Market research is a common conundrum for every business.  In a perfect world where coffee is always fresh, all women are drop-dead gorgeous, and government obeys, a businesses would buy plenty of primary research to be completely certain about their marketing decisions.  Not only would such circumstances stuff obscene amounts of money into my own pocket, but the risk side of the businesses risk/reward equation would drop to zilch and assure huge rewards.

Sadly, complete research would cost a fortune and never be complete.  Even Oracle has to guess once in a while, rolling multi-million dollar dice on limited research and a hunch.  Former Joint Chief of Staff Colin Powell – who led the rescue of Kuwait – once said something like “I research until I have 60% of all critical information, then I go with my gut.”

Most start-ups operate on 1% … or less.

This is the toughest part of raising a business from diapers.  Before funding (and even afterwards) the amount of cash available for research is limited.  Yet investing in research greatly reduces the probability of failure.  CEO’s of struggling tech start-ups need to invest in many things, but often scrimp on understanding their market, segments and buyers to the fullest rational extent.  This lack of insight causes their business to burn through cash in trial-and-error market outreach, which rather defeats the purpose of the CEO’s original frugality.

CEO’s need to invest in market research in incremented fashion, and in an order that is counterintuitive.  The pieces of information required are most commonly in this order:

1. 1^st segment whole product: Most products start niche, and in order to survive they need to achieve dominance in one key segment.  Knowing what constitutes a whole product for a chosen segment will help assure shorter sales cycles and sustaining revenues.
2. 1^st segment genotypes and motivations: In almost the same breath as above, knowing who actually influences a purchase decision and what their motivations are is critical to promotions.  You can have a whole product and still sell it in a way that attracts nobody.
3. Branding and messaging: Spending a few quid to perfect corporate and product messaging and your brand sets the stage for blocking competitors in your first segment and making you more buzzable.
4. Market definition: Once established, understanding the broad market and all the segments therein allows growth planning, which leads to long-term product planning.
5. Competitive positioning: Competition research, combined with your market definition map, shows which segments should be assaulted and in which order to effectively maneuver past competitors and ultimately surround them.  This is the key to market dominance.
6. Repeat 1-3 for each new segment: Those who do a good job in their first segment will be condemned to repeat it for every segment thereafter.  The process never stops – competitors, shifting markets and market lifecycles keep changing and this makes your marketing research life a living hell (which is why Silicon Strategies Marketing is in business – so your life can be less hellish).

Bottom line for budding entrepreneurs is that you need to research, but do so in an order that allows minimum investment at each stage, and in an order that assures success.  If Collin Powell had waited for a complete set of information Kuwait would be part of Iraq and Sadam Hussein would still be smoking stogies in one of his palaces instead of fertilizing crops in Tikrit.  But Powell did enough research to win.

Bookmark to:

Hide Sites

Back when I had a regular job – during the Taft administration – my co-workers loved to drop Dilbert cartoons on my desk whenever marketing was the strip’s topic.  In one installment a customer asked Dilbert if he was lying about a product, to which Dilbert replied “No, that’s marketing’s job.”  This naturally reinforces the very stereotype that Seth Godin outlined in his masterwork All Marketers Are Liars.

The reputation of marketing people has been rightfully sullied because many marketing “professionals” destroy reputations – of their companies and themselves.  They fail to grasp both the mechanics of reputation as well as its essence.  Much has been written about the former since reputation in social media is a hot topic, yet the latter has been incompletely analyzed for high technology.  Reputation for a company and its technology products are intertwined, and failed market reputations have a number of causes.

I assert that marketing must be in charge of maintaining corporate reputation.  Marketing is not responsible for defining corporate/product reputation as that involves strategic business decisions and tradeoffs.  However, assuring the reputation is maintained and grows falls in marketing’s domain because they define the interaction with customers who in turn defines the public’s perception of your reputation.

The dictionary declares that reputation means “the estimation in which a person or thing is held, esp. by the community or the public generally.”  Thus marketing’s role is to assure the perception by the public is sufficient to achieve corporate objectives.  In order to do so, marketing operatives need to understand the elements of reputation, which are slightly more complicated than a typical Starbuck’s order (“I’d like a triple shot soy mocha, cinnamon frapomaco, extra foam, nutmeg, with a twist and a half gainer.”)  Though not exhaustive, the following short stack of basic reputation elements common to business and technology are essential and ones that marketing staff should have tattooed in reverse on their foreheads so they can review it every morning in the bathroom mirror.

