Browsing Category

Product Marketing

Marketing Statistics Are Hard . . . Sometimes It’s Just Easier to Make Them Up

Some fun quotations . . .

  • “42.7% of all statistics are made up on the spot.” — Steven Wright
  • “There are three kinds of lies: lies, damn lies, and statistics” — Benjamin Disraeli
  • “Figures don’t lie, liars figure”– Mark Twain
  • “There are two kinds of statistics, the kind you look up, and the kind you make up.” — Rex Stout

I’ve been doing technology marketing for over 20 years.  One of the hardest things for marketing teams to do is to come up with credible ‘proof points’ to help justify the hard and soft benefits of their solutions.  A proof point is supposedly a fact-based statement backed up by a tangible reference.  A classic example would be “Our customers reduced their operational costs by 8% in the first year and achieved a 213% ROI in less than two years”.  The challenge is that most marketing teams have never built valid case studies that could give rise to real proof points.  The teams often lack the financial literacy to actually calculate the proof points and they rarely can get access to or permission from real customers to do this type of analysis.  When push comes to shove from the sales team, marketing organizations often just make up proof points and hope that no one ever challenges their validity.

The Wall Street Journal’s ‘Numbers Guy’, Carl Bialik, just published an article entitled ‘Marriage-Maker Claims Are Tied in Knots.  The subtitle of the article is ‘Online Dating Sites Say Hordes of People Ultimately Marry, but Their Methods Have Plenty of Hitches of Their Own.’  In the piece Carl talks about the bogus nature of online dating sites claims of the number of marriages that have occurred as a result of people hooking up on the site.

“Online-dating sites have changed romance for millions of Americans. But claims that such dating leads to hordes of newly wedded couples may be fairy tales.

EHarmony claims in television or online ads in the U.K., U.S. and Australia that 2% of Americans who got married last year met through its site. But the stat is based on an online survey. Similarly, a Match.com media kit claimed that 12 marriages a day trace their roots to the site, but the company now says it’s inaccurate. And Markus Frind, chief executive and founder of Plenty of Fish, doesn’t advertise about marriages, but says his site brings about 100,000 marriages a year, a figure based in part on “some study I found online.

. . . Mr. Frind, of Plenty of Fish.com, scoffed at the dozen Match.com nuptials per day, noting that eHarmony claims 10 times that number. He says that his site creates 800,000 relationships each year, according to exit interviews with departing members. He says that works out to about 100,000 marriages per year, based on a study, the details of which he couldn’t recall, that says 10% to 15% of relationships lead to marriage.

The only statistic Mr. Frind knows with certainty, he says, is the number of members who have self-reported success stories on his site — now around 2,000. “I don’t want to pay $200,000 to a research company to find out how many marriages I have per year.”

It’s clear from Carl’s reporting that the dating sites basically made up their claims and are not too interested in investing the time and money to find out what the real numbers are.  I was surprised to learn that there is a lot of formal research on this topic.  Terms such as Ipse-Dixitism and Argumentum ad Verecundiam have been used to describe this syndrome before.  Argumentum ad Verecundiam or argument from authority is defined in Wikipedia as “Argument from authority or appeal to authority is a logical fallacy, where it is argued that a statement is correct because the statement is made by a person or source that is commonly regarded as authoritative.”

The most common tactic employed by technology marketing organizations to overcome a deficit of proof points is to hire an industry analyst firm like Aberdeen Group, Forrester, or AMR Research.  These firms all provide consulting services to technology providers to help them research, position, and prove the effectiveness of their technology solutions.  Typical services include sponsored white papers, research studies, webinars, or speaking engagements.  In general, these firms do a very good job at providing these types of services.  During the height of the Internet Bubble some analyst firms were accused of being paid shills for some technology providers.  While there may have been some truth to certain allegations the industry as a whole has significantly cleaned up their acts since then.  Most notable is the Gartner Group.  Gartner created the Office of the Ombudsman whose mission is “to openly and assertively address issues of analytical independence, accuracy and integrity through compliance with Gartner’s Principles of Ethical Conduct.”

The primary challenge with working with industry analyst firms is cost.  A single project can cost anywhere from $25,000 to $50,000.  Analysts and consultants conduct dozens of engagement in a year – they have a very wide and deep experience base.  Since they’ve worked with so many technology companies they have a pretty good idea about what works and what doesn’t work.  In today’s tough economic times a lot of marketing teams cannot afford to make single project investments of this scale.  If your company is in this kind of situation I have a plan that you could execute on your own to build and leverage credible proof points for your solutions.

