The Question of Pro Bono

Last week I was twice asked my point of view regarding pro bono work.  I didn’t have to think hard about my answer.  I support it (at least for myself) under two circumstances.

1. I don’t collect any fees for anything I blog about or generally post to the web.  I write to gain exposure.  I view making my writing freely available as the cost of gaining exposure. 
2. I happily devote 10% of my company’s time to assist non-profits (the Starving Artists variety).  I do it because I genuinely like to give something back to the community.  I don’t see it as a cost.

I don’t provide anything for free if the motive of the person - or the entity - requesting it is profit.  That said, I do get requests from the profit seekers.

No one outright asks me to do something free.  Requests are usually put forward as a quid pro quo: you do this for us and you’ll get plenty of great publicity (reach, exposure, etc.) in return.  That statement is typically accompanied by data and charts that not only show how much attention I’ll receive, but seemingly imply that the scales of good fortune at tipped decidedly in my direction.

Hmmm.

So, I had to smile when I read Seth Godin’s 7/30 blog on the subject of the price of exposure.  I share his view.

In reading it, I couldn’t help but laugh heartily when I watched script writer Harlan Ellison’s video that Godin had included.  It’s a riot!  Give it a look.

Each of us is our own clearing house.  We decide what to put in the public domain, and what to put a price tag on.  We draw our own line between what we do for personal gain ( or simply to eat and pay the bills) and what we do to contribute to society (to the degree that it matters).  Think through where that line is for you.

Seth Godin and TV 2.0

I’m a Seth Godin fan.  He’s viewed by many as a revolutionary marketing thinker.  To me, though, he’s very good at making sense out of how to apply marketing to an always-on, internet-connected world.  He does so in an unorthodox, contra-Madison Avenue way.

Seth Godin’s telescope brings insights into view.  He then puts these into metaphors to explain what the rest of us see but have difficulty putting into words.

Case in point:

The advertising all of us have absorbed since 1930 is based on a model of control - manufacturers speaking one-way via print and broadcast media.  They controlled the message and its destination. 

It’s a model that has been in place since 1930.  It’s a tick of the second hand on the human clock perhaps, but it’s all most of us have ever known.  

The along came 1995 and internet, and the “new media” soon thereafter to change all that.  Now, every individual with a point of view has the opportunity to reach and affect millions for the cost of an online connection.

Many companies continue to apply old media methods to new media to new media uses - what Godin calls TV 2.0.  Unfortunately, new media and old methods are oil and water.  The two just don’t work well together.

If you want to understand why, then set aside 10 minutes to watch this video interview of Seth Godin.

Pack Your Parachute Carefully

“I do not risk my money until I can verify the facts.”   - Baron Rothschild

I came across a story about Warren Buffett that wonderfully that cuts to the chase regarding risk-taking.

It seems that an acquaintance of Buffett’s was doing his level best to persuade him to invest in a startup he had come across.  Buffett listened until the man had presented his case.  

Buffett then asked him: what did he figure were the odds of the company being successful?

The man mulled it over momentarily and then responded: 50-50.

Upon hearing that Buffett raised his hands and brusquely responded: if I told you a parachute had a 50% chance of working would you jump out of an airplane with it?

The pitch ended there.

The Demise of the Pencil and Pen

How attuned are you to markets?

I won’t test your knowledge of what is taking place in technology or new media.  Not even the experts truly know (though it’s something none of them will admit).  Instead, I’ll invite you to weigh in on a set of products you are certain to have a great deal of experience using: pencils and pens.

How much are annual sales of pencils and pens expected to change over the next 5 years?

1. grow at 7%
2. grow at 3%
3. stay flat
4. shrink at 3%
5. shrink at 7%

You’ll have to hold on a bit to see the answer.

I have never met anyone who does not know what a pencil or pen is, and what they’re used for.  Even three year-olds know.  

However, who really wants to use a pencil or buy an extravagant pen when you can get something that leaves them in the dust?  How about a snazzy iPad 2, Samsung Galaxy or HP Touchpad?  Or, for that matter, an Android smartphone or any of hundreds of brands of laptops and desktop PCs fill the bill also.

Add on one of the thousands of writing and note-taking programs (Word, Pages, Evernote).  For good measure, an all-in-one printer scanner makes the chore of electronically capturing what’s on paper (or printing on the rare occasions that paper is needed) a snap.