Delivering on the promise: Everybody makes promises.  With technology the basic promises are that it will deliver some features, cause some expected outcomes to occur, and works reliably enough that your tech support staff will not require extra medication (and given some recent tech support interactions I have had, I fear some support teams are over medicated).  Failing to keep these basic promises is a fast path to fiscal oblivion.

Exceeding expectations: Merely meeting customer expectations give them no reasons to discuss your reputation.  Under delivering will, though in ways slightly less pleasant than attending confession after a Vegas bender.  However, exceeding expectations, even slightly, creates positive reputation and one that people will communicate to future customers.

Timeliness: Great products or service delivered late might as well have not been delivered at all.  Lack of timeliness is frustrating to customers, so you have to deliver within what they think is reasonable (no matter how unreasonable) or at very least within your promised timeline.  I once told Nokia the battery on my new cell phone didn’t hold a charge.  The department in charge of replacements took over a week to call and tell me they would send a replacement.  In that week Nokia’s reputation in my alleged mind fell, and I quit recommending their products.

Consistency: I’m an Oakland A’s fan because they consistently disappointment me.  Sure, it would be better if they won, but at least I know what to expect of them.  Consistency has value because customers know what to expect.  You can set expectations low as long as you meet or exceed those expectations consistently (in fact, there may be danger in setting expectations low and occasionally exceeding them by a wide margin, because customer may expect such surprises in the future).

Let’s put these four precepts into practice using Microsoft Vista as an unfair example.

• The promise of a better and simpler operating system was broken.
• If failed to meet expectations by a large margin.
• It was very, very late.
• However, it maintained Microsoft’s consistency in disappointing the market.

One out of four ain’t bad.  Oh wait, it is!  Perhaps this explains Microsoft’s faltering reputation.  Let’s try a different technology for contrast.  The iPad would be appropriate:

• The promise of a “wow” device that redefined the relation between man and media was met.
• It was beyond the public’s expectations, which for Apple are pretty high anyway.
• It was delivered on time.
• It arrived in a manner and style consistent with the public’s expectations.

Four out of four is a good score, and explains why Steve Jobs can afford to buy a new liver yet Steve Ballmer can’t acquire hair plugs.

Bookmark to:

Hide Sites

The effect of marketing on innovation must be understood.  Unguided innovation has created many interesting, amusing and completly unprofitable technology products that caused tons of venture capital to evaporate (often through excessive and misguided marketing budgets).  Similarly, marketing occasionally identifies untapped markets, and is the seed for new and successful products (unless the market research was flawed, in which case see the preceding outcome).  Thus, marketing is both a creator and regulator of innovation.

This subject is often not understood my entrepreneurs and even CEOs of major corporations.  Inbound marketing – the more interesting half of the profession – is all about understanding markets, buyers and competitors and serves as both a regulatory governor and catalyst. Let’s break-down the two halves of the schizophrenic condition know as marketing strategy.

Our first case is where innovation has occurred organically, often in the alleged mind of the entrepreneur.  In their own ad hoc way, entrepreneurs perform market research:  they observed some part of some market, witnessed a gap between what people want to achieve and how products failed to help buyers do so, and attempted to create products that bridge the gap.  Often such products fail because:

Market size: The market is very small or the people who want the product have no budget or buy authority.

Whole product: The entrepreneur does not completely understand the needs (expected outcomes) of his market, or tries to bridge so many segments early on that he never creates a whole product for any one buyer.

This is where marketing’s regulatory function comes in.  Marketing must validate that markets exist and describe to engineers what the market requires.  The innovation may have occurred organically, but marketing ties the germ idea to a trellis (segment alignment) and waters the roots (whole product definition).  Market research thus helps expand/refine product definitions and confine the product concept to viable segments.  It regulates and nurtures innovation to conform with reality.

The flip side is where inbound marketing discovers the market need.  While performing market research (typically qualitative) certain trends may emerge.  Silicon Strategies Marketing recently performed a “deep interview” series with key buyers in one market in order to measure branding issues, and in the process kept observing a negative similarity among all the respondents.  Observing this similarity of responses led to the identification and development of a new product.  Thus, marketing was like a structured entrepreneur and identified a need/gap in a market.

