Marketing Memos

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June 22, 2010

Social Smarts

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I love technology fads.  If I could just think of a way to profit from the inevitable failure of enterprises trying to implement them, I could retire … to my own private island.

Social networking is more than a fad, though the surrounding hype makes it sound like one (with the possible exception of Twitter, a fad that I hope will fade fast).  Social networking serves a real purpose, namely uniting people who have common connections.  Facebook facilitates all types of unions from the common to the outrageous (if you can get jihadists to threaten you, then you know you have some power in the world).  The secret to social media systems is that they let people decide what common connections are important and that do not occur through nominal daily activities.

Which is why most corporate social media experiments have been misguided wastes of your bonus check.  Corporate life is all about getting people with common purpose together – even sales and marketing, though the bloodshed between those camps makes cleaning up conference rooms an added expense.  Social networking applied to corporations has few benefits because it lacks a real purpose that isn’t already being met.  While judging entrees in last year’s CODIE Awards, I was subjected to a number of enterprise-focused social networking suites that in practice produced no benefits for the enterprise or its employees.  They were, almost to the last, mere playthings without tangible end-games.

Which is why Connect2health is a delightful departure (full disclosure: Private Social Networks, the makers of Connect2health, is a Silicon Strategies Marketing client).

Connect2health was designed to achieve specific things for a specific market, which according to the units-squared principle means that Connect2health is already four time more viable than any other enterprise social networking suite.  Specifically, Connect2health is designed to help hospitals grow communities and thus create marketing opportunities and control brands.  Hospitals – at least those in major metropolitan areas – compete, and they know that creating and exploiting a lasting brand is difficult.  Sure, Kaiser Permanente knows how, but they have been mastering the trade for ages, they have more money than Moses and can establish for themselves almost any brand (except that of being the low cost provider).

When getting into the private social networking business, Private Social Networks decided to pick an industry that had a demonstrated need, apply social networking mechanics to customers in that industry, and find ways of having the product fulfill business missions.  Stated succulently, Connect2health helps hospitals connect patients, families, friends, doctors, nurses and administrators online together with the express purpose of centering healthcare around the patient.  The backend that excites hospital management is the ability to market to the patients, their families, their friends and everyone else who connects into the application.  This amplifies and targets hospital outbound marketing, inbound talent, and for the non-profit hospitals, donations.

More importantly though is that by creating long-term customer connections, in an industry that normally connects only for the duration of hospitalization (and the funeral if it is a lousy institution), this is a brand defining tool.  Patients bring in new people, demographic profiles develop, connections are kept long after patients are discharged, and the hospital (who owns the data) can continue to establish and expand their brand to these people.

Where enterprise social networking plays have gone astray was not providing concrete benefits.  Most of the vendors in this space talk in vague generalities about “synergies of connected teams” and other effluvium written by junior marketing people who have never had P&L responsibility.  Social networking companies that identify and address specific needs of specific industries and create specific payoffs will make some serious cash.  Expect to see some players become “specialists”.

That is if they can keep up with Private Social Networks.  Hospitals are only the first segment in their sights.

May 26, 2009

SaaS Survives

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We may be in a recession, but SalesForce.com has decided not to participate.

Last week SalesForce submitted financial reports covering the three deepest months of the current downturn. From February through April, SalesForce saw their revenues rise 23% and their net income nearly double, climbing 92%. They also announced that SalesForce is the U.S. economy and that Marc Benioff would ascend to the papal throne.

Defying economic gravity is considered a miracle on Sandhill Road.

We should not be surprised by this quarter’s occurrence. When in recession, companies and consumers alike reduce risk while attempting to expand opportunity. SaaS offers a reduction in risk for implementing a CRM system. Since SalesForce is currently absconding with nearly 10% of all CRM revenues and is thus the undisputed heavyweight of the SaaS CRM industry, 3,900 new customers instinctively turned to them in early 2009.

Another angle is that in tough economic eras companies look for ways to increase their own sales. Coordinating sales efforts and keeping proper tabs on your pipeline is part of hitting pay dirt. When times are good, you can be a little lax about managing your sales efforts. When you start raiding the kid’s college fund, you instill discipline on your sales force.

This brings an interesting revelation about SaaS. As a delivery system, SaaS reduces risk to the consumer (and to the vendor as well). During times of profit peril, low risk alternatives beat those with large commitments. Thus SaaS has the ability to grow during down business cycles when packaged software does not. SalesForce has shown that it grows during up cycles too. We might assume that Marc’s Marauders merely are great at what they do (and they are). But a more fundamental shift in the software market is in play.

SaaS’ ability to attract business during downturns is compelling. Not every product category is as fundamental and as organizationally flexible as CRM, so SalesForce’s success is not directly transferable to other software solutions. Yet the principle of engineering risk reduction while offering economic adoption of business-improving solutions alters market fundamentals. It reduces and perhaps eliminates the drastic dips that hit enterprise software companies as industries that consume software suffer. Sure, revenues may lower during recession, but negative growth appears unlikely and thus most of the misery associated with recession may be avoidable. Since SaaS is delivered globally and since other markets suffer recessions less (my New Year investments Brazil are doing quite well, thank you), economic undulations are less serious for SaaS.

Aside from the well discussed issues of integration, I fail to see why a software vendor selling database-centered solutions would not opt to offer a SaaS alternative. Proffering one does not preclude a packaged product, and may well attract customers reluctant to risk the ‘big investment’ during periods of low lucre. SalesForce shows that you can produce double digit growth numbers in a downturn.

There is risk however. Benioff will look bizarre wearing his miter.

 
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