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Archive for the ‘Marketing’ Category

Most Marketing Advice Tells Us How to Market to Marketers

Posted by Bob Warfield on August 18, 2014

free_lunchThink about it–the experts out there writing marketing advice as part of their content marketing strategies are all selling something.  They’re either selling software, consulting, or some other product.  And the audience they’re selling to are marketers.

Sure, many of them have practices or history that involved marketing to non-marketers, but right now what they’re doing is talking about how to market and the audience for that is other marketers.

I noticed a long time ago that what they were saying didn’t work for my own bootstrapped company (CNCCookbook).  It was fascinating to me when things that were repeated so often they seemed like gospel didn’t do me a bit of good, or worse, they actually lowered my conversion rates.

Here are some examples:

-  Infographics:  They’re all the rage.  Personally, I hate them because I am usually reading blogs on an iPad where they take too long to download and then you scroll and scroll and scroll.  But, the intelligentsia largely argues that whizbang infographics are some of the best content you’ll ever produce.  So I have dutifully produced a fair number of them and they’ve all yielded sub-par results.  There are likely a lot of reasons for it.  For example, when marketing to marketers, a lot of the audience are marketers marketing to more marketers.  An infographic that can be shared can have a trickle-down effect in that sort of niche.  In my world, I actually have by far the largest blog in my space and most of the other blogs are by stodgy corporations that aren’t about to share someone else’s infographic.  Disclosure:  I decided to write this article more or less in response to a Neil Patel article on how he is finding Infographics less effective over time too.

-  Controversy:  Lots of authorities have recommended controversy as a way to get read.  Some hugely popular blogs are so snarky I can hardly stand to read them sometimes.  Given my own personal distaste for this kind of thing, I haven’t done much of it, but I did feel it was being recommended so much that I had to at least test it for results.  Nada.  No interest.  Come to think of it, Neil Patel discovered some shortcomings here too.

-  Social Media: I’m down to running robots that post my blog posts at this stage.  Any more investment has never shown much result. Every time Facebook tweaks their algorithm you get less reach and it makes even less sense.  Twitter has never performed for me.  I remain convinced a huge percentage of Twitter users are bots that are incapable of being my customers, and recent Twitter disclosures seem to confirm this.  At best I regard Social Media as an alternative to RSS Readers and Email for a very tiny sliver of my audience.

- AdWords: Never seen these be productive. All the good keywords are hugely expensive due to competition. If you try to go too far out on the long tail, Google refuses to deal with those words saying there isn’t enough traffic.  I was so not surprised to read that eBay cancelled all their AdWords and it didn’t affect revenues.  Of course Google then levied a bunch of search penalties on them for having publicized this and they missed a quarter.

- Removing navigation from landing pages. I’ve tested this many times and every time it reduced the conversion rate. Hard to tell for sure from the analytics, but the bounce rates went up like crazy. My audience are highly technical, have lots of questions, and just didn’t like being stuck on the page with nowhere to go for more information.

-  Headlines on Landing Pages.  This one has been particularly frustrating.  I’m supposed to tell them what problem I am solving in clear and concise terms.  I have tested that endlessly and it gets poor results.  My audience is happiest (so far, I will keep testing this one for years) with a headline that too me seems far from benefit-speak, “Get the Latest Technology.”  I’ve paraphrased it so I don’t have to tell the back story, but that’s it in a nutshell.  People aren’t supposed to respond to that kind of thing.  Who cares what the latest technology is, what solves MY problem?  Yet it consistently beats every benefit-oriented headline I have ever tested, usually by a wide margin.

So what’s the answer?  Should we ignore all the marketing advice?  Should we maybe do the opposite of what they say?

The answer is not nearly so black and white, and if you think it is, you run the risk of throwing the baby out with the bathwater.

What every marketer has to realize (if they don’t already) is that every niche is different.  All of this Marketing Advice that’s available is great, but it isn’t gospel at all.  It’s just ideas.  The one critical deliverable you have to bring to the table to be a successful Marketer is some mechanism that takes all those ideas you want to try and effectively separates the wheat from the chaff.  That’s really the essence of Growth Hacking as I see it.  And the tools you need to do that work have to be Analytics and A/B Testing coupled with a keen analytical mind that thinks in these sorts of terms.  That keen analytical mind is particularly crucial because it is an art and a talent to devise experiments and then gain accurate actionable insights from them.  If you introduce too many variables (often unwittingly), your experiment may not be telling you what you think it is.  This is one reason why I test the Big Gospel ideas many times before I conclude they’re just not working for me.

So, by all means, collect the accumulated wisdom that’s out there, but verify that it actually works for your niche and your business.  I guess that’s what they mean by, “There ain’t no such thing as a free lunch.”

PS

I keep clippings of all the good marketing articles I find in a special blog called “Firehose Press.”  Check it out for a ton of good ideas, and remember, your mileage may vary!

Posted in business, Marketing, service | Leave a Comment »

Best Way to Succeed as a Solopreneur: Go For Fewer Customers

Posted by Bob Warfield on July 29, 2014

I’m reading with interest some posts that are hot on Techmeme at the moment from Jared Sinclair and Marco Arment about succeeding with iOS apps and as a Solopreneur.  Jared’s blog post is a cautionary tale for those who would like to bootstrap a small venture well enough to quit their day jobs.

Many weigh in with various comments and based on his latest post, it looks like Jared was inundated with a bunch of notes from people who thought he just didn’t market the app enough.

I’ve been a solopreneur with some part-time helpers trying to make the gig into a multi-person bootstrap for some years now.  I’ve managed to create a business that now throws off more cash than I’ve gotten at any Day Job I ever had short of being an exec at a public company.  It’s been an extremely happy experience and I thank my lucky stars and my awesome customers every day for making it possible.  I want to talk through what Jared has bravely reported about his venture and compare it to what’s different about my own CNCCookbook and talk about how I think those differences matter to a successful solopreneur.

First the Results of Both Companies

Jared starts out presenting his financial results from his iOS app, Unread:

FirstYearSalesUnread

Unread Cumulative Sales in the First Year…

It’s pretty easy to see why Jared is unhappy–most of the action happens shortly after he shipped the initial application.  Yes, there’s steady growth afterward, but the actual sales per week or month (remember, the graph is cumulative) had to be pretty disappointing if you want to live off that income.  The app only costs $4.99, so Unread has actually been extremely successful in terms of the number of customers it has attracted–looks like somewhere between 6,000 and 7,000.

I wanted a way to provide some similar insight into CNCCookbook’s apps, but I’m not as interested in Jared in giving away my exact finances (sorry folks, you’ll just have to do some back of envelope calculating to figure it out).  Here is the cumulative graph of software license years sold for CNCCookbook’s software:

CNCCookbookCumLicYearsSold

CNCCookbook Cumulative License Years Sold…

I’ve been at it for a few years now, and the growth has been steady, almost hockey-stick-like–this is a very happy business!  The big bump between 10/22/12 and 10/22/13 reflects the launch of our second product.  I’m hoping to get another bump like that in the next 6-12 months as I launch our 3rd product.

With all that said, I want to make some suggestions about what I think has made CNCCookbook successful.

Suggestion #1:  Lead With Subscription Pricing for Recurring Revenue

First, what is a “software license year sold?”  CNCCookbook sells both subscriptions and perpetual (you buy the software for life with one payment).  Recurring revenue is essential for Solopreneurs because it means they’re getting new revenue without much new work other than keeping the software vibrant and useful.  Getting new customers is hard work.  In a minute I’ll discuss how CNCCookbook goes about it, but suffice it to say I have created a business where my biggest problem is having enough software to sell my customers moreso than getting the new customers.  Part of that is due to the recurring revenue stream.  If you’re a fan of the SaaS/subscription model as I am, you’ll realize that once one of these revenue engines gets up sufficient momentum, they’re almost unstoppable.

So, my graph shows how many years of subscription were cumulatively sold for both products over time.  I plugged in a figure of “6” for any lifetime sale because that’s more or less how I think about my lifetime pricing.

Suggestion #2:  You’ll Want Perpetual Pricing Too, and the Subscription Helps Justify a High Price For It

 FWIW, I mostly wind up selling the lifetime version during sales, but that’s okay too because having a fairly expensive lifetime version does a couple of things.  One, it addresses the needs of customers who just don’t like getting tied to a stream of payments.  This is a very real audience, and if you don’t give them an out, you’re not going to reach them.  Why not choose a perpetual price where they’d have to keep resubscribing for so many years before you come out ahead that everyone can see it as a win-win situation?  Why leave the perpetual hole open for a competitor to come in and take over?  Once you have both pricing models, it gives your customers options.  Do they prefer to preserve cash flow?  My subscriptions do that, just like the lease vs buy decision on a car.

Suggestion #3:  Find the Sweet Spot on Price and Insist On It.  You Probably Want Fewer Customers Willing to Pay More.

My first product offering was $69 for one year.  It seemed like a lot to me at the time, but it wasn’t.  It was actually less than the product was worth–I raised that to $79 with no impact on the units whatsoever.  More importantly, it was and is too low for a business you want to have be your sole occupation.  This gets me to the point of my headline–figure out a business model that requires as few customers as you can easily sell to achieve your financial goals.  Jared’s Unread sells for $4.99–pretty typical for an iOS app.  But it took him almost a year of very hard work to produce it and it isn’t paying the bills.  It’s not really a matter of promotion–he has a ton of customers.  It’s a matter of the customers not paying him enough cash for each sale.

