05/9/13
SaaS

Selling and Marketing SaaS to the Enterprise (Part III)

This is the third post of a six post series discussing Sales and Marketing strategies for Enterprise Cloud Computing (SaaS) companies. Links to the related posts will be updated at the bottom of each page as they become available. You can start from the first post here.

Today’s post focuses on Freemium, Social, New Age Customer Behavior and Key SaaS Metrics

Freemium, Free Trials, and the EnterpriseFreemium_Tombstone

$$$ = Commitment. If you remove all barriers to entry, you are removing all barriers to exit. The freemium model can be great at appealing to a large, point product market to see where you stick, but is much harder to execute in the Enterprise.  Free trials are similar, in that it shows faith in the quality of your product to provide value in a short period, but those that sign up can only be considered leads at best, and have a low conversation rate into actual opportunities.

If a prospect is willing to commit their money to the evaluation process, it will also guarantee their time and attention. Consider a scenario where you have 2 products that are similar in nature that you are looking to evaluate. The first you receive for free for 30 days, and the second you have committed $5,000 for use during that same period. You can bet that more of the companies resources will be committed to the ensuring the second option is properly evaluated.

If using freemium or free trials today (and targeting the Enterprise), I recommend trying paid pilot and evaluation programs. Unsure how much you should you charge? Start by asking your prospects what they would be willing to pay. Using the paid evaluation model will significantly raise your conversation percentages, and position you for more long term success with each prospect.

Social Media

Should you be investing in social media? Overwhelmingly, the answer will be yes.

But should you be investing in social media campaigns? Marketo co-founder Jon Miller says no, or at least not directly. During his talk with us last week, he shared that Marketo does not run social media campaigns specifically, but rather every marketing campaign is elevated by social media. “Social Lift” promotes each campaign to higher levels of effectiveness. Landing pages, online ads, email, events… all get the social treatment.

There are many blogs and resources dedicated to this subject, Marketo’s own blog being one of the best.

Customer Behavior, “The times, they are a changin”customer

Well, with regards to customer behavior, they have already changed. Gone are the days where customers were deprived of information and had to resort to lowly measures like calling sales representatives to access white pages, pricing and the like. Instead, today’s consumer is dealing with problems associated with TOO MUCH information being available.

It is the job of marketing to make your information relevant, easy to understand, and available in the right forms that it will gain the attention of potential buyers and move them to take further action. Sales teams are now invited to the party only after the buyer has done initial reserach and decided they are ready, often when a shortlist has been decided. It is important for marketing to have balanced the right amount of information being pro-actively provided to prospects, while withholding enough information to ensure engagement between the prospect and sales needed to impact the decision process and articulate the value of your solution for the specific customer.

Defining Your Ideal Customer

In order for marketing to gain the invite to your sales team, it is important that the right information is available to perspective buyers in relevant and timely formats. In order to achieve this, marketing must understand the unique nature of their prospects in customers like never before. While you may sell to many industries, verticals and regions, it is important to tailor your message according to the key personas that purchase your solutions. While company size and vertical will factor in to some degree to defining these personas, more important characteristics include having (and acknowledging) the problem you solve and willingness to provide access to the economic buyer.

It is not easy to define such a persona, as it can be hard to stereotype your customers on a general level. You can start by listing out as many single-line characteristics as you can think of for an ideal customer, and continue to read and revise as you engage with your customers, ideally narrowing the list down to less than 10 key descriptors. Perhaps none of your actual customers will be a perfect match, but having an accurate ideal customer list can help identify good opportunities earlier in your engagements, and alerting you to those that are less likely to become quality customers.

The Key Metrics of SaaS - CAC and CLTV

We covered basic cash flow of SaaS companies in Part II of this series, but to summarize: SaaS companies burn through more money than they make in the early stages of growth, with the renewal strategy paying major dividends in the long term. For many, that would seem like a turnoff to early investors, as businesses of the past were often measured on total bookings and revenue from day one. So why are companies that have not achieved profitability being valued in the 100′s of millions?

Investors and analysts are more concerned with metrics relating to growth and long term value than they are with current bookings. Two of the metrics that are monitored from the start are Customer Acquisition Cost (CAC) ratio and Customer Lifetime Value (CLTV). These metrics are especially important when a company is young, as a company builds its renewal pipeline and validates the business model.

CAC Ratio = (Recurring yearly revenue from customer) / (All Sales and Marketing Costs in year 1)

  • CAC < 1/3 means it will take 3 years or more to get payback on this investment, VERY BAD!
  • CAC > 1 means you will be paid back in less than a year, and should go peddle to metal as long as you can maintain this.

