look more closely at trees. The key place where marketing and sales needs to collaborate is in field marketing. Smart companies map each sales phase and each influential genotype. They create lead nurturing processes and sets of messages for each phase. Together, sales and marketing devise and perpetually revise a discipline for engaging prospects, be it on a web site or in the client’s office.

This almost ever happens. When marketing wants to look at trees, they do so with precision. Marketing understands the value of structure in how prospects are coaxed from one sales phase to the next, and the value of field testing messages and calls to action in a way that these structured processes are constantly refined.

Sales doesn’t. Structure, especially when imposed, is something the average sales person despises. Structure is the opposite of art, and sales people are artists. The times when structured field sales lead nurturing processes work is when the head of sales understands and endorses the process, then mandates his team to collaborate with marketing. In the absence of that, the odds are effective marketing/sales teamwork is predictably south of zero.

Perspective of intimacy

Sales is almost correct when they accuse marketing of not understanding the customer. Sales has very intimate relationships with customers, adjusting on the fly to the needs and wants of each. I have noted that sales and dating are similar processes – a dance where willing participants slowly move towards greater depth of intimacy, culminating in naked exchanges.

Marketing rarely does. Now marketing does know the customer … as a blob of faceless statistical aggregates. Marketing can tell you the mean demand-priority of feature XYZ for the key influencer genotype in the secondary market segment, and tell you this down to three decimal points with a 95% confidence interval. Yet they cannot name one member of that genotype in a recent sales engagement, or what his nuanced objections to feature XYZ were.

Marketing should be on the road one day each quarter. They should – at gun point if necessary – ride to several sales calls, smiling at the prospect but otherwise keeping their mouths shut. Doing so exposes them to the different buyer genotypes and their attitudes toward the product, the marketing behind the product, the sales process, field marketing messages and more. Naked interaction brings a taste of reality to the otherwise detached and academic predisposition of marketing strategy.

Sales should understand and appreciate something as well. Marketing does a lot of hard work eliminating sales frustration by selecting the right markets, segments, buyer profiles and genotypes for promotions. In other words, marketing keeps sales from wasting their entire work week chasing weak leads. Marketing’s strategy leads sales to the right battlefields and hands sales the right weapons. Marketing would benefit by seeing the battle up-close. You know the object of your conquest best when you can smell them.

Perspective of contribution

Both sales and marketing contribute to top line revenues. Sadly, sales tends to think they do it on their own.

I won’t criticize closers. They do the hard work of moving a lead toward a deal. But they do not do this solo. When marketing works well, the quality of the lead goes up, the ease of buying rises, and the sales person has an easier time of everything. If any sales people do not believe this, then I make them this challenge: do it on your own for a quarter. No marketing support. No lead generation. No lead scoring, filtering or profiling. Nada. Sales soon sees the strategic marketing perspective.

Perspective on pulling it together

The primary role of executive management is communications, with most of that geared toward leadership. Organizations with weak executives who fail to keep mission, objectives and teamwork as constantly communicated priorities hinder their own outfits. People constantly work together for common goals, be it in charities, political parties and even corporations.

This can include sales and marketing. In the absence of constant focus on goals, either or both of sales and marketing will myopically focus too intently on their specialty. It takes a strong CEO to set common objectives and refocus the energy of sales and marketing toward mutually supportive activity. This is the only way to break down barriers and egos.

And if that doesn’t work, 40 lashes for everybody in sales. That’ll teach ‘em.

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Financial forecasters foretell that the technology sector leads the economy out of recessions.

Which means we are in for a long one this time.

I decline to scare my fellow technophiles into believing the end is nigh. It might be … I just lack any specific evidence indicating eminent doom. North Korea and Iran are persistent wild cards but they have nothing to do with technology marketing. They are strictly consumers of high tech products like rockets and reactors.

Yet as recessions go, this one will be worse than average. Today the Federal Reserve – co-progenitor of the current recession, thank you Mister Greenspan – downgraded their economic forecast. Far from being Depression 2.0, the outlook is still glum with unemployment rates and GDP shrinkage rivaling the late 1970s. The Fed’s dower description of the economy echoes what Computer Economics predicts – that the recession will not bottom out until the end of 2009. Thankfully inflation is not an added factor, but given a couple of trillion dollars in new national debt, that will come along about the time the economy revives.

The effects of the recession are already felt in high tech.

During the summer and fall while giving speeches on recessions marketing, I told my audiences not to believe the overly optimistic forecasts by industry analyst. Those people are paid to be upbeat even when their clients are beaten down. Sure as silicon is sacred in The Valley, analyst fall forecasts are proving to be higher than Peruvian Coca farmers.

Look at any sector in IT technology and you will find no sunshine. HP reported today, and except for services they see slumping sales. Servers down. PCs down 19%. Printer and ink (for Gawd sake) down 19%. In other words, if it is a commodity or a supply, belt-tightening rules apply and sales have and will continue to degrade.

What does a marketing executive do during periods of economic carnage, aside from investing in the Jack Daniels company one bottle at a time? It largely depends on the market and segments in which you play, but there are some simple rules for recession survival.

Best buddies: IBM makes about 20% of their annual revenues off a mere 100 customers. Targeting long-term relationships on which you build near exclusivity helps. Pick your top 100 and arrange sit-down strategy meetings to learn their plans and forecasts. They don’t stop spending during recessions, but they do change their priorities. Know those priorities and apply them to your top 100 and perhaps the rest of your customer base.

Sell proper pills: Marketers stereotypically peddle either pain pills or vitamins (i.e., “we can cure your problems” or “we can make you a muscle man”). Selling pain relief has the unfortunate requirement of discussing pain, and unless your particular digital analgesic relieves your customers of recessionary afflictions, then you increase their desire not to spend by discussing pain. Switch mainly to selling vitamins. Show how you can make them stronger in bad times. Your message will be better received.

Up and away: Sell up and sell laterally into existing accounts. During down cycles, people don’t want to take on new technologies because it amplifies risk. However, selling up and selling sideways is selling into existing accounts where you are known and trusted. T’is better to sell a low cost add-on module to 100 existing customers than nothing to 100 new customers.

Socialize: Social marketing works in B2B … believe it or not. Studies show peer-level recommendations work in high tech. But you have to instigate and facilitate these conversations. The good news is that once you learn the ropes, this can be cheaper, faster and more effective than other forms of marketing. During a recession they may be imperative as many people resist thinking about purchases until someone they trust brags about their buy.

Then there are services. It may be too late in the game for you to invent meaningful sets of new services that have clout in a staggering economy. But HP’s report shows what IBM figured out a long time ago: that IT is complex to the point that services are more important than product (and increasingly so since IT products are rapidly commoditizing). HP’s services revenues (discounting the effects of their recent EDI acquisition) crept up.

The take away is this: marketing during a recession requires being closer to your customers than ever before, be it tapping your top clients, selling deeper into your base, or becoming a service oriented outfit. In down times think high context, not high volume.

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