A solopreneur can only touch so many people.  You can only get the word out so far.  There is an upper limit on how many people you will have a chance to sell to when you launch, and on how fast you can grow that audience over time.  You need to be cognizant of that fact and find a product opportunity that can be priced accordingly.  Be brutally honest about how many customers you can close.  Forget models that require too many.

Advertising?  Fuhgeddabout it.  No hope in heck.  I’ve estimated that charging for your product is about 2000 times more effective than giving it away free and relying on advertising revenue.  Why make your job 2000 times harder?  It’s so attractive to sell Free until you realize the sheer magnitude of scale you must achieve.  Those are VC-only deals, folks.

Cheap Phone Apps.  Based on the information I’ve seen, Jared’s information, the problems with finding apps in the app store, and the platform owner’s huge tax of 30% on sales, I am strongly thinking phone apps are not a good target for bootstrapping or solopreneurs.  It’s too hard to market the apps, the platform owner has too much control over the walled garden, they get too big a share of your revenues (30% is huge if they’re not driving huge demand your way, and they’re not), and you aren’t able to charge nearly enough in most cases.

Phone apps have been a dilemma for me in my own business.  My audience would love one.  I have done the work to actually keep one code line running on PC, Mac, iOS, and Android, and there has even been a prototype run on iOS.  But the thought of the work involved finishing the app and questions of whether I’ll be cannibalizing my existing sales with sales that have a 30% tax to Apple or some other big guy has given me pause.  The project has been on indefinite hold while I look at other more promising ways to invest my time.

To get an idea of what you need to charge, look at some successful bootstrappers.  Take Basecamp–it’s $150 a month.  There are cheaper plans, but they limit the number of projects.  Eventually you will be likely to upgrade.  At $150 a month, you only need about 140 customers to be making $250K a year.  I see all these Solopreneurs talking about their $60K a year businesses and wonder why they aren’t aiming higher.

Or, if you have something with more mass market appeal, say like Smugmug, you an charge $40-300 a year.  It’s going to take a lot more customers than Basecamp, but if their average sale is say $60 a year, that’s about 4200 customers to do the $250K a year.  Given how many love photography, that again seems like manageable adoption to be able to succeed.  Either number is a lot fewer than Jared has already sold.

I mention that I thought my pricing was too low and I mean it.  $79 a year requires me to find 3200 customers to get to $250K per year.  It can be done, but I surely didn’t get there in 1 year or even 2 years.

If I had my druthers, I’d be looking for a niche that needs circa 1000 to 2000 customers to get to that $250K.  Hence, we are charging $125 to $250 a year or at least $99 a month.  Look around.  There are quite a few SaaS businesses at $99 a month.  I use a bunch of them to help me with CNCCookbook marketing–Wordpress hosting service Page.ly, SurveyMonkey, MailChimp, my shopping cart provider, etc., etc..

Things are priced where they are for a reason, and not simply because it’s what the market will bear.  It is not only what the market will bear, but it is also what can support a happy healthy growing business.

Suggestion #4:  Debug the Marketing and the Market Before You Ever Write A Product

Many solopreneurs are software developers.  I tell my non-developer friends about my business and they are envious, but can’t see how a marketer can get a product written without paying an engineer, at which point they’re no longer solo.  Engineers, OTOH, seem to think they can bump along and do a decent job of marketing.  As my marketer friends are fond of saying–everyone consumes marketing so everyone thinks they are an expert on it.

Here’s the thing: as a software developer, you know you can get the product built.  That’s pretty low risk.  It’s fun to dive in and start slinging code and pretty soon the demo starts showing some life.  But so what?  As I said, you know you can get the product out.  What you don’t know are two very important things:

1.  Are you solving a problem anyone cares about?

2.  Can you successful reach that audience to sell them your product?

Now here is the truly amazing thing:  you can answer both questions with very high confidence as a solopreneur in a relatively short time.  You can even do it fairly comfortably while holding down your Day Job–even better.

There’s a short list of tools and skills you’ll need to master that I’ll get to shortly, but in order to solve those two big marketing problems, you need one critical talent:

You’ve got to be able to tell a story people want to listen to, and you have to be able to do it in writing.

If you can’t tell a story people want to listen to, I think your future as a solopreneur is probably not going to go well because you’re going to be left either needing someone else to tell your story or just buying advertising.  I keep playing with advertising every six months or so.  I am very analytical and well versed in how to do it.  I have conversion hacked landing pages with great results and done tons of A/B ad testing to try to improve the results.  My conclusion each time I try the experiment is that it just isn’t very profitable.  It costs me so much to sell a customer using AdWords that it is hardly worth it.  I’ve talked to a slew of bootstrappers, and their mileage varies.  Many report something similar.  Many do not keep good enough analytics to even know, they just budget for it and spend the money, hoping it will work.  I guess if you want to depend on ads, this is also something you can know up front.  You can try ads that lead to a page and see what it costs you to get people to that page.  The trick is in what they do when they get there.  In my case, they sign up for a free trial.  That’s one conversion event.

The next thing is to convert them from the free trial to a paying customer.  That’s a second conversion event.  I do very well on the latter–about 20% of free trials become paying customers, which is very decent.  Where I fail is getting enough ad click throughs converted to the free trial relative to what the ad costs.  You can do the math:

1.  The ad costs $1.50 per click through, for example.

2.  The page converts 27% to click through to the trial signup.  Conversions for me are better if they don’t sign up on the landing page–that’s being too pushy for my audience.

3.  Once on the trial page, 25% successfully register for the trial.

4.  As mentioned, 20% of the trials convert to paying.

So if I get $79 for the sale, I can afford to pay $79 * 20% * 25% * 27% = about $1 to break even.  $1.50 is very unprofitable.  Even if I can buy ads for 50 cents, which I very seldom can, it still seems like I am giving Google the Lion’s Share of my hard work.   OTOH, if I am Basecamp, all that changes because I am looking at an annual value of $150 * 12 = $1800.  I can afford to pay quite a lot for advertising in that case.

Working through those numbers is how you debug advertising as a marketing possibility.  There’s still one other big advertising drawback even if you can afford it: it doesn’t create a sustainable marketing asset.  Once the ad has run, you quit getting value from it and you must spend more money on ads.  That’s one reason why I much prefer inbound or content marketing.  If you create great Evergreen content, and own the searches for those subjects, you own a marketing asset that keeps on giving without your having to do much.  You can spend time adding even more Evergreen content.  That model scales well for the solopreneur and small resource-limited bootstrap.

With that model, you’re relying on giving away great free information to attract people via referrals and search engine traffic.  This is the one you can really debug well without even starting a product.  This is the one where you need to be able to tell a story.  The reason is that you can start a blog aimed at your audience with an email mailing list for that blog and find out what works.  Do they care about a problem you want to solve with a product?  Write articles about the problem and see if anyone comes to the party.  Can you reach this market?  Go forth, read the relevant blogs, visit the relevant social sites, and find out what they’re talking about.  Find out what they’re interested in.  Start talking about that on your blog.  If they show up, start building your readership.  Collect their emails and start a weekly blog digest newsletter. Track your progress.

Now do some more back of envelope.  How many do you need in your fold?  I’ve typically been able to sell 4 or 5% of the folks on my email newsletter a new product.  So if I must sell 1000 to reach my financial goal, I had better have 20,000 folks reading my email newsletter.  I recommend you spend 6 months to a year building up your online content (blog) and building your newsletter before you even start writing your product.  Get a sense of how long at your current growth rates it will take you to have enough that you can meet your financial goals and plan it so that by the time you finish the product, the audience are already there, eating popcorn in their seats, and waiting to see what you can offer them.

This is what I mean by debugging the Market and Marketing before you start a product.  Nothing could be more frustrating than to turn in a ton of cubic hours building a sweet product only to have it fall far short of your financial goals for it.  You need to discover whether you can tell stories well (or write ad copy or whatever) enough to attract an audience without a product.  If you can do that and give them a sweet product,  you’re much more likely to succeed.

What about those skills and tools I mentioned?  Yeah, there’s time to figure all that out too during that 6 months to a year when you start creating content.  You have to figure out how to run a blog, (I have 4 or 5 kicking around here somewhere).  Just go get WordPress, don’t even mess with anything else.  Figure out how to use plugins.  Don’t write custom code, that’s a distraction.  You need to figure out how to collect the emails.  That’s a WordPress plugin plus an email service.  I use AppSumo’s List Builder (not here, on the CNCCookbook blog) and MailChimp.  Then there’s all the techniques of creating landing pages that convert and SEO and all that jazz.  It’s not that hard.  Seriously.  I have a clipping blog I call Firehose Press.  Every single great marketing how-to article I have ever read is there.  Read it and digest it and you will know nearly everything I know about marketing.  Go back over the articles in this Smoothspan blog.  There’s plenty of posts that chronicle various epiphany’s I’ve had about marketing along the way.

Conclusion

I didn’t write this article to knock Jared’s efforts–he’s done well by getting so many customers.  He obviously built a sweet app.  If I were to suggest differences, it would be in two areas.  Jared had wanted to succeed with his launch and with blog and social media mention.  In my mind, that’s too passive.  You have to create an engine that you can control with a throttle you can push when you need to.  My throttle is to write more and better content.  I suspect that the lack of controller marketing that could be invested in is what made Jared’s sales graph so flat, while a price that was too low is what made it so hard to live on the revenue from the product.