CLTV (or CLV) definition (thanks to Wikipedia):

\text{CLV}  = \text{GC} \cdot \sum_{i=0}^n \frac{r^i}{(1+d)^i} - \text{M} \cdot \sum_{i=1}^n \frac{r^{i-1}}{(1+d)^{i-0.5}}

where \text{GC} is yearly gross contribution per customer, \text{M} is the (relevant) retention costs per customer per year (this formula assumes the retention activities are paid for each mid year and they only affect those who were retained in the previous year), n is the horizon (in years), r is the yearly retention rate, d is the yearly discount rate.

Also, a great free Harvard.edu tool for calculating CLTV here.

For companies that have maintained a CAC ratio near or above 1 and continue to maintain a positive CLTV for a few years, they can achieve profitability almost at the flip of a switch by cutting expenses and focusing on renewals and organic growth. But why should they? These metrics indicate they should continue to drive growth, negative cash flow from investment into sales and marketing will be offset by added company value. Should these metrics begin to drop, it may indicate a time when the company has matured to a point that focusing instead on profitability rather than growth is the right move.

On to Part IV!

Please leave questions or comments in the forum below, and be sure to subscribe by RSS or email to automatically receive updates to this series and other posts from The Valley Floor.

Read the other posts in this Selling and Marketing SaaS to the Enterprise series:

Part I - Introduction to SaaS Selling and Marketing

Part II – Startup SaaS Selling and SaaS vs On-Premise

Part III

Part IV - (not yet published)

Part V - (not yet published)

Part VI - (not yet published)

05/3/13
SaaS

Selling and Marketing SaaS to the Enterprise (Part II)

This is the second post of a six post series discussing Sales and Marketing strategies for Enterprise Cloud Computing (SaaS) companies. Links to the related posts will be updated at the bottom of each page as they become available. If you missed Part I, you can start from the beginning here.

Today’s post focuses on early stage, startup selling and positioning SaaS vs On-Premise solutions

SaaS Startups and Early Stage Cash Flow

imageI have heard various estimates as to the cost to provide SaaS vs On-Premise (as a solution provider), generally they land in the area of SaaS being 1.5-2.5 x’s the cost of On-Prem. This investment begins running up operating costs for the provider before they have landed their first paying customers, pushing cash flow into the red until the SaaS model can realize gains through renewals. Think about this from a VCs standpoint, scary right? But while it is common for a startup in the SaaS world to continue to go in “debt” as they burn through early investment dollars, VCs are more concerned with metrics like Customer Acquisition Cost (CAC) ratio, churn rate and Customer Life Time Value (CLTV) that ensure long-term financial success. The upside of Enterprise SaaS is huge vs the traditional “hockey stick” projections of On-Premise solutions.  Once a company reaches the inflection point and starts eliminating debt, the business model provides long term sustainable profits. Eliminate churn, and all new sales effectively all contribute to growing your bottom line. The graphic at to the right is from a good SaaS Economics post written by David Skok at For Entrepreneurs.

 Who Sells Your Product at Early Stages?

Not only who sells it, but what are they selling, and to what end? The faster the company can make it through the early stages and reach the inflection point, the better position they will be in from a cash flow perspective. The number of customers in this chart or debatable, but give an idea of how a truly Enterprise solution does not have to rely on a huge customer base, just needs to identify enough pain to get large sums of money from a few.

Stage
# of customers
Who is selling?
What is being sold?
Goal of selling
Likely cash flow
Discovery1Technical FounderOne-off solutionUnderstand NeedNegative and declining
Learning4-6CEO + CTO + VP SalesTechnology + Custom ServicesLearn -> develop productNegative, declining less rapidly, approaching or passing inflection point
Execution20+Professional Sales TeamProducts / SolutionsTransaction orientedPositive (or near 0) and increasing

Technology Adoption Life Cycle and “The Chasm”

The graphic below provides a typical Innovation Adoption Life Cycle, with a small modification represented by the red lines. This represents the chasm that technology solutions face in getting traction beyond the early adopters to reach the mainstream customers that hold the big $$’s. This is a vital topic to understand, and may be best addressed in Geoffrey Moore’s Crossing the Chasm (a must read for pretty much any business person), or you can read a summary version with additional insights here from ReadWrite. It is important to make this crossing successfully, as the enterprise money is tapped in the majority and laggard stages, get there and you can develop sales teams that can milk the market through transaction-style sales.

