Sunday, June 27, 2010

The Difference Between Dog Food and Dogma

Part of successful marketing and sales is confidence in your product.  As any top sales person can tell you, it's tough to sell something that you don't believe in.  However, product confidence can easily cross over into dogma.  When that happens you end up with brand imagery that diverges from the reality experienced by their customers.  This creates a credibility gap that breeds customer cynicism.  We experience cognitive dissonance when we can't get a company selling CRM systems to call us back or see poor graphic layout on a web design company's site.  If they don't walk their own talk, how well will they serve us?

Rant:  For example, I use an iPhone which means AT&T is my carrier.  My blood pressure rises every time I see an AT&T ad touting that they have the nation's fastest 3G network and the best global coverage.  Really?  This is why they're phasing out their unlimited data plan?  This is why they want to sell me a 3G mini cell tower to fill in the gaps in their coverage that I'm already paying for?  And this is why every fifth call either won't connect or drops mid-call?  I can only conclude that someone at AT&T has been inhaling too much of their own marketing.

So what's the cure for marketing dogma?  It's called eating your own dog food.  The expression stems from an apocryphal story well known in marketing circles that goes like this:
A pet food company created a new dog food.  To ensure that the launch was a success, the company hired a top advertising agency.  After conducting sophisticated market analysis, the agency put their best creative team on it, and launched a brilliant advertising campaign promoting the new dog food.  Sales went nowhere.  The agency was fired, a new one brought in, and a new campaign launched.  Sales still languished.

Fed up with spending millions of dollars with nothing to show, the CEO called together his sales and marketing team.  They met for hours, arguing back and forth over the reasons the two campaigns had failed.  The TV spots were too subtle and hadn't featured the product enough.  The co-marketing campaign with the supermarkets wasn't synchronized tightly enough with the print advertising.  The demographic targeting should have aimed a higher on the socioeconomic scale.  On and on it went until everyone was talked out.

Finally, the exhausted CEO looked around at his burned out staff and asked if anyone else had any possible theories to explain the poor sales of the new dog food.  After a long silence, a junior employee timidly raised her hand.  "Yes?"  asked the CEO.

"Well, I know this isn't exactly about marketing, but I noticed that the food tastes terrible and the dogs don't like it,"  she answered.
To eat your own dog food has become parlance for using your own products.  By doing so, a company avoids the trap of brainwashing.  Through use, they find out what works well, what doesn't, they gain a greater ability to empathize with their customers, and insights for future development.  It also creates credibility as customers see the company walking their talk.  Think which has one of the most effective sales processes around enabled by their own CRM system.

As for AT&T, there is a serious need for less marketing dogma and more eating of dog food.  Instead of having telesales call me twice a week to sell me their U-Verse service, take those millions and  spend them on expanding their network capacity.  Or better yet, make every AT&T executive and all their family members rely exclusively on AT&T cell service.

In the meantime, I can only hope that Verizon will cut a deal with Apple.

Sunday, June 20, 2010

My Top 25 (and counting) Business Book List

Periodically people ask me what business books I would recommend?  Or which books have most influenced my thinking?  Being a book junkie, I have a hard time whittling this down, but after much thought here is my short(!) list of 25...for now.

(Note:  Book title links will take you to an reference.)