There’s two things technology marketers know about product life spans, and the growth outlooks for technology offerings as a whole.

• First, like people, all products have a life cycle.  They are born and then they die.  There’s even a graph that depicts it.  It’s known to every marketing student.  It’s called the Product Life Cycle (PLC). 
  
  Every product starts out as an idea.  If its potential is good, it attracts development capital, and is taken to market.  From there sales grow along the familiar pattern of the PLC curve.  Sales grow with exposure to the market, and level off as the market becomes saturated.  Sales decline when buyers grow tired of the product, or when something better replaces it.  There are two great unknowns upon which every business bets: how high will the curve go (sales)?  how far will it stretch out (time)?
• Second, sales of personal and business technology will only continue to grow during my lifetime (yours too, I’d wager).  Brands may come go (remember the Atari and the Commodore PET?) but consumption of technology will only increase.  There is no horizon in sight.  Computing technology has moved from expensive mainframes housed on elevated floors in air-conditioned rooms to our homes, cars, pockets and purses.  Applications have moved from floppy discs to CDs and now to the cloud.  We don’t know how it all works, but who cares.  When we do a search, check our bank balance or pay for an expresso using our phone, it just works.  Reliance on older technologies - like paper and pen - diminishes in lockstep with the growth in consumption of new technologies.

This is the basis for the story marketers have been telling about new techologies for 50 years.  As Seth Godin noted in his bestseller, All Marketers Are Liars, framing a compelling story about the future is an obligation marketers have to buyers.  

Skilled marketers write stories of promise and a world made better.  Skilled marketers make stories appealing, believable and - especially - wanted.  They create an urgency that craves action.  Buyers have choice, and they ultimately vote with their wallets.  As long as the story continues to satisfy, there will be buyers to hear it.

Now, the curious thing about pencils and pens is what’s not happening.  Sales are not spiraling down as was believed (honestly by the story-tellers).  Quite the opposite.  

If you answered (b) to the quiz you were right.  Sales of pens and pencils worldwide are approaching $20B, growing about 3% annually.  Growth is not coming from recent technology adopters, either.  Sales in China are growing at 4%, with growth expected in the two largest markets for writing instruments - the U.S. and Europe.

The market for writing instruments is alive and well.

It certainly is for Newell Rubbermaid, maker of the Sharpie.  It’s the marker pen made popular by professional athletes who use it to autograph everything from hockey sticks to basketball jerseys.

At 60% market share, the Sharpie holds first place in the permanent market industry.  Now, it’s setting off on a bold mission to expand the size of its attainable market.  The target: teenagers.  The story: a catalyst for creative self-expression.   The media: TV, print, social media.

Teenaged Sharpie users are do-it-yourselfers who have turned ordinary coffee cups into $900 works of art, designed customized skateboards, and even converted pencil cases into purses.  As it turns out, a down-and-out commodity is  a hot item among the demographic who propel the adoption of new technology.

Learnings:

1. Good marketers tell great stories, but make lousy predictions.
2. Old habits die hard.  There is always a market for a good product. 

Did Netflix Blow It?

It was a mere two weeks ago that Netflix announced that it was increasing its subscription fees by as much as 60%.  That launched a tsunami of customer complaints.  Anyone with their pulse on social media felt the blood pounding through the network veins of Twitter, Facebook, Google+ and blogs.

On Monday’s quarterly earnings call CEO Reed Hastings acknowledged that the price hikes are having a ‘negative impact’.  Results were mixed, Wall Street was unhappy, and shares fell 10% in after-hours trading.

Hastings went on to say some other things:

• “We knew what we were getting into.”
• “We feel bad about having our customers upset with us.”
• “We’re feeling great about the decision, as tough as it is."

It is useful to understand what Netflix did, why they did, and which customers are unhappy - and then question what Netflix might want to do next.

What Netflix did: unbundled its streaming video and DVD plans.  Before, one could opt for streaming video and one DVD for $10 a month (actually $9.99).  Now the plans are priced separately - DVDs or streaming video at $8 a month, or $16 for the pair.  For streaming-only subscribers (40% of Netflix’s 24.6 million base) and DVD-only (12% of the base) the price hike isn’t a big deal.  The 60% bump hit he 48% of the base that subscribes to both DVD and streaming.