Adoption Lifecycle

 Perception of Value

Successful businesses can be established at all levels of delivered value, from commodity items to mission critical solutions. The key to being successful in selling your product is understanding where you fit as a value proposition, and being able to speak to your strengths and proactively defend or embrace your weaknesses without trying to be everything to everyone. Think about the value your product or solution provides, and how do your customers describe you. Are you a vendor, listed supplier, solution provider, trusted solution provider or mission critical partner? In Enterprise SaaS it will generally favor you to be towards the end of that list, but that does not mean it is the only viable solution or that you can’t evolve to this place over time. Don’t get caught in the glitz and glam of mission critical solutions, as they come with their own challenges, but in general the higher value you offer the more benefit you stand to gain.

Total Cost of Ownership (TCO): On-Premise vs SaaS

TCO is your best friend when selling SaaS vs On-Premise. While the market is much better educated now than it was 5 years ago, it is important to be able to remind them of the value of SaaS as well as updating the value statements to reflect your individual offering’s benefits. This means stacking up the cost of hardware, upgrades, security, performance, change management, third party software, maintenance, implementation costs and licensing (and potentially more) vs simply the licensing, any initial services and perhaps the time for a customer admin.

Please leave questions or comments in the forum below, and be sure to subscribe by RSS or email to automatically receive updates to this series and other posts from The Valley Floor.

Read the other posts in this Selling and Marketing SaaS to the Enterprise series:

Part I - Introduction to SaaS Selling and Marketing

Part II – Startup SaaS Selling and SaaS vs On-Premise

Part III – (not yet published)

Part IV - (not yet published)

Part V - (not yet published)

Part VI - (not yet published)

04/24/13

7 Reasons You Should Take a Job in Sales

Considering a job in sales? Sales will teach you universally applicable skills that help advance in any career. After leaving my engineering job and moving to San Francisco, I unexpectedly found myself considering a job offer in technology sales. My father’s advice was, “everyone who wants to work in business should at some time in their career work a year in sales”. I took the job, and in hindsight completely agree with my Old Man.

Here are 7 lessons learned through B2B sales that in hindsight I feel I would not have learned (or would have learned much slower) had I not worked in sales.

salesman1. Sales Skills = Life Skills

You sell every day of your life, whether you are actively or passively doing so is up to you. The clothes you put on and the way you present yourself send messages to those around you. The interactions, negotiations and trade-offs that naturally happen between colleagues, family and friends are all in themselves micro-sales. You sell your ideas to management and negotiate for budget approval. You sell yourself for promotions and making new connections. The more aware you are of this, the more you can take an active role in ensuring your happiness, achieving your goals and improving communication with those around you.

2. Managing Highs and Lows

Somewhere in the world there is a retired, life-long salesperson that never missed quota in his or her life — and I expect that person is now operating a unicorn ranch with leprechauns as farmhands. For the rest of us, the inevitable lows of sales are, well, just that… lowly. Sales quotas are intentionally difficult to obtain, and overachieving is often rewarded with higher quotas or tougher territories. Whether you attribute it to unrealistic quotas, buying cycles, or bad luck, it is likely you will miss quota sometime in your career. Learning to be modest through the good times and to persevere through the lows are important characteristics of leaders and successful people in any role.

3. Output vs Input Based Work Culture

As opposed to salaried and hourly employees, the majority of sales professionals are partially or fully compensated based on their performance. The commission amount typically has no relation to the amount of time spent at work, but correlates to the ability to deliver revenue for the company. If you are not producing, it doesn’t matter how much you work. Working extra hours and being more efficient should lead to more revenue being generated (and from my experience it generally does), but there are no guarantees. There is no room for excuses in sales, results are all that matter.

4. Handling Rejection and Objections

Nobody likes being told no, and fear of rejection may be the single biggest deterrent to more people working in sales. Being told “no” over and over again can weigh heavy on a new salesperson, but in time “no” mentally registers as “not now” or “not from what I’ve seen so far”. The greatest sales people are told “no” all the time. Everyone loses deals. Not everyone you talk to will become a customer. You can’t always get what you want. But you will close more deals and get what you want more often in life if you are willing to push past initial an initial “no” and not let rejection keep you from pursuing future opportunities.

Objections are opportunities. Objections present a perceived (or actual) shortcoming in the solution you provide. The fact that the objection occurred in the first place means the prospect or customer has at least considered the possibility of using your solution. Many people will be offended or get defensive when objections are posed, but being comfortable listening, empathizing, and responding with valuable solutions are key communication skills with global application.