A recurring management problem is that CEOs often do not understand this half of marketing’s job.  This is especially true with innovators and out-of-the-box leaders with myopic (or megalomaniacal) vision.  Market research decreases the probability of failure by reining in the unfounded expectations of the innovation, or expanding the vision to meet market requirements.  Visionaries don’t understand the value of marketing’s innovation contribution because in their eyes the original concept is perfect.  In reality it isn’t.

Nine out of ten funded start-ups never succeed.  The percentage for unfunded start-up failures is higher.  Yet check the boards of any tiny tech company and you will not see a marketing strategist listed.  My conversations with VCs indicate that lack of marketing perspective is the bane of the losing part of their portfolios.  In all cases there was innovation but no marketing to guide it.

Poor Peter is moaning in his crypt.

Bookmark to:

Hide Sites

I don’t pick on Steve for the fun of it – not entirely at least.  I bring up the dreaded discussion of putting a new captain at the helm because after a decade with Ballmer as skipper, the good ship Microsoft is foundering, leaking between nearly every plank.  In an era where everything changed, Microsoft did not change fast enough and has failed to catch the rising tides.

Apple has not capitalized on everything and yet Apple now has a market cap larger than Microsoft (which we can take with a few drops of sea water since Apple’s forward P/E ratio is more than 50% higher than Microsoft’s, showing that navigators see better odds with Jobs on the investment horizon).

Drucker wisely noted that “Business has only two basic functions – marketing and innovation.”  High tech is uniquely a product of both.  Inbound marketing leads to innovation, or at very least appropriately channeling innovation.  Since technology markets are in perpetual change, and since the Internet has accelerated change, the key goal of marketing becomes tracking change and anticipating where this will cause money to flow.

Microsoft missed almost every change of the last decade.

By “missed” I don’t imply they ignored it.  They simply failed to capitalize on the change in a timely manner, with a great product, or both.  Here is a short list of huge opportunities that Microsoft flubbed:

• The web: Microsoft owned and then lost ownership of the web experience.  Their half-conceived attempts to create a rich Internet application infrastructure was eclipsed by Adobe (Flash), Sun (JavaScript) and other software.  Even the iconic Internet Information Server – an IT product for Microsoft’s core buyers – was effectively eradicated by Open Source (Apache).
• Search: Like Microsoft and desktops, Google understood that owning the most fundamental product in a market is a good grounding strategy.  Microsoft should have owned the search space, but every attempt was late and occasionally weird (like Live Search).
• Smart phones: Smart phones are portable computers with built-in telephony.  It is the closest thing to a desktop aside from pads/slates which are just now hitting market demand.  Microsoft should have owned this space, but they missed the opportunity by not uniquely bridging their established dominance in desktops.  Apple created something flashy while Microsoft should have bundled in email, desktop document tools and other office accoutrements.
• Pads: Same as above but with a much sadder ending.
• Music devices and music: Content has never been Microsoft’s forte, so missing this opportunity might be understandable.  Where as Jobs knows content (iTunes, Pixar, etc.) for Microsoft it is an afterthought.  Owning the desktop in most households should have lead to a more complete and pre-packaged audio experience.  Zunes don’t meet the market and unlike a MacBook, iPod, iTunes combo, Zune does not deliver an experience that people want to talk about.  Zune is a buzz kill.
• Clouds: Cloud computing will be the new norm, and one that Microsoft failed to engineer out of fear of losing control of the data center.  The future of the cloud space will be mainly VMWare and Linux, and rightly so as they strive and succeed in fulfilling the new whole product definition for data centers.

This roster covers only the opportunities Microsoft missed.  The list of things Microsoft simply screwed-up is long as well, and has such monumental errors as Vista, security and MSNBC (seriously, have you seen the ratings on that channel – I’ve never seen negative Nielsens before).  Vista, the next edition of Microsoft’s XP bread-and-butter was a bummer.  Lousy security is like owning a dog that invites burglars into your home.  And littering a news channel with blatant activists contradicts the definition of “news”.

It seems that under Ballmer, when Microsoft was not screwing up they were taking all eyes off of the ball.

I don’t think Microsoft’s board is going to oust Ballmer immediately.  Yet stockholders have the convenience of leaving at a whim which causes stock prices to drop and the remaining owners to demand action.  Innovation and marketing require vision and leadership, and Ballmer has ten years of misfires that indicate he does not lead on these two fronts.  Steve Jobs can see a market and conceive products for that market.  Ballmer, though perhaps good at operations is not the visionary that Gates was or Jobs is.