I didn’t write it to beat my chest about what I’m doing.  It doesn’t matter, it isn’t that big a thing, and I don’t believe it will help CNCCookbook in any way despite what some marketing folk say about such things.

I wrote it because I love being a solopreneur and bootstrapper.  I think it is the greatest thing since sliced bread.  I’d really like to see as many people as possible get a shot at it, so I’m trying to pass along what I’ve learned along the way.

As always, there are many strategies that work.  I certainly don’t have the One True Path.  But if I’ve helped clarify things even a little bit, then I will have accomplished what I wanted and I thank you for your patience reading through the post.

Posted in bootstrapping, business, Marketing, strategy | 5 Comments »

Microsoft: World’s Worst Customer Service? (Walmart, Amazon, GE, BestBuy, MacMall, and Paypal Not Far Behind)

Posted by Bob Warfield on July 28, 2014

microsoft-surface-pro-3I recently tried and failed for the fifth time to buy a Microsoft Surface Pro 3.  It’s been a real comedy of errors, but the latest attempt has been by far the most spectacular failure.

Let me start out by saying I really like the Microsoft Surface Pro 3.  I am a perfect candidate for it as I would like to replace the combination of my Macbook Air and iPad with just one device for travel and for demos of my software away from the office.  The business I’m in is software for the CNC Manufacturing world, and while my own software runs on both Mac and PC, most from that world is PC-only.  Hence a device about the size of an iPad that can run desktop Windows software would be a real boon.  The Surface reviews I’ve read have been largely positive, and I played with one at a Microsoft store for long enough to feel like I would be very productive on it.  The keyboard was great and I had little trouble dealing with the Win 8 differences everyone is complaining so much about.  So I resolved to get one.

In fairness, all of my problems have stemmed from one little wrinkle in how I wanted to buy the device.  I’m looking at about $1500 all in, and I wanted an interest free for 12 months deal–the same kind of deal I used to purchase my Macbook Air.  My business is steadily growing and I like the idea of charging most of the cost to the larger version of the business that will exist down the road.  These offers all involve signing up for a credit card, with my Apple Macbook Air it was really no big deal.  I recently had paid off the Macbook Air and so time to get another device.

Here’s what happened.

Fail #1:  Best Buy

Despite haunting the Microsoft Store since the Surface launched in hopes of their offering a deal, no joy.  So I started Googling and wound up at Best Buy.  Looked great, so I attempted to make the purchase.  The online credit card app simply froze up the browser and would neither confirm nor deny I would be able to do the transaction.  Geez, how can a company the size of Best Buy have IT producing forms like this that flat don’t work?  Seems like they’re wasting a lot of opportunity if it happens to very many.

Fail #2:  Walmart

A little more Googling and I discover that Walmart has the same deal.  Great.  Except, oh oh, same problem–the credit card app just fails.  Takes all the info, hit the button to go for it, and nothing happens.  I’m now starting to wonder if the problem isn’t some common third party?  It doesn’t really matter, both these two retail behemoths have lost a $1500 transaction for a stupid reason–their web site didn’t work.

Fail #3:  Amazon

At this point I am thinking it can’t be that hard, SOMEBODY must do this.  So I tried Amazon.  Aha!  They’re offering the no interest deal I want!

I filled out all the information to apply, the application worked (I guess Amazon knows a lot more about software than Best Buy or Walmart), but it turned out to be bait and switch.  Buried in the fine print is a notice that GE Capital would only finance $500 of my $1500 purchase.  Now I have a GE Credit card that will get shredded and never used.  That has to be sub-optimal for both GE and Amazon–they went to all the trouble and cost but are getting no revenue from me.  Not to mention a $500 limit is insulting.  Amazon knows I spend a fortune with them on all sorts of things including Amazon Web Services and have never missed a payment.  Come on guys, do your computers talk at all?  Why offer this stupid $500 credit card on a $1500 purchase?

Fail #4:  PayPal + BillMeLater + MacMall

I went back to the PayPal site to process some orders for my business, and noticed BillMeLater being advertised.  Wow!  I had seen the ads come up every time I had paid for something with PayPal, but I generally just pay cash and had more or less ignored them.  They have a product search that will plug you into a BillMeLater transaction with some merchant that has what you want.  I promptly searched for “Microsoft Surface Pro 3″ and got vectored onto MacMall.  Hmmm, that’s kind of odd to buy a PC from a company that sounds like a Mac company, but why not?  I was getting pretty tired of the chase by now.  I started down the path and promptly noticed I was only going to get 6 months interest free, but again, I was beaten down and ready to do a transaction, so I went ahead.  Filled out all the forms, yada, yada, and BOOM!  I was back to Fail #1 and Fail#2:  PayPal reported that they couldn’t complete the transaction for unspecified reasons (like those other credit card apps just freezing up) and I should try again later.  WTF?!??

Fail #5:  Microsoft + PayPal

Is this becoming Epic Fail, or what?  It’s almost comical by this point.  But, the best is the final episode (so far) and involves Microsoft and Paypal.  I was still focused on the idea of using BillMeLater and it was a new day.  So I had the idea of just seeing who would sell me a Surface Pro 3 and let me pay with PayPal.  I tried Microsoft first, and sure enough.  Excellent!

So I hopped on, performed the transaction, got to the part where you pay PayPal, and for the first time ever (I have made hundreds of PayPal purchases) I saw almost nothing of PayPal and never got the opportunity to use BillMeLater.  Bloody Hell!

I immediately went to PayPal and cancelled the transaction.  There’s a button right there and they accepted and confirmed the cancellation.  Then I went back to the Microsoft Store.  Not so easy to cancel there, I had to call  the dreaded 800 number and wait.  But eventually I got a Service Agent and after answering many strange questions, she assured me that the transaction was cancelled, and that she couldn’t really help me in any way to purchase a Surface with 12 month no interest financing or even to use BillMeLater to make the purchase.  Gee thanks, Microsoft.

So I’m thinking this is pretty silly.  Microsoft must want to be moving these stupid devices and should be making it easier, right?  Maybe I would just go lob a suggestion in to them and maybe someone would get back in touch with me with the right stuff.  I searched in vain both the Microsoft site and the Microsoft Store site for some place I could make the suggestion.  Apparently they are not at all interest in hearing from customers.  I guess I should’ve expected that after getting this far.

Fail #6:  Microsoft + PayPal, Again

This morning I logged into my computer to find 3 email message from Microsoft–a return authorization, a notice that the cancellation had failed, and another notice telling me I should just refuse deliver on the shipment.  Oh boy.  You would think Microsoft could manage to process a cancellation that happened within minutes of an order to avoid needlessly shipping physical goods to a customer who doesn’t want them.  No joy.  So then I bopped over to PayPal to confirm that my cancellation of the prior day was still in place.  The report had been updated to say they were going ahead and paying Microsoft.  WTF?!??  Really?  After both organizations had confirmed the cancellation the prior day?  Are you kidding me?

Now I’m angry.  Both these behemoths had clear instructions from me and had accepted and confirmed.  So, I called PayPal Customer Service.  A nice lady eventually picked up (yeah, lots of voice menus for THEIR convenience) and she confirmed from her screen that I had indeed cancelled payment.  Why then, does my report show this as a transaction that will be paid and why is the cancellation no longer showing?  Well, it looks like the transaction went through before the cancellation could take effect was the response.  OK, why does my balance still not reflect a deduction for the payment then if it’s too late to cancel 24 hours after the cancellation went in and was accepted?  “I’m sorry sir, but it is too late to cancel.  You’ll have to wait 48 hours to see if the seller has refunded your money and if they haven’t, you could file a dispute at that point.”

 

Conclusion

I was really pretty excited about getting a Surface Pro 3 when I started this trek.  I’m shocked at just how many organizations screwed up their Customer Experience along the way and at just how low the bar is set for that Customer Experience to be acceptable to them.  It can’t possibly be a good thing for sales of the Surface for there to be this much friction in the process.  I am hopeful that some one of the organizations involved will read this and contact me with a solution I’d like, but at the same time, I don’t think I’ll hold my breath.

Macbook Air and iPad?  You’ve got a solid year ahead of you still.  Maybe I’ll just wait until the Surface Pro 4.

Posted in amazon, apple, business, customer service, gadgets, Marketing, microsoft surface, mobile, strategy | Leave a Comment »

Let’s Try Another Verse of Your SaaS Company Does Not Need a Sales Force

Posted by Bob Warfield on May 23, 2014

MorpheusNoSalesForceIt’s time for another installment of what some of the Enterprise Irregulars have called the Jason and Bob show.  Jason and I have disagreed on a fair number of issues over time, though we have also agreed on a lot.  Jason’s had a great run and is now in the rarefied atmosphere of VC’s.  All of his material is thought provoking and well worth a read.

Today, we’re going to talk about Outside Sales or indeed the question of whether SaaS companies must have a sales force at all, inside, outside, or otherwise.

Jason’s post today is “Inbound or Outbound Sales? The Answer is Yes.”  In it, he argues that

There’s a meme, a CommonThink, among certain segments that Outbound Sales is Bad, or at least, a Little Unseemly.  And maybe a lot bit Old School.

That we’re in a new world of sales, a new consultative world, where leads come in, prospects can try and learn before they even talk to a human, and then, a sales rep thoughtfully answers questions, models business process change, and helps them decide how and why, and if, to buy.

And that’s true.  We are in that world.  Inside sales is terrific.  Warm leads are great.  Live trials of easy-to-use-and-deploy web services really have changed the game.