Leadership, Management, and Entrepreneurship
Marketing and Sales
  • Influence: The Psychology of Persuasion (Collins Business Essentials) by Robert Cialdini (1984).  The first time I read this book, my blood ran cold.  If there is ever a course in sleazy marketing, this book could be the text. Cialdini exposes the psychological underpinnings of common marketing tactics.  I had to do a re-read of Badarraco afterwards to shake the willies.
  • Crossing the Chasm by Geoffrey Moore (1991).  Since it's initial publication, this has become part of the canon for technology commercialization in Silicon Valley.  Moore focuses on the startup transition from early adopter to mainstream markets.
  • The Four Steps to the Epiphany by Steve Blank (2005).  Blank is to Moore as the new testament is to the old in the canon of Silicon Valley technology commercialization.  Blank is father of the Customer Development methodology focused on helping startups gain first traction with early adopter customers.  Customer Development plus Agile Software Development are at the heart of today's Lean Startup movement.
  • Why Business People Speak Like Idiots: A Bullfighter's Guide by Brian Fugere, Chelsea Hardaway, Jon Warshawsky (2005).  This should be required reading for everyone in marketing communications with violators subject to incremental immolation over a hyperthermal heat source.
  • Different: Escaping the Competitive Herd by Youngme Moon (2010). Normally I would not put a current book on the list that has yet to withstand the test of time, but this one is the exception.  Moon goes beyond traditional branding.  Branding 2.0? Anti-branding?
  • The New Strategic Selling: The Unique Sales System Proven Successful by the World's Best Companies by Robert Miller, Stephen Heiman, Tad Tuleja (1985).  This classic on selling to major accounts is still the best around.  And if you're ever offered a chance to participate in Miller-Heiman sales training, take it!
People & Organizations
Sociological Environment
  • Future Shock by Alvin Toffler (1971).  While he didn't predict everything right, forty years later, its impressive to see how much Toffler did get right.  And the major trends he spotlighted continue to roll through our lives today.
  • Data Smog: Surviving the Information Glut Revised and Updated Edition by David Shenk (1998).  One of the earliest and still best essays outlining the differences between living in a world where finding information was the challenge vs. one where information glut is the issue.
The Numbers
Finally, as a Christian, there is one other book that is significant to me from a business perspective (among others).  That book is the Bible.  I've found few books dispensing advice as hard nosed and pragmatic as the books of Proverbs and Ecclesiastes.

Happy reading!

Related Blog Posts:
Useful Startup Marketing Concepts: The Short List

Sunday, June 13, 2010

Teaching High School Students About Entrepreneurship

Starting June 19th, I have the privilege to be teaching marketing and entrepreneurship to a group of high school students as part of the Stanford University Education Program for Gifted Youth.  In putting the course together, there is the obvious task of what content to teach the students, whose backgrounds range from no exposure to business to students who have one (or more!) startups under their belts already.  But equally important is the "meta content" that should be taught, for lack of a better term.  By meta content, I mean the implicit lessons to be imparted to prepare students to successfully apply the content being taught.  For those of you who've seen the movie The Karate Kid, think of the scene where Daniel finally gets fed up waxing Miyagi's car, in exchange for karate lessons, only to be shown that through the process he's actually been learning karate blocks all along.

For example, the meta-content students get through a public school education are geared to the demands of the industrial era.  In school they learn that authority is hierarchical, that questions have a right answer, and that the way to organize knowledge, work, and learning is by specialization, among other things.

The problem is that information era businesses, particularly startups, don't work this way, so that many of these meta-lessons are not only irrelevant, they are dysfunctional.  For example, much has been written about the need to break down silos - a natural outgrowth of the specialization mentality - in order to improve organizational performance.

So what do I want the students to walk away with in addition to the content being taught?
  • The fundamental reason for a business to exist is to fulfill a need;  any activity not directly involved with this is secondary.  The core of being able to do this is learning how to (1) identify a need (2) fill it and (3) do it in such a way that the business can sustain itself (i.e. business model).
  • The purpose of a startup is discovery.  The core of being able to do this is through intelligent trial and error and extracting lessons learned from both successes and failures.  This is Steve Blank 101.
  • In business there is no single right answer;  what's right is what works (provided that this is done ethically!)
  • It's people that make things happen.  Money and materials are just so much dead weight until people transform them into products and solutions.
  • Business is about teamwork and startups are about networking. You might be able to make a living as a soloist, but building a business is a team sport.  And networking is key to finding the team.
  • Business is holistic.  The distinction between functions like finance, marketing, sales, operations etc. is not as real as they teach in the text books.
  • Values matter.  They matter because people matter.  Values will infuse every decision made about how to treat customers, employees, partners, and investors.
  • Brains are important but character is more so.  Why?  Because business is usually conceptually easy but executionally hard, complicated, and messy.  I've found that one's ability to cooperate, inspire, and lead people, to persevere, to bounce back from adversity, to work hard, and to face reality are far greater determinants of business success than one's IQ.
I'd love to hear from you as to what else you think and what might be missing from the list.