The core of this project is helping customers document and then promote their own success using your solutions.  Everyone likes to have their horn tooted.  By helping your key users or champions demonstrate the wisdom of their decision to acquire and deploy your solution you can create a win-win scenario.  For lack of a better term I’ll call this a ‘Customer Success Program’.  The goal of the program is to get 6 to 12 customers to participate in a study to document the business impact your product or service has had on their organization.  The deliverables of the program will be individual case studies and a micro site or blog.  While the customers who participate in the program can distribute the case study internally, as a vendor you will anonymize their identity in any external presentation of the information and only use summary information.  This approach has two benefits.  First, by creating a solid, fact-based analysis of the customer’s success you enable the key users and champions to tout their success inside of their company.  By anonymzing their identities and using only summary information externally you can typically get over any of the typical hurdles customers have with public endorsements of your products and solutions.

Your real goal in this project is to develop 3 to 5 rock solid proof points that you can make about your products and solutions.  To make this work you’ll probably need to approach a pool of 30 to 40 customers, split up into three to four verticals.  If you can get 6 to 10 customers to participate, you will have hit a home run.  Also, you’ll need to identify inside of your organization whom has the best personal relationship with the target customers and users – sales, professional services, customer services, etc.  You will need to develop a basic survey instrument – situation assessment, business problem, decision making criteria, hard and soft benefit categories, risks and risk mitigation strategies.  Leveraging your firm’s best personal contacts, ask for a brief teleconference with your targeted users/champions to explain the program and ask for participation.  Emphasize that this is a fact finding mission on how effective your product or service has been and that you are interested in learning how you can improve your offerings even further.  Stress the anonymity in the use of any results from a marketing and sales perspective and emphasize the benefits of having a documented case study for internal consumption in the customer organization.

You will learn a lot of things in the execution of this kind of project.  First you will find out who inside of your company really does have good relationships with key people at your customer organizations.  Second, you’ll learn that a lot of people are passionate about your technology and more than happy to share their experiences.  Third, it is inevitable that you will learn somethings about your product, services, and company that you did not want to hear but definitely need to be fixed.  Finally, you will be able to harvest real fact-based information to support the proof points you need to effectively market and sell your solutions.

While it may be easier just to make up some marketing statistics and claim victory, the process of actually talking with your customers and documenting their success will actually make your company successful.

July 31, 2009 by
(3)

Why I’d Prefer 1,500 Mid-Market Customers over 25 Fortune 1000 Customers

An interesting blog post came up on my Google Reader the other day that really resonated with me.  Adam Smith founded Bessemer Venture Partner’s Herzliya, Israel office.  He blogs at Savants in the Levant.  Last week he did an interesting post entitled Wanted: Small, No Name Customers.  Adam’s central thesis is that tech companies have a higher probability of success if they eschew trying to sell large scale enterprises and instead focus on mid-market or individual consumers.  Adam has invested in and profitably exited from a number of startups so he has a clue about what he’s talking about.  Here are a few interesting quotes:

“Large Can Be Longer, High Touch, Expensive, Non-repeatable & Unrewarding.  A lot has changed since then. First of all, post 2000 these large customers have grown wary of working with and relying on start-ups, hundreds of which have disappeared, changed direction or simply never reached scale. The result is that the sales and testing processes of large customers is longer and more arduous for start-ups than ever before. Additionally, the procurement process of these large customers is more stringent, built on the premise that they are always better off buying from a select group of large, established vendors(even with an inferior product). Even where they have no alternative, their reluctance to buy from start-ups persists with attempts to indentify a middle man, place the start-up’s IP in escrow(in the event of shut down), or extract a hard commitment to fulfill the product roadmap(rarely accompanied by any NRE dollars). And once an order is finally placed, the long coveted joint press release is blocked by the legal department”

“Small Can Be Quick, Low Touch, Repeatable & Inexpensive. With large customers no longer worth the effort, start-ups should consider focusing on smaller customers and/or consumers. Luckily, several trends play in favor of such a “no-name” customer strategy. Performance marketing including targeted online advertising and affiliate networks allows start-ups to reach a wide audience cost effectively and with minimum up-front investment ( see “When Marketing and Sales Becomes Scientific”). Similarly, advancements in delivery methods, including downloads, virtual appliances and software-as-as-service lower the cost of sales, deployment and maintenance. Of course, strategies focused on small customers and consumers do not preclude sales to large customers as mentioned in my previous blog post “A Preferable Route to Market.” The challenge for Israeli companies is to build a product that emphasizes usability and simplicity as much as technology and performance. I have little doubt that such skill sets exist in Israel, but the key is to make this a priority.”