And yet …

The reality is, by revenue, this isn’t the way the majority of the world buys.

My role here today is to cast a dissenting vote, and to explain why.  In fact, this one’s been argued between us before so I’ll just refer you gentle readers to my original response to get the ball rolling:

Does your SaaS company have to have a sales force?

In that article I make the case that, no, your SaaS company doesn’t automatically need Outside Sales. It’s a function of who you need to sell to and that’s a function of what your solution costs. The more money involved in an individual sale, the more likely you need Outside Sales.  This isn’t really news or something I made up, by the way.  I learned it at the knee of one Geoffrey Moore, he of the Chasms and Gorillas and such.  I find it makes a lot of sense to think about how you need to sell based on the size of the transaction involved.  In hindsight, it’s obvious that a very expensive purchase carries a lot of risk and that a large organization will need to involve many people and ultimately a highly placed decision maker to get it done.

Jason does tip his hat to this notion with some remarks about selling to SVP’s, but I believe it’s something that startups need to think really carefully about very early on.  Horses for courses. What’s the right way to sell for my specific product and opportunity?  You need to make a conscious choice during the very early stages of the startup about what your strategy will be in this respect, because it’s going to have a profound impact on what sort of company you’re building, what kinds of skills you will need, and even the capital needs of your venture.

Jason mentions the “meme” that Outbound Sales is Bad.  Surely that’s damning with faint praise, but there are sound reasons why that meme is out there.  He says, “by revenue, this isn’t the way the majority of the world buys,” referring to purchasing without the need for Outside Sales.  Au contrare, Jason.  I don’t believe it and I have never seen any data to support it.  In fact, you don’t have to look far to see that the biggest revenue is associated with offerings that don’t require either inside or outside sales. Think Apple, Walmart, et al. Their selling is totally self-service and marketing-driven. Not software? How about Google or Facebook? Oh, not business enough? What about Github, Amazon Web Services, or many other ventures that are hugely successful.  While we’re at it, let’s look to where the majority of the profit, not the revenue goes and the differences are even more stark in favor of finding models that don’t require Sales.

What if that’s the real opportunity–start something that works and doesn’t require Outside Sales.  Or if you prefer, consider the potential for disruption that going into a market with a product that can work without Outside Sales offers. That’s exactly what PC’s did to the Minicomputer vendors. The Rolex-clad, scratch golfing, Armani suited crowd with good haircuts laughed at the little computer stores and the pathetic IBM PC.  Ken Olson himself laughed at them all the way to the point where DEC disappeared and was never heard from again and in a very short span of time.  Hitting an Outside Sales-driven industry with a solution that requires no sales creates the Mother of all channel conflicts for the poor sales-driven company.  It is just as toxic to companies with Sales Forces as Subscription models are to Perpetual License models.

The other reason the meme is strong is capital requirements.  Outside Sales-driven opportunities are going to require more capital to finance their longer sales cycle.  It’s unavoidable when you have to wind your way through the organizational complexity that’s there to stop a company from foolishly spending its money without proper checks and balances on your expensive solution.  SaaS itself is already capital inefficient because it pulls expenses forward and pushes profit out over time relative to getting it all up front in the Perpetual License model.  We live with it to get to the pot of gold at the end of the rainbow, but what if we could at least mitigate it by selling a product cheap and easy enough that it didn’t need Outside Sales or even Inside Sales?

That’s how the companies I’ve mentioned got to be so big so quickly.  That’s why this so-called meme is a real business strategy that’s disruptive and must be considered by any startup.

Figuring out how to leverage strategies like this in new markets where you can be supremely disruptive to the incumbents is what successful startups are all about.  Don’t be a slave to tradition.  You’re not here to build another SAP.  You’re here to build the next generation by disrupting SAP and Oracle.  SaaS is probably not enough to do that, though some argue otherwise.   I think many of those are confusing disruption with room at the bottom (great link from Jason, BTW).  The thing is, everyone’s doing SaaS now, so what’s different about your story?

 

Posted in bootstrapping, business, enterprise software, Marketing, strategy | Leave a Comment »

Random Thoughts on Customer Engagement, CRM, and Social CRM

Posted by Bob Warfield on May 13, 2014

Can Enterprises learn to talk WITH Customers rather than AT them?

Can Enterprises learn to talk WITH Customers rather than AT them?

I read with interest Paul Greenberg’s, “Random Thoughts on CRM.”  They don’t call Paul the “Godfather of CRM” for nothing, and this post got some old neural circuits firing again just like it was yesterday.

The gist of the article was about how a much larger market, called “Customer Engagement”, will eventually subsume CRM and make CRM just a feature of the larger Customer Engagement matrix.  The process of assimilation is already underway and presumably resistance is futile.  Paul characterizes Customer Engagement as involving all that is CRM plus the following:

 

  • Customer journey management
  • Customer experience management
  • Customer analytics including sentiment and text analysis
  • Social listening
  • Gamification engines and platforms
  • Customer engagement platforms (broad definition here)
  • Feedback management systems including ranking, rating engines)
  • Reputation management engines
  • Customer interaction engines (e.g. Epiphany, Exact Target)
  • Self-service knowledge engines
  • Community platforms
  • Social networks
  • Personalization engines
  • Communications platforms that foster customer communications (parts of unified communications fit the bill here though UC is a lot more than this)
  • Enterprise video chat/conferencing
  • Customer Effort Scoring (score on what you do. Thanks to Esteban Kolsky for this one). How much effort does a customer make
  • Loyalty and Advocacy systems

I wholeheartedly agree, and it was as I was reading that list that I suddenly had my epiphany:

Customer Engagement is nothing more than Social CRM writ large.

Or if you prefer to be a little less dramatic, Customer Engagement is the Second Coming of Social CRM.

Whether you believe Social CRM failed, was an idea before its time, or is simply percolating along and growing steadily, I can’t think of a better way to describe Social CRM than to say that it’s all about Customer Engagement.  The difference between Social CRM and Conventional CRM is almost entirely a matter of perspective:  are you talking WITH your Customers or talking AT your Customers?  CRM talks AT them.  It values them solely as leads to be qualified and sold to or as an expense area in the case of Customer Service to be minimized.  Paul’s list of Customer Engagement activities is nothing more than a list of what sorts of conversations can be had WITH Customers and what tools may be available to facilitate those conversations.

That problem of talking AT your Customers (and yes, “Customer” must be capitalized in this era when those who can’t learn to talk WITH them will start to increasingly lose) is a cultural problem born of seeing Customers as accounting line items and metrics rather than as PEOPLE who can choose to do business with us or not. Social CRM skeptics back in the day (seems so long ago since I was part of that world) danced around the cultural issues–they were sure Social in the Enterprise couldn’t work just because Enterprises were all about Command and Control and not what it takes to be Social.  Not all Enterprises are, BTW.  Companies like Southwest Airlines come to mind as counter-examples.  But by and large, Enterprises are very much about Command and Control.  I believe that a close relative of the Innovator’s Dilemma is what I will dub the “Politician’s Dilemma.”  It’s what happens when an organization grows large enough that the primary skill needed for advancement is not creativity or the ability to make good decisions, it’s the ability to be a good politician.  It’s been the undoing of at least as many large organizations as the Innovator’s Dilemma, and it is also closely related to those pesky cultural problems that prevent Enterprises from seeing Customers as Customers rather than $customers (and I wish I had an even smaller font for “customers” and a bigger one for “$”).

Here’s where I wonder about Paul’s view that Customer Engagement is, in fact, going to eat CRM.  I wonder because I can’t see much evidence these cultural biases that prevent Enterprises from being good at CRM have even remotely diminished.  Perhaps over time the Internet will exact a toll on their callous disregard for real Customer Service.  Certainly the frictionless exchange of information about what a Company’s products are REALLY like and what it is REALLY like to deal with that company help.  But, our fixation in the 80’s, 90’s, and 2000’s with reducing regulation and empowering ever larger monopolies (and hence the 1%) has been a powerful counterbalance to any renewed sense of egalitarianism the Internet brings.  Simply put, it’s business as usual for these companies.

Paul brings up the 4 largest companies in the CRM space:  Salesforce, SAP, Oracle, and Microsoft.  It’s funny, but with the possible exception of Salesforce, you couldn’t ask for a stronger list of the Who’s Who of having abused their customers and maximized their Bully Pulpit Status.  Perhaps by being (or seeming to be) the exception, this is precisely what has driven Salesforce’s growth.  I certainly know people that work there and talk about it in much more glowing terms than the other 3.  Let’s leave Salesforce aside and ask about the other 3:

What are the chances that SAP, Oracle, and Microsoft can actually learn how to talk WITH Customers and not AT $customers well enough to participate in Customer Engagement at a more empathetic level than, say, researchers watching mice in mazes?

I’m not optimistic, and I don’t think Paul is either.  He offers the following critique of the four companies:

  1. Salesforce.com – They are getting so big and so process driven that a lot of the creativity that characterized the company is starting to seep out.
  2. SAP – The continuous politics at this company are forcing it to step on its own feet every time they make progress – and we start again.
  3. Oracle – They are totally locked and loaded into their customer experience messaging and it’s the wrong message to send to the marketplace.  This prevents them from thinking in terms of ecosystems – which is a 21st century requirement for a large company’s success.
  4. Microsoft – They are moving quickly but still don’t have the messaging down at all. They send mixed messaging signals to the market and they are hard to read. They need to clarify this right away, since they have successfully accomplished a radical transformation of their customer-facing applications for the better. Now the world needs to hear it.

