Marketing Memos

I thought my client had stopped breathing.

We were going over elements of a large-scale survey he wanted Silicon Strategies Marketing to do for them. The mechanics were fine, the methodology was agreeable, and the timelines were A-OK. But when the cost to incentivize respondents was presented, I momentarily mistook his slacked jaw expression as a sign of a cerebral stroke. He quickly reached into his desk draw, took a slug from a flask, then asked if the incentive amount was a typographical error.

The benefit behind primary research is that it delivers precise answers about your market. Surveying remains the best way to build quantified business cases and MRDs.  However, surveying on the cheap produces unreliable results, and surveying in some ways is getting more expensive by the minute. The basic problem is that unless the subject matter of a survey really excites people, they would rather not invest time taking one. This opting-out phenomena causes surveys to be answered by the least viable of all respondents, namely those with excess time and insufficient outside interest. Building a product or defining a market with input from such lackluster respondents is an expensive error, where the expense is accounted in bankruptcy filings.

This congenital defect in surveying has been exacerbated by cheap Internet technologies. Every monkey can survey online today, which has produced a flood of amateur surveyors, survey invitations, and an ever greater public desire to not participate. Survey invitations without incentives have less than a 0.5% response rate, and that average is dropping daily. Even well incented surveys often fail to rise above 1%. The most successful survey Silicon Strategies Marketing ever accomplished achieved a 23% response rate, but everything worked in our favor (solid house list, well targeted audience, and an innovative incentive).

To con or convince people to take a survey requires a few simple steps:

Target your audience: Sending my cousin Bubba `an invitation to rate silk scarves to would be fruitless. If you think blindly sending a massive number of survey invitations to undefined or ill-defined recipients will generate copious and quality responses, then you will be disappointed in the results.

Test invites and incentives: It only takes a little time to test several survey invitation email formats or several incentive offers. If one email option changes response rates from 0.5% to 1.0%, then you will save time, money and aggravation in mass mailing.

Reward participation: Bluntly said, people need to be bribed, and the higher up the economic food chain, the more creative the bribe must be. Some incentives, such as cash, work well providing your target respondents are not well heeled. Offering a “chance to win” something fancy only works when the survey is short (unless that fancy item is the Taj Mahal, and then even I’ll participate). Donating to charity is becoming more viable when polling executives and upper-income people, though you need to be specific about the charity and choose one devoid of controversy.

Keep it short: We all want to ask people a lot of questions, but people don’t want to spend a lot of time answering. If in doubt, find the two or three key questions that you must have answered, and triangulate the rest.

Better yet, drop Silicon Strategies Marketing a line and have us do all the hard work. We know how to get results without causing you a financial coronary.

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Avoiding bad markets is half the battle.

Annually I see multiple software vendors pitching products designed to improve the performance of computers, databases or networks. With few exceptions, these tools disappear within two years because the underlying commodity (computer server, network connection or DBMS) becomes faster and cheaper. One of the most common technology and marketing mistakes is to create a product for an industry that will inevitably correct the problem.

Take home Internet connections (please, take mine and bring me FttP). Long, long ago – about 20 years back – having a 4,800 baud modem for connecting to the Internet was considered state of the art and painfully slow (recent college CS graduates may have to look-up archaic words like ‘baud’ and ‘modem’). Without fail, once every quarter, someone pitched a software solution for raising the data transfer rate across antiquated telephone technologies. The following quarter a faster modem would become the new standard and obviate the software solution. Modems were eventually replaced with cable, then by 3G wireless, then fiber to the premises, then 4G wireless … well, you get the picture. The providers of personal network connections knew what people disliked most about their service (namely having to wait for anything) and kept advancing the product while simultaneously eliminating software speed-ups.

Hence, the classic marketing mistake is to create a product destined for rapid obsolescence. Riding a commodity wave is a fine way to make money, but trying to sell patches to limitations of a commodity that can be fixed by the providers is fast fiscal suicide.