$5. Negotiation

Working in sales you exercise your negotiation skills daily, although not always in the formal sense. Objection handling, pricing discussions, product positioning and virtually all aspects of managing the sales cycle require a salesperson to exercise tact, and constantly position the value of their services appropriately to the requirements and demands of the customer. I recently read a quote relating to this from Stanford Professor Maggie Neale, “Negotiation is a problem solving process that you should do all the time.” Sales gives you a platform to exercise negotiation at every level, every day. When it comes time to negotiate your salary, purchase a new car or home, or debate what movie to watch with the family, you understand the game you are playing and can position yourself to get what you want more often.

6.  Close, Close, Close

The best closers I know effectively combine two skills. First, they understand how decisions are made by an organization, and how individuals factor into such decisions. Second, they are able to influence these decision makers. This includes emotional, political and social factors that contribute to the decisions that are, at the end of the day, made by humans. This is easier said than done, and while working in B2B sales does not guarantee you will become a good closer, it will likely demystify corporate decision making and provide the opportunity to work closely with decision makers. Do this enough, and you will draw your own conclusions on how decisions are made and how to best influence them.

7. Value of Competition

Sales is competitive. So is business. So is life. Unlike other many other departments, sales makes it is easy to single out poor performers. While overall team and company numbers are still the most valuable metrics to the business, individuals cannot hide behind team achievement if you are failing to pull their weight. This results in much higher turnover than most departments, but allows for faster correction of poor employee hires or job positions. Sales teaches you to take responsibility for your function at a company, and holds you accountable to consistently be a top performer.

Getting started in sales

Getting started in sales was one of the most challenging things I have done in my professional career. While I have always enjoyed working with people and pride myself in being a strong communicator, I was not your prototypical “natural salesperson”. The everyday ins and outs of the job were night-and-day to my engineering experience, but I found that once through an initially steep learning curve, sales became fun and allows you to naturally developed your own style and skills.

I encourage everyone to challenge themselves to learn the skills of selling. The best way to learn is on the job (and the pay usually isn’t bad), but if that doesn’t fit your career plans then I recommend joining sales related Meetups, improve public speaking through Toastmaster groups, and perhaps even attending a Sales Seminar or Continuing Ed course. These are skills that you are either using or neglecting to use every day, the sooner you can start using them to your advantage the better.

04/19/13
SaaS

Selling and Marketing SaaS to the Enterprise (Part I)

4 days into my #30daysnoTV and no major signs of withdrawal so far. The weekdays go by quickly as expected, helped by starting my Continuing Education Course at Stanford this week. The course is titled Cloud Computing: Selling and Marketing SaaS Solutions to the Enterprise, I will share a summary of my key takeaways here, so far it is a looking to be a great class.

Finding the Sweet Spot

Everyone should be familiar with the concept of product-market fit (if not, start by reading anything by Steve Blank, or take his free course through Udacity). Enterprise SaaS is in line with this concept, but adds in another equally important factor that puts the “sweet spot” in the center of a Venn diagram for Market Opportunity, Product/ Technology Capability and Decision-Maker Pain & Access. I agree with this addition, but had never thought of access being a factor at the same impact level as product-market fit. Many businesses have failed for only consider the first two, having an excellent solution to a product that end users are demanding, but failing to connect with and communicate value to executive decision makers.

Enterprise vs Departmental vs Point Product Solutions

 

 
Enterprise
Departmental
Point Product
Problem solved at ________ levelEnterpriseDepartmentalIndividual
Changes the way work is done?YesMaybeNo
Sales modelTop-downLand and ExpandBottom-Up (Viral)
Executive decision?YesYesNo
Decision maker has political power?YesYesNo
Decision maker has resource allocation power?YesYesNo
Free trials useful?UnlikelyUnlikelyYes

Viral Approach to Enterprise

This can be a successful model, but relies heavily on selling as a Point Product solution to end users and requires a larger amount of investment ($50M+ was the number we discussed) for marketing, sales etc as done at Salesforce.com, Box and Yammer.

Primary Reason to Buy SaaS: Quick access to new capabilities and functions that cannot obtain by purchasing existing software and services

This reason was over twice as common as the next runner ups, accounting for almost half of the responses (OpEx vs CAPEX, and reduction of IT operations or complexity being 2nd and 3rd respectively) based on 2012 SoftLetter SaaS Report. Was a surprising runaway leader to me.

Primary Objection to SaaS: Security and safety of data

No shocker here. Although, these worries are subsiding and the fact of the matter is that SaaS products are typically more secure than data that customers store themselves. To paraphrase E2Open CEO Mark Woodward who spoke at our lecture this week, Do you have guns and firefighters protecting your data?