Ask yourself whether the essential cultural virtues needed to thrive in a world of Customer Engagement are likely to be strong or weak in the light of those criticisms?  Even for Salesforce, eliminating personal initiative and emphasizing management by excessive process is a sure recipe for stopping any real conversations with Customers.  It’s hard to change for all the same reasons that once the Peter Principle has taken hold, you can step back from it.  People are hired by bosses who hire the sort of people they want to hire.  Bosses who think of Customers as $customers don’t hire people who think “Customer.”  They hire more $customer people.  Sure, you can add a few Customer lovers here or there, but they drown in the sea of $customer people.  It’s a vicious cycle that can’t be undone.  Command and Control never goes softly into that Good Night, least of all because it is very Commandingly In Control.

What does it all mean?

Optimistically, it means that these four will eventually give way to a New Guard of some kind.  I’d like to think that’s true everywhere and in every industry that finally understands the Customer is King.  Taking that view is a powerful Engine of Growth for new ventures.  It is disruptive in much the same way SaaS has been to Enterprise Software because where SaaS was a business model change that could not be achieved, Customer Engagment is a Cultural Model change that is too hard to achieve.  It’s relatively easy to hire a new CEO or merge to make a new entity.  So far, we are tragically short of good Existence Proofs that this New Wave is underway.  There are precious few Southwest Airlines and an endless stream of Ego-Du-Jour companies that power to the forefront or that cling tenaciously to the monopolies they already own.

Fundamentally changing the culture of a company?  That’s darned near impossible.  I’m not sure I’ve ever seen a successful example of it outside the fawning press releases and interviews telling us how transformative some new CEO has been, all of which turn out to be false hopes.  More’s the pity.

Postscript

Paul Greenberg’s response, via Facebook:

Bob, I read the post. I’m more optimistic than you on this, though I really liked your post. Also, these are random, and to be fair to the Big 4, I also noted what I liked big picture about each of them too. I just don’t have a black and white view of this at all. its a nascent, roiling market at the moment and lots to come of it hasn’t happened yet – and is indeterminate. Also, I agree with you totally that this is what you called Social CRM writ large though my take is a little different. You’ll see more on this in a series of major pieces that will be coming leading to the next book. Social CRM was the progenitor for customer engagement – it didn’t fail, like social business morphing in its short life to digital transformation, social CRM now CRM morphed to something much larger and more encompassing that the parent was/is. CRM becomes the operational components of the engagement market. You are a helluva writer, by the way. Seriously good.

Paul is not just a brilliant CRM analyst, but a gentleman and renaissance man of the sort that is seldom seen these days.  I know him via my past life in Social CRM and the Enterprise Irregulars.  Thanks Paul!

Posted in business, customer service, Marketing, strategy | 1 Comment »

Good Customer Experience Trumps Good Customer Service. Bad CUX Trumps All. A Tale of Chukka Boots and Photoshop.

Posted by Bob Warfield on January 22, 2014

ChukkaBootsGood Customer Experience trumps Good Customer Service, even if you are Zappo’s.  My wife quit buying shoes from Zappo’s after they sent her the wrong pair of shoes for the third time and she had to return them.  They didn’t do it all on the same transaction, it happened over a fairly long period of time.  And yes, the Zappo’s Customer Service people were wonderful as always.  But it didn’t matter–the underlying Customer Experience was giving her the wrong shoes and she only allowed that to happen so many times before she gave up on them.

I had a similar experience with Zappo’s, but I didn’t even get as far as Customer Service.  I have bought shoes from them once–a nice pair of Clark’s Chukka Boots.   Great!

Some time later, I went looking for some tennis shoes.  I have a penchant for bright red shoes of the most exotic design possible that I wear when I go to hear live music.  I went straight to Zappo’s, found a pair of shoes I wanted, and tried to purchase.  I expected to be able to use my Amazon account, given they’re owned by Amazon and all, and it looked like I could do that, but I actually couldn’t quite make it work.  I don’t have an account on Zappo’s, because in a time of data breaches like Target’s, I open as few accounts as I can.  So I moved on.  It came time for me to buy another pair of shoes and I went  back to Zappo’s again, thinking that companies as savvy as Amazon and Zappo’s would surely have fixed the problem.  I found the shoes I wanted and tried once more to buy them.  No joy.  I could find no way to buy on my Amazon account and did not want to spend the time opening a Zappo’s account.

Not only did Zappo’s lose the sale of 2 pairs of shoes, but I just won’t go back there again.  It isn’t clear to me Amazon cares much, because in the end, I did buy those 2 pair from Amazon.  But if there was a good alternative I was familiar with, I would’ve skipped Amazon too, just for annoying me.

Now, how hard would it be for Zappo’s not to send my wife the wrong pair of shoes 3 times?  She doesn’t buy shoes all that often, so it was surprising it happened to her so many times.  And how hard would it be for Amazon to make it easy for me to buy shoes from Zappo’s with my existing Amazon account?  Come on, this can’t be rocket science for a company like Amazon.  If Google can figure out to put a birthday logo on their search page on my birthday because it picked up my birthdate somewhere in their far flung empire, Amazon can let me buy Zappo’s shoes with an Amazon account, right?

Fast forward to this morning.  I was doing something and fired up Adobe Photoshop CS3 (yes, I have had it for a long time!).  It immediately announced I had 2 days left to activate or it would die.  Great, I did remember it asking a few days ago.  I had tried and it kept telling me it had an Internet connection problem.  I knew it wasn’t at my end, nothing else was complaining, so I figured I try again–they surely had fixed their problem by now.

No joy.

I was forced to use their phone activation.  With some trepidation I dialed the toll-free number and waited.  I really hate phone support.  It just isn’t ever a happy thing.  Ever.

Eventually, it had me key in a 24 digit serial number followed by a 32 digit activation code using my phone’s keypad.  Wow, that was a joy–not!  But, Photoshop at least did pop up a box that had the phone number to call plus these two lengthy codes to make it easier.  Unfortunately, the phone robot announced my activation code did not have enough digits.

WTF?!??  This was exactly the same code that Photoshop was telling me was the one to use.  How could it be wrong?

I tried twice, to no avail, at which point it told me to hold for a support representative.  Good, I was ready to let some human being know what I thought about all this after having used the software for several years.  Unfortunately, after a 5 minute wait, the Adobe side announced that they were no longer handling activation problems by telephone and gave me a URL I would have to visit with my browser to fix it.  Of course my blood pressure went up to the next DefCon level.

I went to the page suggested and couldn’t find even a hint of clue about what to do.  It was kind of a haphazard FAQ that only listed a few things, none of which could possibly be at issue.  When I got to the bottom, there was a Chat button with a message that cheerfully informed me I could get on right away with an agent if I would simply click.  So I did.

Of course as soon as the chat window opened, it informed me there were other customers ahead of me in line.  WTF?

Okay, deep cleansing breaths.  After no less than 10 messages informing me I was still waiting (no duh, I know I am waiting), Kumar finally popped up.

Kumar is mostly robot.  He is no doubt based on the old ELIZA simulated psychiatrist program which would always turn your question back around without really ever answering much.  It’s a primitive AI technique that’s been around forever.  Try it if you like, it’s kind of creepy in the same way that Kumar was.  I had to provide a description of my problem up front, and Kumar would ask me questions that were phrased along the lines of what I’d already told it, but that didn’t really add much color to the situation:

“Hi Bob.  You’re here because you can’t activate your Photoshop?”

“Yeah Kumar, that’s what I said in the original description.”

This is where Kumar gets clever.  Every time I respond, I get back a message saying, “Okay Bob, I’ll be back in 2-3 minutes after I check into that and take the necessary actions.”  Literally every single response I made, it would do that.  This is because Kumar, or whatever the real human being is named, is sitting in a giant call center somewhere dealing with probably 100 customers simultaneously.  He doesn’t want to get back to any one of us too quickly lest we monopolize too much of his time and annoy the other customers.  So, he uses all this clever software mostly to stall us customers so he can handle more of us.  Sweet!

He asks me to type in my 24-digit serial number (DOH!), but fortunately, I can just copy and paste it (Hah, outsmarted you bozos!).  Then he goes away for extra long–longer than the 2-3 minutes promised.  When he gets back, he wants to know my email for my Adobe customer account.  Oh boy.  Each piece of information will be asked for at 5 to 10 minute intervals–this is going to be painful and I have an appointment in 10 minutes.  I call the appointment to say I am coming, but I will be late.  It’s taken me 45 minutes with Kumar to get this far.

And then, a bit of magic happens.  Kumar comes back and says it’s all fixed, please try again.  I do, and low and behold, the Internet activation works.  A modicum of happiness ensues and I recall the nuclear bombers my DefCon blood pressure rise had summoned.  Then I started thinking about what had happened. Basically, the only reason online activation, had failed, the only reason I had worried whether I would fail to activate and thereby lose a valuable tool, the only reason I had to spend 45 minutes trying to tell Kumar the two pieces of information needed to fix the problem, the only reason I was getting really ticked off at Adobe, was because they wanted to associate my serial number (Kumar didn’t even ask me for the activation code) with my email.

Remember when I said I didn’t create an account with Zappo’s?  Well I also didn’t bother registering Photoshop.  It used to pop up a box about every 2 weeks asking me to fill out an elaborate form, and I would just tell it to go away.  Eventually it offered me the chance to tell it to never ask again, and I did so, thinking what a relief.  Nowhere did they tell me that eventually some power that be would decide they were going to force me to reactivate software that had already been activated and then put me through a painful experience of apparently having that activation fail, just because they wanted me to register.  A registration they no doubt needed so they can send me better marketing spam.