I have been in the technology business for almost 27 years.  I spent the first 18 years of my career in the classic enterprise software market.  We targeted the 15% of the Global 2000 that drank the 1980’s Information Engineering Kool-Aid.  While our products targeted a niche, it was a very profitable niche that grew into a $300 million business by 2000.  The bulk of our revenues were concentrated in about 500 global enterprises.  Other companies I have been an executive of worked to ride the coattails of large ERP companies like PeopleSoft and Oracle.

The overarching theory was that big enterprises were always a much better market than mid-market and the SMB space.  The challenge with this strategy is that most enterprise software companies only ever succeed in winning a small share of the Global 2000.  As Marc Andreessen recently noted during the launch of his new venture capital firm, Andreessen-Horowitz “The problem is that there aren’t valuable companies being formed. And there never have been . . .There are on average 15 tech companies launched a year that will ultimately do $100 million a year in revenues, and these companies are responsible for 97 percent of the returns in the venture industry overall.”  I also attended a CIO Roundtable event last week where 40 Atlanta CIOs gathered for a panel discussion.  Most of the CIOs were from multi-billion dollar enterprises like Coca-Cola, GE Energy Services, First Data and even Popeyes Chicken.  The theme of the event dealt with the challenges of buying and selling technology in today’s world.  Several of the CIOs discussed their concerns with working with startups.  They told a few war stories about how they had ‘crushed’ startups through their tough, global requirements.  Most admitted that they focused their procurement on a few, large, well known vendors that they had long track records with.  A key take away from that event was that most startups today had a better chance of winning the lottery than they did trying to crack their way into a Fortune 500 shop.

For the past 9 years of my career I have worked with firms that targeted both the enterprise space as well as the mid-market space.  By mid-market I mean organizations with revenues between $50 million and $1 billion a year.  Conservatively, there are about 25,000 organizations in that size range in the United States.  There are probably another 75,000 outside of the USA for a global market of 100,000+ organizations.  In comparison to the Global 2000, the mid-market offers fifty times more opportunity to sell a solution to a specific customer.  Without a doubt, the deal sizes are radically different.  For a typical enterprise-scale customer, a technology company can reasonably expect to extract $2.5 million of revenue over the life time of that customer.  For a tech company that focuses on the mid-market, the number is more like $50,000 over the customer life time.  When you do the math, 25 enterprise customers generate $62.5 million in life time revenues.  It takes about 1,500 mid-market customers to generate the same amount of life time revenue.

Selling to mid-market customers is fundamentally different than selling to enterprise customers.  First off, the classic enterprise software big elephant hunter sales team strategy does not translate into the mid-market space.  Enterprise sales people typically have annual quotas of $1 million to $3 million.  They use a direct sales model and focus on closing a few very large deals to make their annual nut.  They spend countless hours courting, wining, dining, and developing relationships.  They rack up massive travel expenses since there are typically only a few elephants in their home towns.  Some sales people may go 18 months between closing big deals.  When they land a deal, however, the massive commission checks more than makes up for the dry spell between deals.  Startups that hire enterprise sales people often find, however, that while they may be able to close one deal, most often they are unable to repeat that achievement before the company’s venture funding evaporates.

Mid-market selling is typically done without the rep ever having to travel or meet their customers face-to-face.  The telephone and webinars replace on-site visits.  Web-based demand generation and lead nurturing replace the enterprise sales person’s personal rolodex.  A typical mid-market rep will close between 100 and 300 transactions a year in comparison to the enterprise sales person’s 5 to 10 deals.  Mid-market teams are highly dependent on their company’s ability to establish a well known brand in the marketplace and highly credible/effective web-based marketing.  Mid-market reps become expert at long distance conversations.  They are rarely in the same room as their prospects so they must learn to hear the signals their prospects are sending instead of being able to read their body language.  Successful mid-market technology firms are masters of execution when it comes to selling and supporting their customers.  In fact, superior company execution often makes up for technical deficiencies in their products and services.

Another strategic benefit for startups focusing on the mid-market versus the enterprise space is revenue risk.  Startups that focus on the enterprise space tend to have ‘lumpy’ revenue.  The revenue tends to be concentrated in a few very large customers and comes in fits and spurts based on when the big deals close.  Given the challenges of today’s economy, predicting when a new deal will close is always tough.  Also, recurring revenue (like software maintenance fees or monthly usage fees) are concentrated in a few customers.  The loss of any single customer, or groups of customers, can be catastrophic.  Historically, the finance, banking, & insurance vertical has been one of the richest for enterprise software companies.  Dozens, if not hundreds, of enterprise software startups has shutdown in the past two years because they focused on the finance vertical and their target market simply stopped spending money on new purchases and significantly curtailed the spend on maintenance contracts.