Why they did it: Hollywood and the changing dynamics of content distribution.  It took years for motion picture studios to get comfortable with videotape and DVDs.  Once assured that they could control distribution and released timing they were off to the races.  In fact, not only did theater revenue not tank as had been feared, but overall revenue increased.

Video streaming is a different game.  Distribution control is in the hands of a few dominant players - Netflix, Amazon and Google among them.  It harkens back to broadcast television where ABC, CBS and NBC controlled the medium for a half-century.  Add cable providers into the mix (especially Comcast, new owner of NBC Universal) and a combined content and distribution player enters the scene.

Not only is there money to be made from content distribution, but there’s a ton of opportunity with advertising.  No one has figured it all out yet.  The economics are complex, and technology is reaching the market faster than strategic options can be lined up.  

There’s are other matters to be concerned about, too:

• What’s occurred in the recording industry in the past decade (e.g. plummeting CD sales).  No picture studio wants to be Napstered.  
• Fringe players who may not be happy staying on the fringe -  Facebook, Apple, Walmart - and who possess the muscle to be spoilers.

There is much at stake.

Content is king.  Rights to the hottest new movies and TV shows are on the line.  That’s where the lever rests on the fulcrum for the studios.  They are jealously guarding hot content and pricing it at a premium.  Therein lies the rub for Netflix.

Netflix cannot grow a profitable long term streaming business with yesterday’s content.  Subscribers want the latest and greatest.  But, to provide that and stay profitable, Netflix has to shed the cost of physical DVD distribution.

Why Customers are Upset: At $10 a month subscribers get the best of both worlds - new releases via DVD, and everything else streamed to their flat panels.  It’s good value.  At $6 more, many would argue that it’s still good value.  

But for the many of the 48% of customers who, by design or inability to migrate near term to streaming video, a 60% bump seems a shot to the gut.  Reading the online comments suggests that these folks were expecting an orderly, steady-as-she-goes migration - not a shotgun start.  As a result they feel caught off guard, backed into a corner and betrayed.

Everyone enjoys hitting the piñata; no one enjoys being the piñata.

What’s to be Made of all This?  Let’s first get something straight.  I don’t believe that Reed Hastings or anyone at Netflix has enjoyed the past two weeks, or is as excited about the upcoming quarter as the scripted rhetoric of the earnings call would have us believe.

I’ve sat in more than my share of similar corporate meetings where the unpleasant trade-offs between having happy customers and happy shareholders end up on the table.  Scenarios are considered.  Spreadsheets tally the financial upside and customer attrition downside.  The CFO usually assumes customers are the stoic kind who grumble at first, but soon settle back into civility and teh uninterrupted routine of paying their invoices.

I’d wager that, though this customer reaction was taken into account by Netflix when evaluating options, it wasn’t the outcome they expected.  Otherwise, they would have had better damage control in place (including a better-prepared call center than was apparently on deck).

Customers fear when upstarts become successful and powerful.  History shows that powerful firms begin to act like monopolies: pay the price or find an alternative.  I’m not accusing Netflix of this.  But I am suggesting that enough of their customer based has a chip on its shoulder to be worrisome.

Can (should) Netflix do anything?  To begin, Netflix is not about to fall off a cliff and into the abyss anytime soon.  How it conducts itself in the next few months will, however, set its course for the next several years.  The situation is not trivial. 

There are three things Netflix should seriously consider:

1. Leave the new pricing as is, and secure in-demand content.  There’s little percentage in retreat.  The issue is about securing the rights to in-demand content.  The studios hold that card.  The sooner Netflix delivers high-demand content (as they intend) the sooner customers receive the value.
2. Expand choice and access quickly for streaming customers.  Nothing neutralizes lingering doubts about a price increase than seeing immediate increase value.  Price increases kick in September 1 - so should new, fresh content.  Lots of it, too.  It’s the strongest incentive they can put on the table for DVD customers to migrate fully to the streaming option.
3. Decrease DVD waiting queues.  These customers feel the price squeeze most, and are at greatest risk of loss.  The biggest complaint among them is the long wait times given the demand for recently released DVDs.  Reducing lead times by increasing the number of DVD copies is the best short term salve that Netflix can offer them.  Make no mistake: these customers now know for certain that they must migrate to streaming video.  Soon.

Netflix can bring its customers along, or risk leaving them behind.  At a combined 48% of their customer base, it’s a no-brainer.  They may not have expected to be on this journey so soon, but Netflix can make the trip enjoyable for them.