On to Part II

Please leave questions or comments in the forum below, and be sure to subscribe by RSS or email to automatically receive updates to this series and other posts from The Valley Floor.

Read the other posts in this Selling and Marketing SaaS to the Enterprise series:

Part I

Part II – Startup SaaS Selling and SaaS vs On-Premise

Part III -

Part IV - (not yet published)

Part V - (not yet published)

Part VI - (not yet published)

04/10/13
Say No to TV

Idle hands…

This past weekend I ran my first half marathon. While glad I did it, I was surprised by the amount of time it consumed to train and am glad to have those hours back to commit to other areas of life. To resist the urge to turn those hours into wasted time catching up on TV shows, next week I am starting a personal experiment: 30 days without TV.

Say No to TV

No Netflix, no documentaries, no movies, no YouTube, no nothing. I typically watch far less than the 34 hours/week American average reported by Nielsen, although during March Madness I may have gotten close. This experiment is more a commitment to making use of the increasingly scarce commodity of free time than it is to breaking bad habits. This weekend will be my last hurrah with the boob-tube (Shameless and the Masters tournament on the agenda) before going cold turkey on Monday the 15th. How would you use the extra free time?

I expect a number of positive results of hyper-consciously making use of free time. What do I plan to do with those 34 hours a week that the rest of America is watching Mad Men, Game of Thrones and the like?

Read more (not just Twitter and Feedly)

I have a few books queued up I have been meaning to read, recommendations welcome.

Learn more (get dumber less)

Just removing television from the equation will probably raise my IQ, but over the coming months I will be comparing Traditional Education to MOOCs (read more on MOOCs here) through personal experience: I am taking a paid for in-person higher education course at the same time as a free online course and will compare the experiences. If anyone has taken any MOOCs lately that they recommend I am open to suggestions, but here are the courses I am planning on taking (already enrolled for the continuing ed course):

  • Stanford Continuing Education - Cloud Computing: Selling and Marketing SaaS Solutions to the Enterprise
  • Coursera - Statistics: Making Sense of Data

Network more (be home less)

There are a number of Meetup groups and events that I have been wanting to attend, but have not made the time for. Meeting new people and exploring various industries and job functions has helped me tremendously over the past years in defining my career goals as well as charting a course to reach them. Do not wait for someone to come ask you what you want to do, get out and let people know.

Other Benefits:

  • Exercise more (veg less)
  • Cook more (eat takeout less)
  • Listen to and make music more (Spotify is going to be well worth the $10 this month)

*Any suggestions for books to read (could use a good novel), courses to take online, or things to do/learn to otherwise pass the time productively?*

04/3/13
unconference 624

The Unconference

unconference 624

Recently, I volunteered to help at the 2013 Silicon Valley Product Camp event hosted at eBay, which bills itself as an “unconference”. Visit the event page here, or view slides, notes and more from presentations here. It was my first time attending this type of event, and while there will be a number of posts to follow regarding the experience and content, I want to start by introducing the unconference format to anyone who is not already familiar.

From Wikipedia:

An unconference is a participant-driven meeting. The term “unconference” has been applied, or self-applied, to a wide range of gatherings that try to avoid one or more aspects of a conventional conference, such as high fees, sponsored presentations, and top-down organization.

It provides almost all of the same benefits of your standard pay-to-attend conference, except strips away many of the things I hate most about traditional conferences. Here is a more detailed comparison based on my experience (largely comparing to Salesforce.com’s Dreamforce event):

 
Unconference
Traditional Conference
WhenTypically on the weekendThe more overlap with workdays the better
WhereAnywhere they can get a large enough space donatedLarge, expensive convention centers
Cost to attendFree$100's-$1000's per attendee
AttendeesPeople from all walks of life including VPs, managers, grunt workers, entrepreneurs, freeloaders and more.People who work for SMB and large companies willing to sponsor them to 1) miss work to attend and 2) cover the costs for travel, lodging, attendance etc.
HostsVolunteersPaid committees with marketing budgets to burn
PresentersAnybody can present, but only gets the opportunity to do so if the other attendees vote for their proposed topics.Paying sponsors (over $1M for a keynote in some instances) and hired speakers decided on by host company and planners
Additional flairSlide decks posted online and shared with attendeesConcerts, magician, motivational speakers and more

Product Camp 2013 was probably the best overall conference experience I have had to date. I came with the intention of learning more about product marketing (relevant to my expanding job role), and meeting product managers and marketers to better understand what makes them so effective as CEOs and founders. This was relatively easy to accomplish, largely because of the unconference format that allowed me to tailor my experience and move between various presentations and groups, easily making connections in the informal setting.