Can we see by now how to apply the maxim that Good Customer Experience trumps Good Customer Service?  Adobe didn’t really give good customer service, BTW, it was terrible.  I don’t blame Kumar for it.  I blame a Draconian wall and a moat filled with alligators designed to keep costs down on a cost center (Customer Service) that was built by a left and a right hand not knowing each other in a large bureaucratic organization and a marketing organization that only cares about filling its lead hungry maw.  It’s about par for the course with large organizations but it also happens to small organizations that pride themselves on treating customers well.  Tragically, it is so unnecessary and counter-productive too.

Let’s take Adobe’s case.  One could argue they never should’ve resorted to all this to connect my email to a serial number.  Let the man not register.  Or, they could’ve just told me I had to register to activate.  Hell, they could’ve just asked for my email as part of the re-activation and I’d have been happy.  Or they could’ve asked me to login to my Adobe account, also acceptable.  There are endless up front Customer Experience things they could have done to eliminate the need for me to deal with Customer Service at all.  Ironically, it would’ve been cheaper to do that.  45 minutes of Kumar and all those automated voice response systems had to cost something.

I run a one-man SaaS company (actually there are a couple part timers, but I’m making a point).  I do all the Customer Service myself.  Whenever and wherever I can, I try to change the User Experience to eliminate classes of Customer Service I see over and over again.  I have to just to survive.  Best of all, it makes the Customers happier and less frustrated.  The next time you’re gearing up a new release of your software, e-commerce front end, or whatever, ask what you can do to reduce the need for Customer Service.  Find out what the common sources of it are.  Get rid of a few of them every time you ship another release.  It’ll be a Good Thing for all concerned, I promise.

Posted in amazon, customer service, Marketing, service, strategy, user interface | Leave a Comment »

Everything You Need to Know About Email Marketing in One Tiny Little Post

Posted by Bob Warfield on December 13, 2013

seths.headTake the time to go read Seth Godin’s post about the 8 things you really need to know about email.  It’s short, totally to the point, and exactly the way my bootstrap business CNCCookbook tries to pursue email.  It has worked great for us and I get tons of love letters back as a result.

If you have all of Seth’s bases covered, you will too.  As I mentioned recently, we use Mailchimp (sounds like he does too) to automate as much of the email process as possible.  Interestingly, I have not heard a word from them about my post on their becoming less user friendly over time.  That’s got to be a first.  OTOH, as Seth points out, they’re just a tool and not really the important part of the equation.

 

Posted in bootstrapping, business, Marketing | Leave a Comment »

Does Your SaaS Company Have to Have a Sales Force?

Posted by Bob Warfield on October 7, 2013

used_cars_SalesmanAny time absolutes are being bandied about, I have to do the fact check.  Sorry, it’s just an automatic reflex.  We live in a world that is largely gray and seldom black and white.  This was never more true than in the world of startups.  Entrepreneurs need to see both sides of every coin before they cast their lot in any particular direction.  BTW, I get Jason’s posts directly via email thanks to Google+ (bloggers, take notice), so I seem to disagree with him fairly often.  It’s really more that his posts get to the top of my queue more often than others–I love a great deal of what he writes.

Fellow Enterprise Irregular Jason Lempkin just penned a post, “Curse of the Middlers:  Why Happiness Officers Can’t Stand in for True Sales Professionals.”  It’s a decent article if you start out a priori thinking you must have a Sales Force, but it never really delves into the question of whether you need a Sales Force.  That’s a pretty darned important question that goes to what your basic business model is going to be.  There’s a little bit of hand waving about the possibility of companies like Atlassian or 37Signals which have not needed sales forces.  Jason basically says:

Well maybe you can.  More power to you.  As long as there is enough momentum in your business to hit your revenue goals without a true sales team, then by definition you don’t need one.

I don’t think this is right.  It isn’t a question of whether there is enough momentum and it certainly isn’t the case that adding sales can always increase momentum.  Sales is not something you can necessarily add to any business and expect it to make a difference.  It is integral to what the business model is in the first place.

Let’s drop back a few paces and you’ll see what I mean.  I was with a startup one time who had the luxury of having Geoffrey Moore (Mr Chasm Crosser) come in to advise us about the business.  If ever there was a guy who understands the arcane alchemy of how to combine products, markets, marketing, and business models in successful combinations, it’s Geoffrey.  His view of the whole Sales thing is that it is a question of ASP’s.  Below a certain ASP, a Sales Force won’t work.  The numbers we talked about were along these lines:

0 – $15,000:  Forget the Sales Force.  Focus on reducing the friction to purchase.  This is where the Atlassians and the 37Signals thrive.  These are pure Marketing plays, and there are zillions of successful businesses that work this way.  One could argue most successful businesses do.

$15,000 – $100,000:  No Man’s Land.  It’s too much money to expect the buy to put on their credit card, yet it is too little to field a Sales Force profitably.  You can argue Telesales works here, and it can towards the upper end.  This is also traditionally good territory for Dealer networks, which is yet another business model.

Over $100,000:  Prime Sales Force Territory.  When I worked for Oracle, Sales used to tell us product people that if they couldn’t charge at least $100K, they wouldn’t even look at the product, even as an add-on to something else.

Looked at in those terms, it becomes fairly straightforward to understand whether you need a Salesforce or not.  Let’s consider some potentially extenuating circumstances, and also consider as an entrepreneur whether you want to try to steer towards one of these or some other (realizing you probaby wouldn’t ever want to steer towards, “No Man’s Land”).

I Just Started My SaaS Company and No Way Am I Getting $100K.  None of Them Do.

Yep, it’s true.  Welcome to the world of needing reference accounts.  You don’t start with $100K sales day 1.  Not even year 1.  If you have an offering capable of commanding such sales,  You won’t be ready to take them down until you’ve gotten enough credibility through reference accounts to satisfy they buyers you’re worth betting on.  The last Big Sale + Sales Driven company I worked for was Callidus.  I was with the company from $12 million in revenue through IPO.  You could see tangible results each time a bigger customer was signed up.  Nobody ever liked being your biggest customer unless there were no alternatives or it was such a screaming deal they couldn’t lose.  But, as soon as you could point to someone bigger, suddenly you had almost infinitely more credibility.  Steadily climbing that ladder of bigger and bigger sales is important to a Sales Driven company.  Until you get there, you won’t be very capital efficient, which is a big problem when Bootstrapping Enterprise SaaS that has a Sales Force.

What if I Tilt Slightly Up-Market?

Jason has another good post, “Why Tilting Just a Smidge from Self-Service Can Grow Your Revenue 30x.”  I like the post a lot and think about its ramifications for my own company, but I’m skeptical of a lot of the numbers in there.  For example, Jason says single seat SaaS churns at a rate of 2.5% to 4%.  Annualized, that comes out to 24-36%.  He goes on to say that 5 seat deals churn at 1-1.5% a month and that over time the churn will be negative because some customers will add seats faster than other customers churn.  My problems with this are four-fold.

First, Jason shows the single seat numbers with churn factored in and concludes you keep the customers for 8 mos and that therefore they are only worth $240.  He gets there by arguing the customers are only around for 8 mos on average.  But there’s a better way to do the math since one of the great charms of small ASP businesses is they have a lot more customers.  They don’t have just one or a handful like a Big Ticket company.  If we model it that way, I get an ASP for the year of $290 to $324 per seat.

Second, Jason shows no churn on the 5-seat deal after having said there’ll be 1.5% per month.  Let’s be fair and factor in the 1.5%–that means a seat is worth $331.74.  That’s starting to be a lot closer to the $324 a seat a good single seat sale company can achieve.

Third, Jason conflates the number of seats sold with the likelihood the deal will close.  He’s up front about saying that he thinks Sales will make a deal more likely to close no matter what in the Happiness Officer post.  As he says, “More deals will both open, and close, when you have a trained sales professional working with your prospects.”  But this is a problem of how you measure it.  If you count the deals closed as the percentage of Sales Leads closed, he is right.  A good sales force will do very well on that metric.  But, Sales Leads is the wrong metric for this comparison because they have already self-selected buying interest.  they were qualified six ways to Sunday else the VP of Sales excoriated the VP of Marketing for sending him crappy leads.  We should drop back and count all visits to the company’s web page and then take the percentage of those closed to get a real Apples-to-Apples comparison.  Looked at another way, there’s always far fewer but bigger transactions with a Sales Force.  For purposes of this example, it simply means it isn’t quite right to throw down 5 seats against 1 seat and call that Apples-to-Apples.  If we had to throw down # of seats, it should be adjusted by the relative close rates.  But we don’t know what they are, so I’ve got to stick to comparing single seat numbers.

Fourth, Jason says churn will be negative over time for Sales Driven SaaS.  You should be so lucky.  If that were common, why do so many SaaS IPO candidates get looked at so carefully for churn?  Why do we see so many articles about SaaS unprofitability that call out churn?  Why do so many get called on the carpet over it?  At the same time, he takes it as an article of faith that the churn rates for single seat sales must be much higher.  Why?  Where’s the data?  Let’s talk about great brands selling to individuals that have very little churn.  I’ll just start right at the top and mention Apple.  Don’t like Apple?  Well how about Google?  Dropbox?  37Signals?  Atlassian?  SmugMug?