Buying for All the Wrong Reasons

Falling in love with your products carries the same risk as falling in love with your stocks: you don’t let go when you should.

There are many reasons why people buy a specific product.  Any product.  Though marketers and their firms would like to think that people buy for the 4-5 reasons summarized in marketing plans, buying motivations operate in a more complex manner.  

Take any well-known product.  If you interviewed a statistically valid sample of buyers to learn why they bought, you’d likely end up with a very long list indeed.  Often, buyers will cite identical (or nearly so) buying considerations - so it’s easy to lump these buyers together and view them uniformly.  This is how buying segments are formed.  Yet, upon examination, other factors may end up being contributors to what may otherwise appear to be a similar buying motive.

Take food products, for example.  Marketers know that taste is a principal buying factor.  But taste perception is not uniform.  As at least 5 distinct tastes can be perceived, people don’t necessarily mean the same thing when they say that they like a product’s taste.  What is salty to one may be spicy to another.  They are not the same, and it would be unwise to treat them as such.  Likewise, laptop manufacturers know that speed represents a whole category of buying factors.  Yet, buyers could equally be referring to disk I/O, application load times, processor, bus, screen refresh rate, and so on.  These cannot be conveniently lumped together into a bucket labeled speed.  What is fast to one buyer does not mean the same as fast to another.  The distinction is not trivial.

Neither is gathering such data.  It takes time and can be expensive - which is why only a small proportion of firms undertake this kind of research regularly.

Why research it at all?  

Because sometimes firms learn a couple of surprising things.  First, people may buy a product  predominantly for a reason that was not anticipated.  Such a discovery can be serendipitous to the seller who, wisely, alters promotion to align the product’s appeal to the market.  Second, the marketing appeal that is promoted by the seller may even harm the acceptance of the product in the market.  Of the two outcomes, this is the frightening one.

Sometimes a potentially good product is doomed by making an appeal (or positioning the product) in a way that defeats its acceptance in the marketplace.

There are plenty of examples: 

•  
  • Ford Edsel (positioned between the Ford and Mercury lines)
  • Brown-Forman clear whiskey (buyers perceived it akin to gin and vodka)
  • RC Cola challenge (how could a distant third cola really taste better than the other two)
  • Alka Seltzer Plus (perceived as improved, not as a cold remedy)
  • Xerox computers - “The machine that doesn’t copy” (no one knew what that meant or what to expect)
  • Life Savers gum (the reflexive thought of “the hole” didn’t compute)
  • Bayer non-aspirin acetaminophen (how can Bayer aspirin make non-aspirin, why would they do it, and why should I care?)
  • Mennen Protein 21 shampoo (why should you care about protein for your hair?)
  • Marlboro Menthol (how many cowboys smoke menthol cigarettes?)

Which brings me to the purpose for writing this blog.

Every company I know (certainly in the technology sector) develops products with a view as to what the primary and secondary market appeals will be.  When you think about it, it’s very difficult not to do so.

Those same companies test out those concepts with industry analysts and customers.  The problem, however, is that those test runs [a] gather anecdotal evidence, and [b] there’s a back-and-forth give-and-take on any issues that arise.  All of which is good.  The only problem with this is such opportunities never arise when buyers are perusing an ad, reading a promotional email, or scanning the seller’s website.  The seller’s proposition sets the stage for the buyer’s expectations.

That task falls to the sales person.

It’s perfectly fine to be passionate about your products.  After all, management knows how much money, time and expertise goes into developing them.  But the reasons a firm loves a product may not synchronize with the sentiments of the market.  In this case it’s the perception of the market that rules.  The customer is always right!

Love your product for what it means to the firm and its development team.  Love it even more for what it means to your customers.  Shareholders will appreciate it.

No One Said Managing Would be Easy

Over 30,000 books are currently available on the topic of managing.  There are both great and popular thinkers and practitioners - Ram Charan, Harold Geneen, Peter Drucker, Jack Welch, Ken Blanchard and Spencer Johnson,  and John Kotter among them.

My favorite read is Drucker’s Management: Tasks, Responsibilities, Practices.  At 800 pages it’s a weighty tome, yet every page begs careful attention for the insights it contains.  The book’s value increases as one gains experience.

Management theory, and its models, are prone to be complex.  After all, marshaling one’s resources and shepherding them through a day in the life of the world toward some goal is no small feat.  The sophisticated theories have their purpose.  But they can mask the fundamental nature of what managing is.