Understanding this method of mistake leads to understanding innovation and value, which brings us around nicely to marketing and where it fits into the process.  “Innovation” is, by etymology, something new (from Latin innovatus, from in- “into” + novus “new.”). Software accelerators and their crippled cousins are by definition something old. To be new requires being something unanticipated by the market. This still is a rather broad notion. Early iPods were not new given that MP3 players had been around for quite some time, and the notion of portable music had existed since transistor radios. But Apple marketed iPods as fonts of spiritual liberation, and that was new (along with white ear bugs, slicker case design, etc). Marketing cannot by itself innovate, since innovations requires the unique human insight that aggregates what is possible (engineering) with what people want to achieve. Marketing contributes by assessing what people want to achieve, and then validating product concepts before build commitments are made.

No amount of survey triangulation will create inspiration.

Inbound marketing adds to the base of knowledge that feeds inspiration and innovation. Though Steve Jobs was not a fan of focus groups during product development, they remain great vehicles for discovering what people are frustrated about or wish to achieve, which can lead to innovation moments. More directly, market research can unmask gaps between competitor offerings and the expected outcomes of buyers. Such investigations lead to +1 value points that decide what company dominates their segment or market.

Most important though is knowing where not to go. Since the probability of success equals one minus the probability of failure [ P(s) = 1 - P(f) ] not failing is always your first mission and not entering doomed markets eliminates a lot of potential failure.

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Don’t try this at work.

A discussion recently erupted within an online marketing mavens’ forum. Someone wondered if Do It Yourself (DIY) market research using social media would eliminate more traditional forms of research and many of its freelance practitioners. I responded that amateur efforts create amateur results, and that SMBs would thus find new and exotic ways to stay small through inappropriate research.

Oddly, everyone agreed with me, which is surely a sign of the End Times.

Services like Survey Monkey have created a great deal of poor research because research is a scientific pursuit and Survey Monkey is a digital chemistry set for DIY researchers. The internet is now littered with invitations to participate in surveys, and as a result people have grown numb to these invites (which makes our research work here at Silicon Strategies Marketing more difficult). Sadly, the results obtained by ad hoc surveys and trolling through social media forums ranges from useless to endangering. Poor insight from poor research produces poor decisions, which in turn produce longer unemployment lines.

Though the list is extensive, there are several common areas where DIY market research fails:

Lack of scientific approach: All research processes, and especially surveys, have rich and deep scientific histories. There exist very wrong ways of conducting surveys, which lead to skewed information and inappropriate analysis. Since product or corporate decisions are based on research, having solid methodology, sound survey question design and statistically valid analysis are essential and never achieved by junior marketing staff using rent-a-survey suites.

Unstructured everything: The question is all important, because if you ask the wrong question you never get the right answer. DIY researchers often initiate projects that lack defined goals or even structured approaches to finding answers. The fuzzier the focus and source of input, the less structured and more opinion-influenced are the results.

Social shouting: Social media has its place in market research, but suffers from presenting the opinions of people with the loudest voices. Akin to self-selecting surveys (and all surveys are self-selecting to some degree), spelunking social media to ascertain market metrics is nonsensical and dangerous to your paycheck’s health.

Strategic decisions require strategic thinking, which requires good data, which eliminates DIY and unmanaged, qualitative ingestions. DIY research is not unacceptable, but presents many potholes that, at best, take your revenue growth for a rough ride, and at worst will wreck your company’s shocks, bend your frame and trash your tranny. As grating as spending money on market research is, it remains better to invest in sound data than risk DIY disasters.

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We can name many famous explorers, but can you name those that never returned from their expeditions?

The unknown is the danger within every new territory.  Venture into an unblazed forest and you may never find your way home.  The same goes for new markets, or even markets that are rapidly changing (the sense of panic is palpable in the book publishing market these days).  Yet marketing in virgin territories is not unlike exploring a new continent.  In each, testing is essential.

When the pilgrims landed in what later became the United States, they did not make a mad Lewis and Clark dash across the continent.  They rarely ventured away from the shore and whatever rivers provided fresh water.  In small steps, they set off in one direction for a short distance, blazed their trail and returned the way they came.  The next morning they would try a different direction.  Once several compass points had been tested, they would select the most promising of the paths and go a little further, testing again until they found a good place for a new encampment.  The process was repeated from that outpost.

New markets are always appearing, and with the advent of wired-everywhere technology, many markets are changing (for example, e-books recently outsold the dead tree variety in the adult paperback category). With each new/changed market, we enter uncharted territories.  Like explorers of old, it is better to make many small forays in different directions than to leap down one trail … and off one cliff.