If you are fortunate enough to live in an area where they are already hosting unconferences, I highly recommend not only attending, but volunteering. If they don’t have any, then seize the opportunity and start one. It takes a small village to host an event as large as Product Camp (500+ attendees), but start small and as an organizer or volunteer you will be rewarded by meeting remarkable people and gaining street cred with you peers. If anyone is considering hosting or participating in an unconference, I would gladly introduce you to some of the individuals I met who have successfully organized and coordinated these events for years.

03/15/13
image31

Has Samsung stole Apple’s mojo? – Galaxy S4 Release

While the history books will rightfully credit Apple with revolutionizing the way the world views phones, Samsung has had the edge in device sales since 2010 when they took over as the world’s biggest smartphone seller. Samsung’s dominance has continued over the past 2 1/2 years, and they look poised to take another step forward with yesterday’s announcement of the Galaxy S4.

Apple has made a habit of slapping lawsuits on competitors for design similarities to their beloved iPhone and other devices, but can they stop Samsung from stealing their marketing and PR mojo?

From the big-time venue and tech blogosphere buzz to the uninformative teaser ads and product leaks, today’s Samsung event was hyped and executed according to the playbook that Apple wrote and executed for years. But with their epic success (and without the leadership of Jobs), Apple is proving less capable then Samsung at executing their own game plan.

Apple’s latest batch of marketing feels largely uninspired and the last few updates severely lacked the Wow-factor. Don’t get me wrong, the iPhone 5 is an amazing product, but it is no longer leaps and bounds (perhaps not even inches) above the competition. The public is over the “coming back from the edge through innovation” card, and Apple’s stock is showing the pains, down over 40% from their high of over $700/share just 6 months ago.

So Samsung went to the marketing well that Apple left for dry, cashing in on their unique position as both the market leader and under dog of public opinion. The Galaxy 3S was a huge step for Samsung, acting as a worthy alternative to the iPhone, and rewarding Samsung by becoming the top selling phone in the world. Because of this success (and a massive marketing spend by Samsung), gadget gawkers formerly with tunnel-vision to Apple news started paying attention, and helped broadcast and build hype for yesterday’s event. There was speculation, product rumors and genuine interest from the tech community. Everything you would expect from an Apple event.

Outlook

Samsung is really swinging big with the Galaxy S4, and there is no reason to believe it will not overtake its predecessor as the highest selling smartphone on the market. They have not had to do much trailblazing (both relating to product features and business model) as they have been able to learn from Apple’s successes and turn them against the previous market leader.

It is that Apple is investing in producing Wow-factors for future iPhones, as rumors are leaning more towards cheap(er) offerings that will keep them relevant in this huge market without requiring them to bend over backwards and redefine the market again. They seem to be saving their innovation and throwing their resources into markets they have yet to make big splashes in, such as wearable devices (a la Pebble) and streaming television.

Things are looking up for Samsung, if they do not let it go to their heads they are in position to lead the smartphone market for the next few years simply by feeding the marketing machine, which they have Apple to thank for.

03/13/13
dd

Blind Hotel Booking – Seriously, Internet?

With my busy social calendar (read: my girlfriend’s busy social calendar) over the coming month, this past weekend was looking to be my last opportunity to take to the Sierra’s for a weekend of skiing before spring and summer race into Northern California. When nearly 20 inches of snow fell on Tahoe in 3 days last week, it was a near certainty that I would find my way to Tahoe.

Initial plans called for a couples trip, but circumstances beyond my control lead to the girls backing out and me and a friend planning an early Saturday to late Sunday ski adventure. No longer did we have to meet the high (although likely diminished since dating us) standards of our girlfriends, but  we could let function guide our decisions — we are men after all. So I took to the internet to find the best deal on a hotel that met our minimalist qualifications.

That’s when the internet made me an offer no logical person should make, and I almost accepted.

It actually made me the offer twice. Once through Priceline’s “Express Deals” and again through Hotwire’s “Hot Rates”. To secure “Super Savings” for our desired night and location, all I had to do was blindly pay for the reservation without knowing the name of the hotel or the exact location. I could not read reviews or view pictures, but must trust them to provide a quality stay. I don’t trust William Shatner, but I do love deals.

Why I Almost Said Yes

The offers simplified my buying process immensely by giving me what I wanted (a quality room for a lower price than their lesser quality brethren that I was also considering), and not complicating with additional information to review and consider. I have reviewed some of the benefits of doing so in my earlier article on Product Messaging.