I favor simple models.  It’s far easier to flesh out a simple model to give it texture and applicability than it is to decompose some behemoth and distill it down into its essential elements.

So, here is a simple model - and it’s easy to remember.  It’s specific to the management of people.  

 There are four things that can be managed in people: Knowledge, Skill, Attitude and Activity.

I’ll use the example of managing a sales person to illustrate.

• Knowledge is a straightforward factor to manage.  Knowledge can be taught, communicated, and acquired through reading, observation and experience.  A sales person can learn product specifications, selling methods, how to fill out an order, and so on.  Testing one’s know-how is equally straightforward.  One either can - or cannot - demonstrate recall.
• Skill is more challenging to manage.  Skill is know-how - the capacity to convert knowledge into desired results.  Effectively and repeatedly, such that the outcome is never seriously in doubt.  Knowing 10 different closing techniques is one thing.  Achieving a consistently high close rate is quite another matter.  The more sophisticated the skill, the more complex the behaviors that comprise it, and the more astute a manager needs to be to determine which behaviors must be tuned and reinforced.  But some factors, genetics being one, limit everyone’s ability to apply particular skills well, e.g. inherited muscle composition is a greater determinant of success in long distance running or sprinting than is weight training.
• Attitude is, without doubt, the most difficult factor to manage.  It’s often easily observable: winning attitude, own in the dumps, lack of confidence, success-oriented, customer-oriented.  But attitudes are even more complex than skills to manage.  Especially in a team or an entire organization.  Get a group of managers in a room and ask them how important good morale is to achieving success.  You’ll get strong and ready agreement.  Next ask them how to achieve and maintain good morale.  They’ll be all over the map.  Good attitude is like good art: easy to spot, hard to create.  Managing the attitudes and tenor of individuals and organizations comes with the territory.  There are many formulas for coaching and developing skills, but scant little tried-and-true for instilling or rebooting good attitudes.
• Activity is the appropriateness of an action relative to the result.  Sales people engage in typical activities: prospecting, getting appointments, proving claims, making proposals, closing orders.  Activities are concrete, observable, and measurable.  Which is why activity management is the manager’s sweet-spot.  A sales person may have enviable closing skill, but if that person avoids prospecting they’ll never got the opportunity to close.  Most every sales, marketing or CRM statistic or report of any value measures activity relative to outcomes.  Consider: qualified prospects, sales-qualified prospects, forecastable prospects, conversion rate, close rate.  They each checkpoint an outcome relative to the activity intended to drive that outcome, and typically some comparative standard.  Performing the right number of sales activities at the right time does not guarantee success; but not performing them assures failure.

Knowledge can be acquired.  Skill can be taught, coached, directed and reinforced.  Attitude is the X-factor - easy to see, hear and feel, but inherently challenging to manage.  Activities are the one concrete and measurable factor that managers can get their arms around.

A Great Product at a Great Price

Jack Welch, former CEO of General Electric, was asked this at a business school Q&A forum: what do you think about short term government subsidies so that small businesses can compete with big companies like GE?

Welch’s response: It’s a terrible idea.  The only way for a small company to compete is to offer a great product at a great price.  If you need a subsidy then you don’t have a competitive offering.

Jack Welch is right.

Look at the past few years for online companies alone.  Google, LinkedIn and Facebook.  And consider what could well happen with Zynga, Twitter, Groupon,  Dropbox and Vimeo.

Sure, they’re VC-backed, but none of them started out as sure things.  Each conceived of and delivered a unique offering along with a unique pricing model.  And for some, an entirely new distribution model.  The value proposition is so compelling and believable that each of these companies was able to grow at lightning speed.

A well-marketed product does not mean merely a well-promoted product.  There’s a good reason that business schools still teach the four Ps.  

Find the potholes that are ignored or overlooked in the market.  Do the homework on the competition to understand why they cannot - or choose not to - address that need.  Find a need that, satisfied, affects millions and moves mountains.  Use that as the benchmark to build out an offering that stands apart from the competition, and is strong enough to fill a wide and deep moat around your business.

Social Media is Taking No Prisoners

Caught an interesting snippet on eMarketer Wednesday.  The headline:

Executives Fail to Focus on Social Media Strategy

The article goes on to summarize findings from several US and UK studies.  Its bottom line: while almost 80% of executives deem social business strategy important, only one-third as many see it as a strategic priority (27%).