We shouldn’t confuse nice to have impulse purchases, which can happen to Sales Driven SaaS too, with powerful brands, products with lock-in, products with network effects, and products that are just too good to be without.

Here’s what I will readily agree to:

Tilting slightly up-market may increase your multiple-seat sales revenue by 30X.

Here, I’ll use language similar to Jason’s about this case:

Well maybe you can.  More power to you.  As long as there are enough multiple-seat opportunities for your business, you might benefit from a true sales team.

It’s really a function of whether whatever team features your software offers make it interesting enough to the team that they’ll bite.  If they do, it’s great news.  Just make sure they’re closing big enough deals (back to that Geoffrey Moore business) and that they’re not deals you could’ve closed anyway without them.  For my own business, I already offer volume purchase discounts on 3, 5, and 10 seats and they sell well.  I will be adding some Team features to see how much that accelerates, but until I get some really BIG deals, I just don’t need a Sales Guy to close a few multi-seat deals.

Note that at some point, you will automatically be able to add a Sales Force.  You’ll be dealing with enough large companies that they will insist on the kind of care and feeding a Sales Force can give them, and it’ll be worth it to oblige.  Just don’t think that has to happen too early.  It certainly didn’t happen very early for Amazon Web Services or for Google.

But Won’t Sales Always Increase the Dollars I Can Sell For?

This is another one I have to differ with.  Jason spells it out pretty clearly when he says, “Sales professionals know how to maximize the revenue per lead.”  Hang on, do you really think an individual sales guy knows how to maximize revenue per lead better than say the people at Walmart who maximize revenue per shopper?  What about the people at Amazon who do the same thing?  Substitute the people that design promotions for any E-Commerce site.  Why would we assume every Sales Rep can automatically do a better job?

OTOH, having come out of the Sales Compensation business with Callidus, I will tell you that one of the most effective ways to improve the bottom line is to change the sales comp plans to give them less flexibility in what they negotiate.  Gaining alignment between an individual sales person and overall revenue and profitability is extremely difficult.

The way to look at this is to consider who in the organization will be responsible for maximizing revenue per lead (or profit if that is more important as it sometimes is).  If nobody is responsible for maximizing sales per lead, then Jason has a point.  The Sales Guy has an advantage: he can look the customer in the eye, and if he is good, he will see how much money is in their pocket and take most of it out.  The Marketing Guy has an advantage:  he has lots more transactions than a Sales Driven company, he can measure the results of experiments much more accurately with analytics, and over time he can hone a promotion strategy that maximizes revenue per shopper.  The only way to tell who actually does better would be to compile metrics of the profitability and revenues of sales-driven vs revenue-driven companies.

Once you start thinking of the Sales Guy as the one who offers promotions by negotiating price, you’ll be a lot wiser to the issues where their agenda (make quota, go to club, buy a new car, yada, yada) may not be that well aligned with the overall company’s agenda.  For example, I find there is a certain frequency with which I can offer my marketing-driven promotions.  If I have them too often, all I am doing is lowering my average selling price.  If I have them too infrequently, I am lower my close rates as some people will only buy if they get a deal.  Can you really coordinate your salespeople to such a cycle?  Some you can, some you can’t, but you will have to work at it hard in either case.

One aside is that there is a natural tension between Marketing and Sales.  It is very hard to get an extremely high quality Marketer to join a Sales-Driven company (hard to get very high quality product people too, hence Enterprise software is often not the paragon of software virtue).  They don’t want to be under the thumb of that Sales Guy.  They don’t want to be constantly blamed when numbers are missed.  But eventually, if the CEO is good enough, he will create a situation where the company can attract and retain both and he’ll see to it that they work and play well together.  Interestingly, I have seen this work best when you have a CEO that was a Sales Guy who isn’t on his first CEO gig.

One last point here–the role of Sales is to make the market they’re in less efficient in hopes of increasing profitability.  That’s the real reason why you can’t get much real information without filling out a lead form.  This approach works, unless someone is disrupting you by making the market radically more efficient.  That brings me to my next point:

Important Counter-Example:  Lack of Sales Force as Disruption

The history of the modern computing landscape is one of increasing efficiency disrupting sales forces that wanted the markets to be inefficient.  That’s how mass markets emerge in new fields–they kick down the doors, offer unprecedented lower price points, and tell people things they never knew before.  Think IBM or DEC scratch-golfing Sales Guys having to go against the neighborhood computer store.  That was a painful disruption that neither survived when it came to the PC market (or indeed, their whole market for DEC).  They had to retreat up market.  Think the neighborhood computer store, which essentially was just smaller time sales people, competing with online sellers like Dell.  One more turn of the wheel and those guys were in trouble.

Once a market encounters meaningful disruption of this kind, it is extremely hard to put the genie back in the bottle.  After all, how do you argue that more information and lower prices are bad to customers?  The only defense is to retreat up-market.  The disruption involved in trying to change a Sales-Driven company into a Marketing-Driven company is at least as bad if not worse than going from On-Premises to SaaS.  I’m not sure I know of any successful examples where someone pulled it off.

Entrepreneurs, take note: if you can figure out how to take a crusty sales-driven market and turn it into something coin operated (insert credit card here, pay low fee, get product now), you can go disrupt a market.

So I Shouldn’t Ever Need a Sales Force?

Not so fast!

There is the matter of what your ASP’s will be–at a certain point ($100K for sure, maybe less), you will have to use a Sales Force.  To a certain extent this will be governed by the nature of your product.  Can it add enough value to relatively few people?  Will Enterprises require an all-or-nothing decision?  Such factors will dictate.

But suppose you have a blank sheet of paper.  You want to start a brand new SaaS company.  What should you aim for?

The choice here, for me at least, is easy–I’ll take the low ASP marketing-driven ideas every time.  We live in a time when you have to bootstrap on your own dime as far as possible before you can get any outside capital.  Cash flow is king.  Insights into where to double down and where to fold are king.  The web is there as a relatively frictionless resource to get the word out about your offering.  I don’t want to wait for sales cycles.  I don’t want to wait to close large enough sales to have built credibility.  I want the insights that come from analytics on large numbers of transactions today.  I want my customers lifecycle from prospect to happy subscriber to be one integrated UX on the web.

That will maximize my chances of growing a company to cash flow positive.  That will maximize my early growth potential.  Down the road, I will be able to look at whether I want to raise capital and whether I want to try to fire up a sales force to sell Team Editions.  Meanwhile, I’ve got a web company to focus on.

Posted in business, Marketing, strategy | 9 Comments »

Will Context Eat the Software Industry?

Posted by Bob Warfield on September 23, 2013

ManBehindCurtainI read with interest fellow Enterprise Irregular Michael Krigsman’s recent post, “Context Will Eat the Software Industry.”  Kudos for the excellent link baiting paraphrase of Marc Andreesen’s “Software is Eating the World.”  Andreesen is right, but I’m not so sure about Michael’s hypothesis.

He is centered in some thinking about Content Marketing and why some Content Marketing, specifically Enterprise Content Marketing, is not so hot:

The best content speaks directly to the reader, listener, or viewer. However, creating great content requires a nuanced understanding of the audience, which precisely explains why most enterprise content sucks. Content without empathy misses the target and quickly falls into the trap of jargon and sameness.

To see the effect of bland content marketing, try a test. Examine marketing materials for directly competing products from the major enterprise software vendors and try to discern significant differences in messaging and positioning. You’ll likely discover that the major vendors tend to look similar; remove the product name and see how the competitors all sound similar. I tried a variant of this test and the results demonstrated how bland enterprise marketing become as it regresses to the least common denominator.

From this he sees Content that is increasingly targeted to specific readers (e.g. targeted to Context) as the answer.  Let’s talk about that.

First, in the spirit of Full Disclosure, I want to point out that I make my living as a Content Marketer.  I don’t do it as a service for others, but it is nearly exclusively how my bootstrap company, CNCCookbook, sells its wares.  As a result, I have spent a lot of time thinking about it and trying to get better at it.  I’ve been extremely happy with the results so far.

Now, what about Context?

Context is critical to the extent that there must be content available that speaks to the reader well enough to move them to some action.  If you can do so, you’re Content Marketing.  That action may range from buying a product to promoting a brand (i.e. telling others about it) to (especially in an Enterprise setting) being predisposed to favor or at least not block a brand.  I list those in roughly the order of importance.  While it’s great to have lots of people who’ve heard of you and think positively of you, if they never bother to tell anyone else and nobody buys your products, you’re not going to make it very far.

At this stage, I should point out that Enterprise selling is special.  I have been there, done that, and gotten the T-shirt, frequent flyer miles, and hotel breakfasts that comes of selling multi-million dollar Enterprise Software.  For that world, the costs are such that you don’t just get somebody to whip out a credit card after reading a pithy article on your blog.  Instead, you may get them to exhibit enough enthusiasm that you can regard them as a sales lead.  This will start the corporate CRM gears in motion and somebody from sales will contact them.  One could argue and probably win the argument that the whole point of Sales is to provide a finely honed and real-time sense of Context.  It is the Sales Team that puts feet on the ground inside the customer’s organization.  They get to know the players, the politics, and all the details of the buying decision being made.  That is the essential key context for such a transaction.

Does that mean Context is unimportant for Enterprise Content Marketing?  No, of course not, but it is an important nuance to be aware of and I will come back to it shortly.

The next thing I want to discuss is how Context can be implemented, because that seems to be the gist of how Context might eat the Software Industry.