I could save the time of reading reviews, formulating opinion, being let down when good looking deals are marred by bad reviews, and book a steal of a room.

***Do not discount the fact that the turn from a couples weekend to a guys weekend meant impulsive decision making with disregard to quality was fully on the menu***

Why I Did Not End Up Buying

Up until that point I had followed the standard internet flight/hotel/restaurant search process. Filter out anything over budget, remove 1 star listings (keeping it classy), and read reviews to catch red flags and develop general opinion to help in making my decision.

The cheapest option through my initial searches was a 2 star smoking room with generally bad reviews that included details of the unique decor which included bloodstained sheets with cigarette burns. Turns out my standards are not that low.

Could you imagine if I had blindly booked a deal just based off of price at this hotel? In all likelihood if I had booked and not read up on the place, the stay would have been fine, and I would have been happy with the outcome of my thrifty risk. But I know I could not resist digging into the reviews once I had the name of the hotel, and would have felt hoodwinked if I found anything less than 5 star reviews. If it was a well reviewed place, why would they not use that to their advantage in getting me to stay with them, and why are they having a hard time filling rooms to begin with?

Turns out I am willing to pay more for less if it comes with the reassurance and knowledge of what I am getting for my money. With the amount of information available to consumers today, withholding transparency creates a huge amount of distrust, not a good thing for customers to feel.

Why Hotel Booking Sites Offer Such Services

Here is the claim from Hotwire regarding why these deals are being offered in this manner.

When brand-name hotels use us to fill rooms that would otherwise go unsold, their prices are deeply discounted. Hotels don’t want to publicize rates this low, so we hide their name, address, and picture until after booking.

What is more likely is that the hotels have suffered from bad reviews or PR in the past, and are looking for quick wins to fill their rooms that frugal travelers will blindly jump on. It cannot be easy to rebound from even a few highly negative reviews in today’s world of information. Even if you respond and improve your services or offerings, the review generally remains as a permanent mar to your record.

As I learned while bar tending in college, if a customer has a great experience they will tell their friends, but if they have a bad experience, they will tell EVERYONE. With the internet giving everyone a medium to voice their dislike, that can be hard to recover from.

Has Anyone Booked This Way?

I would expect most people who book blindly have excellent or at least satisfactory experiences. I am wondering if any TVF readers have been so bold. If so, what lead you to make the decision to take the risk, and was it worth it?

03/8/13
runshorts

Run, Kent, Run – Why Nike+ is awesome (and free)

As mentioned in my earlier post, What Saying “Yes” Taught Me About Product Messaging, I am currently training for my first half marathon. I use the word “training” in its loosest sense, as you would have to go back to the 8th grade phys ed mile run for the last timed run I did over 400 meters (I registered for the Bolder Boulder once but was kidnapped at the last minute for a Vegas road trip. That’s right, kidnapped).

runshorts

In my amateur running state, I realized I could use some help getting into the whole 20+ miles a week thing. First things first, time to upgrade the gear. Fresh new kicks… check. iPhone running armband… check. New headphones… in the mail. Short shorts… well, might pass on those.

A couple weeks into training, I am happy with the equipment upgrades but the most useful tool has far and away been the free Nike+ Running app. The app has a great UI and a solid set of features, but the most impressive aspect is not that it tracks my run through GPS, or that Ellie Goulding or some Olympic athlete I have never heard of gives me a verbal pat-on-the-back each run, but that it is almost completely free of advertising.

nikeplus

The app does include a Shop section, but it is unobtrusive to the user experience, slipped into the bottom of the menu to remind the user they can buy new gear if they feel the need. Honestly, knowing it is a Nike product, the app would feel somewhat lacking if it didn’t have the shop.

Nike has a whole slew of apps that target different users (Nike Golf 360, Nike+ Basketball, etc), and have embraced Facebook and social media while moving away from traditional television and large media based advertising (read the Fortune article here that reviews this shift to Digital Marketing). While watching my Buffalo dismantle Oregon last night, I saw a handful of Under Armour commercials in the span of 30 minutes. Can you even remember the last time you saw a Nike commercial on TV?

I applaud Nike for embracing digital marketing (spending over $800M in non-traditional marketing in 2010) like few large corporations have, giving away a quality product that delivers value customers would be willing to pay for (and previously did for the Nike+ Sport Kit), staying true to their core business.

I usually cheer for underdogs, but cannot hate when a big company does something right, this digital marketing focus is a big + in my book (sorry, I couldn’t resist). Nike is in the business of making money, so why give these apps away for free?