As the Greek’s say and know, the fish rots from the head down.  It may be time to make some fish head soup at Microsoft.

Update 2010-06-07: News from the All Things Digital conference indicate that the tech world is marginalizing Microsoft.  To quote from the news report:

They allowed the conversation to be focused mainly on competing products: Apple iPad, Google Android, Google Apps, Google search. Since these products have exposed weaknesses in Microsoft’s own offerings, it was unlikely to work out well.

Not good.  Not good at all.

Bookmark to:

Hide Sites

Your brand is created with every buyer interaction.  Some interactions occur in advertising.  Others occur between buyers and cut you out of the interaction loop.  The rest occur whenever your buyers visits your company, be it your web site, your sales office, or your support department.

The letter can destroy you.

Not long ago, Dell was flagging.  Part of this was a change in the market which they failed to anticipate and were also slow in responding.  Yet a good part of their fall from prominence was due to ill-advised shifting of technical support (something that had been a glowing aspect of Dell’s brand) to under-trained staff in India.  Many formerly loyal Dell customers became openly antagonistic, and this negative brand image was communicated from customer to customer.

Support as a brand touch point came sharply into focus for me last week as I encountered two completely opposite examples of customer service, or lack thereof.  In the case of Comcast, they tarnished an already inferior brand through indifferent and idiotic “support.”  Amazon, on the other hand was so superb in execution that their already strong brand became more so.

Comcast – casting doubts about their sanity

For someone in the high tech business, I’m a technology laggard.  There is not a single HD-TV in my home.  Needing to replace a failing low def tube, and deciding I might as well start down the HD highway, I emailed Comcast support with a simple question:  since I have to use one of your set top boxes to get HD, tell me which box(es) will you provide in my area so I can buy the best TV to use with it.

Eleven emails later …

The sundry exchanges could be considered comical were they not aggravating.  The first response said “I understand that you would want to know more about HD” and then provided a URL to Comcast advertising.  Sorry Kandarpa, not even close.  Interestingly, a different support agent who had the entire preceding email thread and saw my reaction to this odd substitute for “support”, gave exactly the same answer.

One fellow bordered on helpful, sending a list of links to their many different set top boxes, but did not identify the one used in my area (they are different in different areas because Comcast is rolling out different services on different schedules to different regions).  The rest of the emails resulted in a continuing lack of enlightenment until I said that I would document the email exchange for Comcast’s VP of marketing.  That threat (yes, threatening Comcast is about the only alternative) got a senior support slacker with two of more functioning dendra to clearly state that Comcast technical support had no way to know what set top boxes were issued by any office.  Period.

I worry about company that provides data services but cannot make data available to their own support teams.

One can (and I would) argue that such sloppy support can only come from a monopoly, which describes any municipal franchise.  Amazon, always mindful that they have no such government protection, goes further to protect their brand and service their customers.

Amazon – amazing affection

In the same week that Comcast was cascading down the canyon of doom (AT&T and possibly Google will soon run fiber to the premises here), I ordered a new cell phone from Amazon.  This surprised everyone given that I have been hauling the same smart phone the nearly a decade.  Being the frugal descendants of Scotts, I naturally opted for the cheapest shipping option available (free), but was surprised the next day when Amazon said the in-stock handset wouldn’t even leave their warehouse for five days.  I popped them an email and noted that out of simple curiosity I wonder why the delay.

Amazon sent a single, coherent, informative email about the mechanics of their order fulfillment system, apologized for my confusion, and upgraded me at no cost for two-day shipment to make sure I remained satisfied with Amazon.

Contrast the two – Comcast and Amazon.  The former clearly didn’t care enough to even try to answer a simple inquiry.  The later, having a more complex question to answer did so and then, at their expense, did something unexpected and downright endearing.  Comcast diluted their brand by forcing a soon former customer to battle their ineptitude.  Amazon hugged me into submission.

The marketing message is that you brand is impacted at every interaction.  Giving people reasons to dislike doing business with you is the pump primer for churn.  Hurry up AT&T and Google … you have a paying customer waiting on you.

Now, if Amazon started providing internet services to the home …

Bookmark to:

Hide Sites

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.

Bookmark to:

Hide Sites

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.

Bookmark to:

Hide Sites

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.

Bookmark to:

Hide Sites

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.

Bookmark to:

Hide Sites

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.

Bookmark to:

Hide Sites