The problem is that marketing budgets are finite, and the number of potential marketing tactics isn’t.  Testing all possible avenues is impossible and unaffordable.  A better approach is to mimic our ancestors – the ones that survived – and make small sorties into the field on different vectors, taking sightings and measuring the natural resources.  Soon enough, certain strategies and tactics will appear vastly more appealing than others.

Let’s relate this to the publishing industry.  In the old days, publishers had delivery cycles that extended beyond a year.  They assembled catalogs of future titles, went to trade shows to give those catalogs to distributors and book store representatives, sent books to every major metro newspaper and national magazine for review, printed thousands of copies in advance, bought massive advertisements, scheduled book signing tours in book stores … and prayed.

Due to Amazon, e-books and print-on-demand technology, new publishers have a 12-week delivery cycle, rarely send galleys for review to newspapers, are causing book stores to go bankrupt, and are keeping the middleman cut for themselves.  For marketing they turn to social media, targeted banner ads and bloggers.  None of these marketing tactics were immediately obvious to the new breed of publishing houses.  There have been many dead publishing explorers, each venturing down one or another promotional path a little too far.  Aggregated, however, they tested most permutations.  More and more are returning to the fort still alive and with freshly killed game.

Testing is the key.  The internet gives us great testing options, be it simple A/B testing of web page content or using surveys to test buyer responses to pitches and images.  Web space costs nearly nothing and HTML coders are cheap (content management systems are even less expensive).  Optimizing messages, images and offers costs next to nada.  In surveying, structured test can be administered when web traffic has yet to be generated.  Social media provides numerous methods for interacting with individuals and assessing which modes and memes work best.

These are the ways to explore new and changed markets … in small and safe outings.  Testing means you will make it back to the fort with fewer arrows in your back.

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The client was slightly stunned to see our proposal for conducting a market research survey.  He blinked twice, signed the contract, and asked if the terms included surrendering his first born male child.

The good news is that we had no use for his offspring, and thus Junior was not part of the transaction.

CEOs from start-ups and billion dollar enterprises alike balk at market research.  There is always a cost, and unless the price is three digits or less, they often hesitate to commit … until I ask them what the cost of failure is, and the contract gets signed instantly.

The cost of failure fits nicely with our formula concerning market success.  The formal is beautiful in its simplicity, and reads:

P(s) = 1-P(f)

Or stated in English for those of your who forgot your college statistics class work, the probability of success equals one minus the probability of failure.  The elegant extension of this principle is that when you work toward reducing failure, the odds of succeeding automatically rise.  Likewise, the probable cost of failure can be easily estimated by taking the cost of an action (anything from a new promotional campaign to a start-up launch) and multiplying by the current state of ignorance, which is roughly analogous to the probability of failure.

The problem with committing to market research is that few people are certain about the need for it in one or another circumstance.  After all, in the realm of marketing, there are hundreds of variables.  The cost of achieving certainty among them all takes more money than Gawd has.  Likewise, perfect clarity is unnecessary – knowing any situation to a 65% level of knowledge is sufficient, because most competitors will likely have a 30% or less view into one or another market metric.

One process through which I drag clients is a marketing readiness review, whereby on a table of 51 strategic marketing elements we jointly identify how complete their knowledge and readiness are.  Any cell where they are less than 50% knowledgeable is an area where market research might be appropriate.

For start-ups, most of the cells score zero.

Interestingly, the more basic the knowledge, the more it affects other points of knowledge.  One’s estimate on segment sizes are hindered by a lack of knowledge about the total and addressable markets. Buyer expected outcomes from using a product are defined by market segmentation models.  The more primitive the information, the more items of refined clarity it affects.

The corollary is that if you don’t get the most fundamental marketing research right, everything else will be faulty and your probability of failure grows exponentially.

The marketing lesson is that market research is essential, but you don’t need to spend your entire budget to achieve perfect clarity on all aspects.  List what you know and don’t know, estimate the cost of failure for what you currently don’t know, then prioritize which bits of research are the most likely points of failure.  This will tip the success equation rapidly and help you make more money than Gawd.

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