Branding

Nike succeeds in creating a positive association with the Nike brand by offering a no-frills tool that the running community clearly was asking for (over 5 million users of this app and the Nike+ website that also displays your running data). For any serious runner, it is likely one of the few apps that an iPhone or Android user opens up 5+ times a week.

Data

For a company like Nike, being able to understand its market better than competitors is a huge advantage. This app allows Nike to understand the habits of casual runners along with people prepare for serious races, and they have massive data on the most traveled running paths and the different types of runners that they will reach their.

Connecting with Customers

Nike’s biggest market it the not the over-40 adults who have almost all given up on both wearing stylish shoes and keeping fit/ living an active lifestyle. It is young athletes. And the younger they can reach them the better, creating brand association with not only their current biggest customers (teenagers), as well as planting seeds in the minds of the future buyers.

03/6/13
6 ways to grow your business

From Startup to Real Company: The Importance of Product Management

Today, the the word App can mean practically the same thing as the word Company, blurring the line between fledgling startup and proven businesses. In our fast paced world of technology, success often appears to happen overnight, but the reality is there are years of hurdles, setbacks and failures that lead to overnight successes. So what is the difference between a startup and a company? How does one make the transition? And why is Product Management vital to successfully doing so?

I have heard many definitions for a startup, but the one that stuck with me most was presented by Steve Blank, a entrepreneurship expert and Silicon Valley veteran who currently teaches entrepreneurship at Stanford (as well as a free public course on Udacity). The key distinction that Steve points out is that a startup is still in search for its business model, whereas a company has a business model selected and is focused on growth and profitability by building and fine-tuning the other pieces of the puzzle (sales, marketing, HR, etc).

Learn more about Udacity and the effects Massive Open Online Courses will have on higher education

This seems obvious when you compare large corporations such as General Electric, Oracle and Shell with stealth mode startups that have yet to release a product (or even to announce what there product will do), but what about the thousands of business ventures in between? Does validated your Minimum Viable Product make you a company? When do you give up the Top Ramen lifestyle and look to dote on your employees in the style of Google, Twitter and Facebook? Checkout Twitter’s digs

The transition from startup to mature company does not happen overnight, but if you are fortunate enough to experience success as a startup, the following will help you to cross the chasm into company adulthood.

Are You a Product or a Company?

Answer this question honestly, as you would have to when asked by potential investors. Even if you have delivered an award-winning product to market, and have a large and growing customer base, you could be a long way from becoming a real company. For a company based solely on a single base product it is inevitable that competition is going to rise, 1000% growth will dissipate, and hockey stick sales projections will flat line.

Pumping more money into sales and marketing will not save you, instead you have to evolve your offerings by engaging customers, understanding their pains and improving the ease with which they see your value and say “yes” to your company (as discussed in my earlier post on Product Messaging).

Take inventory of the time and effort that you put into these activities versus standard sales and marketing (SEO, press releases, social media, conventions). Traditional companies focus almost entirely on the later and are important to growth, but the former is important to becoming more than just a product.

Role of the Product Manager

For many startups, the role of Product Manager is performed by the CEO, largely because it requires someone to work with all areas of a business including sales, support, developers, marketing and beyond. Product Managers are often described as being CEO’s over their products, and many great founders and CEO’s have come from a product manager or development background.

The role of the Product Manager is not a glamorous one, and requires someone who can connect with a wide range of people, being able to create champions within both technical and creative teams, while often being perceived as an outsider by all parties. There are many blogs dedicated to the plight of the Product Manager, if new to the concept, here are a few blog posts you should read.

Product Management 101: How To Be A Product Manager by The Accidental Project Manager

How to Be a Jackass Product Manager in Nine Easy Steps by The Cranky Product Manager

When Do You Need A Product Manager

Alan Ying of Chrysalis Ventures recently wrote an article for Inc Magazine titled Why Product Management is Everything, you can read the whole article here. In the article, Alan writes:

“Product management becomes critical when your prospective customers need you to sell them more than one thing in order to become paying customers.”

While I agree with Alan’s statement, I would add that you may need to add a Product Manager sooner depending on the changing responsibilities of your founders/CEO. Lets say you are CEO of a startup that has already delivered a Minimal Viable Product to market. While it may not be shiny yet, you have introduced your new toy and have proved your assumption that people are willing to buy your product. Now it is time to build the business. With your product leading the way, you start growing sales, marketing, support, legal and other areas of the business.

All of these new departments are reporting to you, the CEO, each taking away from the time that you previously committed to talking with customers,  building the product. While many founders are passionate about product development and will lament putting it in other’s hands, there comes a point where their additional responsibilities do not leave them adequate time to do it all.