Here are the two tables presented in the article if you’re not inclined to read it.

The article ends with the admonition that choosing not to focus on a social strategy is risky, and that companies must start putting a plan into action.

Stop the train!

I looked at the data and drew an entirely different conclusion.

Three years ago 80% of executives would have said that they didn’t have a clue as to what social media was.  In fact, pre-2010 data indicated that not only was SM not understood, but there was enormous caution around committing more than budgetary table scraps to experimenting with it.  The CEO when I worked at Sun Microsystems, Jonathan Schwartz, was the only Fortune 500 CEO with a blog.

That a quarter of Enterprise executives deem SM to be a strategic priority means that we have indeed traveled a long distance in a dozen quarters.  These corporate adoption rates are keeping pace with - or outperforming - the adoption rates of PCs, mobile devices and web investment by corporations over the past 15 - 30 years.

It is rare - especially in large organizations - to see executive attitudes change so materially in such a short period of time.  To be sure, some will miss the boat (there’s a reason the descriptor “laggards” is used at the tail-end of adoption curves).

The conclusion is otherwise clear: social media is not a short term fad.  It is here to stay.  It is changing - and will continue to change - entire industries, the workings of the market, and the relationship of buyer to seller.  There is no middleman: only you and your customer.  And your customer can never be put on hold again.

Those red and black bars in the charts are only going to grow larger each quarter.

Planning to Win by Planning to Fail

Good managers plan to succeed.  Great managers plan to fail.

Like learning how to walk, learning how to manage is an acquired skill.  It’s a mountain of success built on rocks of failure.  Some big, some small.

Great managers can size up a situation, consider options and make a choice.  And become skilled at doing it quickly, and almost effortlessly.  Early in their journey they learn, as Benjamin Franklin wryly mused, that nothing is certain in this world but death and taxes.  They come to know there are no “sure things”.  So they test for failure.  Things overlooked.  Assumptions generously made.  Cause-and-effect where none exists.

Great managers are champions of the null hypothesis.  They have acquired the discipline of turning every promising solution upside down on its head and figuring out how to make it fail.  They take nothing at face value.  They are the Chief Quality Control Officer of their own ideas.  Confident, yes.  Arrogant, no.

They’re quick to take a proposal from a staff member and subject it to swift and demanding scrutiny.  They dissect it to find out what will cause it to fail.  Then send the staff member back to the drawing board.

In doing so they are neither cynics nor tormentors.  They know that failure is best discovered in the meeting room rather than in the marketplace. They are preventing a colleague from making a poor choice.

If you yearn to become a great manager, develop the discipline of planning for failure.  By doing so you are less likely to encounter it.

B2B Marketing That Works

I once estimated that I had a hand in building or executing demand creation campaigns that supported over $150B in sales.  That’s a big number.  And it represents the goal of many hundreds of marketing programs and demand creation efforts.  Yet, that number would have been much bigger had even 1/3 of those campaigns been truly effective.  But they weren’t.

I’d estimate that perhaps 1 in 10 of the marketing campaigns we ran was really effective.  It sounds shockingly low to be sure.  But I’d wager that it’s not much different than the performance achieved by most B2B firms.  Certainly not those whose marketing I’ve had a chance to take a look at in the past 18 months.

B2B marketing is hard to do consistently well.

Why is it so low?  There are many reasons - some of which I’ll blog about another time.  For me, one stands out: the failure to measure the right thing, the right way.    Without good and valid measurement performance becomes art - it is in the eye of the beholder.  Which is why I’ve become such a fan of the insights of Rosser Reeves.  

Rather than dwell on why things don’t work it’s more useful to understand something about the 10% that do work.  In all of my experience I observed that, time and again, successful B2B marketing campaigns share five things in common.