Technology firms that focus on the mid-market don’t share the same risk.  Typically their revenues are spread out across hundreds, if not thousands of customers in dozens of verticals.  The loss on any single customer is not catastrophic since a single customer contributes such a small percentage to the company’s overall revenues.  This benefit, however, is tempered by the fact that for such firms, revenue tends to grow slower than enterprise-focused firms because it takes time to acquire hundreds of customers.  While the revenue may come on slowly, it also tends to decrease slowly in tough economic times since it requires the defection of hundreds of customers before revenues are materially impacted.

In the middle of 2009 if I were given the choice of joining a technology firm that either targeted enterprise customers or mid-market customers I would choose the mid-market player.  As discussed in this post there are simply too many barriers to entry in the classic Global 2000 market place today.  I’d rather take my chances that superior execution against a market with 100,000 participants could lead to the pot of gold at the end of the startup rainbow.

Related articles by Zemanta
July 27, 2009 by
(9)

Year 3 Kick Off: Build/Buy/Partner Analysis – 3 of 3

With 2 parts out of the series down and the market research in place, I completed my last item of reviewing items starred in my feed reader and bookmarked pages – basically the final input which ultimately represents the functional equivalent of a 360 review of  last year’s content.  There are several key things I learned which will influence what I do going forward:

  • Search is a really quirky thing.  Odd really how it all works out, not only do I still own giggly quotes on google – it accounts for the majority of new visits – imagine that.  Hmmm, search drives where people go online, while intuitive and logical, it’s always interesting to look at the metrics for a fact based approach.
  • People share and engage just because they got something to add. I’m not sure I have any better an idea than before the effort, but just like the twitter network audit I did last year, I know a little more about the ‘shape’ of things.
  • There are a bunch of real smart people doing cool things out there. Through the interviews I did, the feedback, the links and articles other people wrote which I read, I’m just humbled by cool people I know and the stuff they did last year.

After reviewing all the metrics and content, I’ve been able to identify 3 key persona’s which I think happen to find this place.

Product Management/Brand Marketing Type: A little too busy to really read or surf and is looking for a technology product management filter.  Main value drivers is “quick hit content” and they appear to come back more so than not – I think.

Randoms: Some vaguely relevant search term got you here, but only like 3% show back up. So not sure there is a value driver for this group, but I think they just are out looking for random stuff/questions to be answered.

People I know: This is the most fun group and since you are people I know, you probably don’t have an opinion one way or another, but still chime in on topics every now and again – either on facebook or through comments.  OK, perhaps they have comments, but are polite enough to stay nice and say something in person.  This group is also more or less technology wonks, product marketing types and brand enthusiasts who I may have met at a tweet up, the panic show or some other random career activity.

So since I think I might have this persona thing for Spatially Relevant down, I’m off to putting a plan in place to:

  • Encourage More Conversation
  • Identify a Better Way to Understand the Readers
  • Link more cool people up together

Achieving the Plan: Build or Buy or Partner?

There are many things I could do to drive forth on these initiatives on my own – commit to 2 pieces a week which aren’t random business slides to see what richer metrics I could get which could allow me to meet more cool people.    If I wrote more, I could potentially work towards achieving them on some sort of incremental YoY scale.  Not that interesting to me, since this blogging stuff is tough stuff and I think it makes you gain weight.  So I need a different option.  The option I settled on was partnering with some cool people I know to help build out content, 2 which currently blog, 1 one that hasn’t and 1 that continously says she will.

John Mecke – A technology operator, product management type who really prefers to browse Hoover metrics more than anyone I know. Full disclosure: I worked for John, with him and previously written with him before most recently on a piece to be published in November.

Keith Finger – Met Keith randomly thanks to Erik Wolf, the lead principle at Zero G Creative.  He’s been a very interesting cat whom I really starting to like.  He focuses on brand’s and how integrating a nurturing initiative can dramatically increase a products position in the marketplace.

Sheryl Altschuler – She say’s she’s going to blog, not sure she will.  But one of the best writers I know and she continuously providing feedback to me via email and phone on stuff I write.  I wouldn’t call her a luddite, but she does definitely prefer real life activities.

Stephen Smith – I’ve known Stephen for just over 2 years and he is just one of those cool people you find in life.  Smart guy, motivated and genuine – oh the people you can meet on the internet.

Many thanks for your patience as I worked through this years strategic plan with y’all and let’s see if the 3rd year of Spatially Relevant is as much fun.

If you want to find out more about these folks, just visit the contributors page – did think about calling it the partners page, but wouldn’t really make sense outside of this post.  I also have some random guest posts on the way as well.  Cheers!

~jon

Related articles by Zemanta
July 26, 2009 by
(1)