Here Michael has some choice Bill Gates quotes:

Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.

and:

A major reason paying for content doesn’t work very well yet is that it’s not practical to charge small amounts. The cost and hassle of electronic transactions makes it impractical to charge less than a fairly high subscription rate.

As Michael points out, micropayments are available from Paypal and many others these days, so that isn’t the problem.  The problem is that, as with making Ballmer CEO for so long, Bill Gates was wrong.  Content isn’t where the real money was made.  In fact, the real money was made by software supplying Context.  You will know what that means more familiarly if you think about names like Google and Facebook.  If you think about Content being where the real money would be made, you’d be thinking of Yahoo, and we all know how that turned out.

Context via Self Selection

This brings up an important first principle of Context, which I will call the Principle of Self Selection:

Context is implicitly applied when people search for content or go to a place where their preferred content is particularly rich.

One corollary of the Principle of Self Selection is that when a Content Marketing team is micro-managed too much to, “Stay on message,” they wind up not creating content that can self-select a broad enough range of Contexts.  I suppose we should not be surprised as the essence of Enterprise Software and the biggest weakness of both the Software and the Companies is that it is overly focused on Centralized Command and Control.  This is perhaps the foremost reason why Social continuously hits brick walls in the Enterprise–something so egalitarian is toxic to hardcore Command and Control.  It encourages too much fraternization with the enlisted and noncoms.  Command and Control is also tragically short on the empathy that Michael points to as being so important.  The higher ups rarely think of themselves as being in the Customer’s Shoes.  The ones that do have typically been the ones I have enjoyed working with the most, but they’re not always the most successful.  I’m not sure anyone ever accused Larry Ellison of having too much empathy.

It has been my observation that most organizations with awesome Sales teams have lousy Marketing.  One wins out over the other, and scratch golfing sales guys are bread to be genetically superior to marketers in the face to face arena.  The marketers simply lose at politics, and it is even worse for the quant jocks that are essential to great Content Marketing.  This is a problem, because when you’re Content Marketing, you cannot simply parrot the party line–you must create real value.  This means your Content Team needs to have some motivated stars who are empowered to do something great.

There is also a subtle mindset difference with Content Marketing.  Let’s call it the Principle of Jiu jitsu:

When Content Marketing, you must give away something of great value to build trust.  In doing so, you cannot overtly sell anything.

It is called the Principle of Jiu jitsu because like the ancient martial art, it gives where the opponent is strong and pushes hard where the opponent is weak.  The opponent is strong at resisting sales pitches.  We are trained to consider whether the spam will be worth it if we give over our email to get a white paper, for example.  In Content Marketing, we give them such fabulous content without the Sales Pitch or demand for email that they give us their email gladly to make sure they don’t miss any future free content.  This is tough for a lot of Sales people to grasp.  They’re used to the idea of using their Jedi mind tricks to machine the prospect into submission, “Sign here, these ARE the droids you’re looking for.”  In fairness, most of them are smart about giving their personal charisma for free to get to deliver the sales pitch, and that is sort of close to what’s being done by Content Marketing, but yet different.  BTW, it’s even tough for most Marketing people to grasp.  They will tell you to do things like remove all the navigation from your landing pages so that once the prospect winds up there, they have no choice but to fill out the lead form.  Sadly, this increases short term lead gen at the cost of long term trust.  Think carefully about your business and your sales cycle.  Is it really as short as you thought, or did it go through multiple iterations, coming on and off the forecast over the course of even a couple of years as the prospect came up to speed?

To capitalize on self-selection we serve up a smorgasbord of content, make sure it is SEO-optimized for search engines, use analytics to identify what’s working, and then double down further with more similar content.  Quite apart from killing software, that approach is only enabled by a bunch of analytics software, not to mention the software at Google that delivers them to your doorstep.  Seeing your content through the SEO lens as well as the reader’s lens is a subtle art that has to be learned over time.

Context via Machination

Of course self-selection is not the only way to establish Context.  There is what I will call, “Context by Machination”, where software establishes Context in real time based on what it is sensing.  Two examples would be Responsive Web Design and Marketing Automation.

Responsive Web Design is simply designing a web site so that it changes based on the device being used to access it.  This is done so mobile viewers have a better experience.  It’s blunt Context, but Context nonetheless.

Marketing Automation is a bit more subtle.  It means a lot of things, but in this case, let’s stick to Marketing Automation as observing what actions a prospect takes and serving up content based on those actions.  Ultimately, the content served up can even be the first call from telesales wanting to see if the budding relationship should be expanded to a full blown sales cycle.  A lot can be gained from this notion of Context.

To give an idea, let me tell a personal anecdote from my college days.  I’m a car nut and would haunt the local exotic car dealerships.  There’s no way I could’ve afforded such a machine as a college student, but I was not deterred.  Inevitably, a salesman would approach and try to determine if I was a serious prospect or or a tire kicking joyrider (that’s me!).  I would be taciturn, and would steadfastly refuse to ask any performance-related question.  Never ever ask how fast the car would go, for example.  Instead I wanted to know such things as, “How reliable are these cars?  What does it cost to repair one?  What’s the insurance premium likely to be?  Can they be driven in the rain?”  The salesman always took these sorts of sober questions as coming from someone who was trying to imagine what it would be like to live with one of these fiery beasts on a daily basis–a real buyer in other words who was over the romance of it.

So it is with what the Marketing Automation people call, “Lead scoring.”  So you read a white paper.  That’s good.  But did you look at the system requirements, for example?  Did you try the pricing calculator out with an interesting number of seats?  Did you look at the salesy content, or just the free value content?

Based on the lead scoring, the system can decide which emails to send to you.

This can be especially potent if you have a completely closed loop software company.  What I mean by that, is a software company where every single contact happens via the Internet:

-  They read your content on the Internet to get interested.

-  The software runs in the Cloud.

-  Customer Service is handled over the Internet.

In a world like that, the lines between Marketing, Product, and Service should rightfully become blurred.  You are always Marketing because SaaS renewals are so darned lucrative.  If they’re in the Product, why have them bail all the way out and go to a separate web site to get Customer Service?  Wouldn’t it be better if the Service people can directly see what’s happening in the Product as it unfolds with a problem?

It creates an extremely powerful combination to combine all three and view them essentially as one User Experience (UX) that has to be optimized for the entire cradle to grave lifecycle.  That’s Context via Machination at its finest.  I haven’t seen any companies that really optimize that end to end experience.  You get the Marketing Automation companies like Marketo and Eloqua at one end, and there are starting to be Product companies at the other like Totango.  It’s an interesting opportunity.  I haven’t even seen many companies that operate in that realm of Contextual Integration, but probably the biggest and best would be Amazon.  Funny how we’re still trying to get to what the CRM world originally called the “360 Degree view of the Customer.”

So, quite apart from Context Eating the Software Industry, that Man behind the Context Curtain’s name is “Software.”  If you don’t have keen Software chops in your Marketing, Product, and Customer Service worlds, you are missing several tricks.

Postscript

Heidi Cohen makes the problems with Enterprise Content Marketing even more obvious with her 3 Surefire Ways to Kill Content Marketing:

1.  Contains Too Much Marketing Hype and Buzzwords

2.  Lacks Truly Independent, Unbiased Information

3.  Is Too General To Be Effective

Yup.  You see all three constantly in Enterprise White Papers, blogs, and other content marketing.

Posted in business, Marketing | Leave a Comment »

It’s In Google’s Best Interest to Kill Marketing Channels They Don’t Own

Posted by Bob Warfield on July 24, 2013

The folks at MailChimp recently did an article that analyzed open rates for emails and how they were affected by Google’s new Gmail tabbed user interface.  There’s not a huge amount of data yet, but there are 3 consecutive weeks of reduced open rates in the wake of the new tabbed interface.  Here’s the graph from the MailChimp article:

Gmail tab open rates

There’s no question that open rates are down in the wake of the tabbed UI for Gmail…

This is not particularly surprising.  Personally, I don’t find the tabbed interface useful at all–it just means I have to look in more places to finish reading through my inbox.  If I do run short of time, it is the promotions tab that suffers.  The MailChimp folks say that it is very hard to write email that doesn’t get stuffed into the promotions tab too.  What a pity Google didn’t put Google Reader on a tab instead of Promotions and Social.  It wouldn’t been a lot more useful, but that’s beating a dead horse.

Marketers are going to be disappointed by this development because email remains one of the most powerful weapons in there arsenal.  Unfortunately, here is a newsflash:

It’s in Google’s best interest to kill or damage any marketing channels they don’t own.

They don’t really help in any way with email marketing, so anything they can do to reduce its efficacy means you’re that much more likely to shift dollars to areas they do own.  They get nothing when your successful SEO leads to lots of results through good organic search results so they’re only to happy to limit the information you can get about how people found your site and thereby make your SEO that much less effective.  In fact, they’ve basically declared all out war on SEO’s.  They are the enemy because they reduce your need to spend ad dollars with Google.

Expect more of this as time goes on.  Big companies can’t resist using their clout to do this kind of Evil.  In the original PC days, the Evil was perpetrated by controlling shelf space.  If you owned all the shelf space, nobody would ever see the Little Guy’s innovative new products.  In today’s world, they want your eyeballs focused entirely on parts of the Internet that contain their ads.  As their growth and profitability slow down, they’re only going to play these kinds of games more often to try to prop things up.

Posted in business, Marketing, strategy | Leave a Comment »

 
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