1. The target market is well and accurately described.  Painstakingly well-defined market and buying profiles take the guesswork out of creating demand.  A sturdy profile is like a pilot’s pre-flight checklist.  It leaves nothing to chance.  In B2B where the demand most often must be harvested by the sales organization, the target profile is both map and compass.  It increases the odds that a sales person will know, in advance, exactly who to prospect, where to find them, and how to appeal to them.
2. A superior value proposition.  For starters, there must be a tangible and relevant benefit to the buyer.  And to raise the bar that benefit must be unique to the firm among its competitors, and compelling enough to drive a spike in order to increase velocity and volume.  And that applies to every vertical or horizontal segment the firm chooses to pursue.  What resonates for a pharmaceutical buyer may be ho-hum to a heavy equipment manufacturer.
3. A concrete and compelling market offer.  In a world of seemingly limitless choice your offer must stand out from the crowd.  It must be concrete, easy to understand, easy to accept (not the no-brainer you might think it is) and beneficial to act upon.  An action to take, a period of time in which to act, a configuration to purchase - overall, a reason to decide in favor of your product, and decide now.
4. Buyer Engagement.  “If you build a better mousetrap the world will ...” most certainly not beat a path to your door, let alone know where to find your door.  You must proactively choose how to get buyer attention and present your offer.  The buyer can find you (the web) or you can find them (email, direct mail, social media, telesales, personal sales).  I don’t prefer one over the other.  I prefer both.  Together, acting in unison.  Just like meeting up at a restaurant.
5. A call-to-action for the Sales organization.  I have seen more potentially good marketing campaigns become also-rans because Marketing did not invite Sales to the party.  The first test of whether a marketing program can be sold is to sell it to Sales.  If Sales buys into it you are assured of a winner.  If you can transfer confidence to the sales organization you can expect it will find its way to the customer.  Sales is your test kitchen.  You must teach them the recipe.  Let them taste the finished product.  And show them how to make it on their own.  Only with guidance served up under a critical eye can performance follow.

Following these principles assures that the B2B marketer will enjoy satisfactory results for her efforts.

The Eccentricities of Warren Buffett

“Develop your eccentricities while you are young.  That way, when you get old, people won’t think you’re going ga-ga.”

- David Ogilvy

I admire Warren Buffett.  Anyone who can assemble the long term financial track record he has, and yet be plain-spoken, humorous, and unassuming in his approach to life is indeed rare.  Yet, he is considered an eccentric by many.  Unjustifiably so, I say.  

I grew interested in Warren Buffett in the 1990’s and studied Berkshire Hathaway’s annual reports.  Buffett offers a great many insights - applicable both to investing and to running a business.  There are three that I especially like.  They form the principles of effective, disciplined business execution. 

1. Economic moat.  What Michael Porter devoted over 500 pages to describing in Competitive Advantage, Buffet captures in the simple two-word phrase he coined and popularized.  Simply put, a moat is the sustainable advantage a business has over its competitors.  It’s what allows a business to offer a product similar to those offered by its competitors, but which achieves superior profits.  With few exceptions, firms with substantial moats (Buffett likes to refer to these as moats teeming with alligators and crocodiles) are themselves exceptional markets.  They understand the relationship between their customers and their offering so well that competitors can only mimic the veneer.  Apple.  Nike.  Starbucks.  Heinz.  Coca-Cola.  A great brand is as good as a patent.  Sometimes better.
2. In it for the Long Haul.  Buffett is a value investor.  He buys based on the economic prospects of the business, management track record, and price.  As he likes to quip, his ideal holding period for a stock is forever.  His friend and teacher, Benjamin Graham, taught him the mental attitude toward market fluctuations through the allegory of Mr. Market, a remarkably accommodating fellow.  Daily, Mr. Market has a price at which he will buy your interest or sell you his.  And, irrespective of the economic stability of the business, Mr. Market’s prices change daily based on the euphoria or fear he feels with market events.  Like Buffett, great firms and their management do not blink.  They manage to the fundamentals of their business, and take a long term view.  They may be disquieted by conditions of change in the short term, but provided the fundamentals of the business are sound they do not become slaves to them.
3. Margin of Safety.  If there is a single lesson to be learned from Buffett, it is one also taught him by Benjamin Graham.  Margin of Safety is the underpinning of value investing - paying a price greater at a discount to the intrinsic value of a business to protect the investor from poor decisions, market downturns, and a future that is not knowable.  Well-managed and effective firms understand and apply this principle in their markets as well.  They do not make bets in the market; they do execute against measured risk.  They do not offer or withdraw products at whim; they execute carefully, methodically and patiently.  They preserve the equity of their brands as much as they preserve the capital of their shareholders.  It is no accident that Lexus, experiencing a recall of its LS sedan during the first year of introduction to the U.S., delivered loaner LS sedans to owners while the recall repairs were made.  It is no fluke that Apple’s market cap has grown 10X since its introduction of mobile “i” devices.  It is not a lucky streak that has caused Coca-Cola to hold its decades-long, seemingly impervious #1 market share position.