Related Posts:
Uncontroversial Company Values
Takeaways from the Stanford B-School Entrepreneurship Conference
The Job of a Small Company CEO
My Top 10 Entrepreneur CEO Lessons

Monday, June 7, 2010

Applying the Customer Profile

3rd in a series on Customer Segmentation

Two weeks ago, we showed how to construct a customer profile.

Creating a Value Proposition Hypothesis from a Customer Profile
For a startup, one of the most important reasons to create a customer profile is to use it to formulate a value proposition hypothesis, the heart of developing product/market fit.

To illustrate, lets start from the example profile from before, looking at just the two pain points highlighted in red in Table 1:
Table 1
We create a new table (Table 2) with pain on the left, value proposition hypothesis in the middle, and product/service on the right.
Table 2
 Initially, the value hypothesis is an unvalidated best guess.  This needs to be validated in discussions with target customers fitting the demographic column (highlighted in blue in Table 1) of our customer profile.  As we iterate over time, the middle column can be changed from value hypothesis to value proposition.

Note that the value hypothesis describes the benefit derived by the customer in relieving the pain.  Ideally, this should be quantifiable.  Value hypotheses usually tie back to increased sales, increased speed, decreased cost, improved performance, or improvement in quality.

The far right column shows the product feature hypothesis (i.e. the specific product or service) we are offering to deliver on the value proposition.  This too need to be validated in discussions with target customers as to whether these product features actually deliver the value the customer wants.

Lead Qualification Using the Customer Profile
Whether as part of the hypothesis validation process or for sales execution, the customer profile is the starting point for qualifying leads.  To illustrate, focusing on just the two demographic points highlighted in blue in Table 1 we create a new table (Table 3) with questions we can use as part of a qualification script in the middle column and information learned or actions to take listed on the right.
Table 3
A good lead qualification script should shunt a raw prospect into the appropriate customer profile among multiple profiles or completely out of the sales process.  What I've skipped in this example is that we actually have several different customer profiles of which I'm only showing two (highlighted in orange in Table 3) called "serial entrepreneur" and "1st time entrepreneur".  If a raw prospect fits none of our profiles, it means that they are either not a fit or we potentially have a new customer type that requires further profiling.

I'm not going to cover the creation of lead generation scripts here.  But typically it's a flowchart with subsequent questions or action determined by the answer to prior qualifying questions.

Customer Segmentation from Customer Profiles
One of the fundamental premises behind marketing strategy and positioning is the concept that markets can be segmented.  The better your segmentation, the better you can target your offering which if executed properly should enable you to dominate your segment better than competitors who do this less effectively.  That's the theory.

One practical implication of this is in the area of sales resourcing and forecasting using the classic sales funnel.  To see how this works, Table 4 shows a simplified comparison of the sales funnels created from the two profiles highlighted in orange in Table 3.
Table 4
Note that based on our customer profile and our understanding of each type's pain, we have two different value propositions.  And in the case of 1st time entrepreneurs, we know that we likely have an additional step - education - not necessary with serial entrepreneurs and that that step has a fairly low yield rate.  This means that we know that to close the same number of new clients we have to talk to seven times as many 1st time entrepreneurs as serial entrepreneurs (30:4 ratio) and that it takes longer as well.  This has obvious implications about where we target our sales time and resources, what resources we use, and how we use them.

Customer profiles:  don't go to market without 'em.