The very best, enduring businesses take the long term view.  Their managements understand the tenets followed by Warren Buffett.  Yet, their managements are not imbued with special powers unavailable to others.  It’s a matter of understanding the principles of sound execution, and having the discipline to follow them.

As Buffett says, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.  What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

Pricing to Value

F. Lee Bailey is a retired criminal defense lawyer who, in the 1960s and 1970s, defended famous clients including Albert DeSalvo (the “Boston Strangler”) and Dr. Sam Sheppard (inspiration for the film and TV series, The Fugitive) and Patty Hearst.  As an attorney he was a brash risk-taker, a showman who loved the stage, and a public figure who gained celebrity status by successfully litigating high-profile cases.

While being interviewed on a prime time TV talk show he was asked an interesting question: what was his fee for defending a client accused of murder?  His response: if successful, all of his client’s net worth.

The interviewer commented that it seemed quite a steep fee.  Bailey then asked his host: if you were charged with murder and faced the death penalty, would you go with an attorney other than me to save money you might never spend?

Few today would argue that Bailey was one of America’s best trial lawyers.  But at the time he was believed to be.  And that’s what mattered.  He realized that he held a unique position (albeit briefly so) in the public’s perception: there were thousands of trial lawyers, but there was only one F. Lee Bailey.

Bailey intuitively understood the value he offered in a very small market, and how to set his price.

I watched that show.  I could not get over the arrogance of the man, but the lesson was not lost on me.

Doing Advertising the Right Way - Part 4

Recap: Last in a 4-part blog covering the time-proven lessons of advertising legend Rosser Reeves, on whom Jon Hamm's character in Mad Men is based.

Lesson 9: The Danger of Creative Originality

If you’ve read the prior blogs on Rosser Reeves you’ve gathered that he believed that advertisers too often got caught up in their ad concepts.  He was an early proponent of empirical testing as he believed that what marketers intuitively like often does not perform at all well.

To underscore his point he relates two stories:

• First, a panel of creative directors from the top 25 Madison Avenue firms to pick the three worst commercials of the past several years.  Two of the three they chose had been campaigns that had garnered terrific results - one of the two advertised products coming from nowhere to grab 60% share!
• Second, a distinguished group of public officials, asked to select the best advertising of the year, chose a particularly striking corporate ad featuring the abstract art of painter William Baziotes.  It has 12 words of copy: “A teacher affects eternity; he can never tell where his influences stops.”  Reeves subsequently tested the performance of the ad, and found two things:
  • 100% of people did not understand the picture
  • 85% of them did not understand the ad’s message  

In both cases: why were these choices made?  Because, in the former, the ads were regarded as unoriginal, unimaginative and dull.  In the latter, the ad was chosen for its stunning originality.

Reeves’ contention is that marketers, dealing with the enormity of product choices and amount of advertising in the market, have migrated to differentiating the advertising rather than the products they are promoting.

Reeves taught that it mattered little if an ad was viewed as creative or original, or if it won awards.  He debunked the myth of Madison Avenue by quoting historian Arnold Toynbee, “A myth is a curious animal; for it feeds upon itself, and he more it eats, the larger it grows.” 

There is only one true test of the worth of an ad: that it drove penetration (it is remembered by many) and usage pull (it shifts demand).

Lesson 10: Performance = a memorable message + high reach

Albert Lasker is regarded as the founder of modern advertising.  He built Lord & Thomas - better known by its name today, Foote, Cone & Belding.  His legacy is the Lasker Awards - 80 Lasker laureates are Nobel Prize winners.

At age 25, Lasker met John E. Kennedy, an ex-Canadian Mounted Policeman, who told Lasker that he did not understand what advertising was.  When queried, Lasker told him that advertising was communicating news about a product.  Kennedy’s response, “No.  News is merely a technique of presentation.  Advertising is salesmanship in print.”

Reeves defined it differently:

Advertising is the art of getting a unique selling proposition into the heads of the most people at the lowest possible cost.

And he further added that effective advertising has to achieve two things:

1. Create the right message
2. Project this message to the maximum number of buyers

It is this second point that leads him to put forth his view in response to a trade-off dilemma that confronts advertisers: is it better to reach a smaller audience more often, or a larger audience less often?

When the trade-off is between reach and frequency Reeves is unambiguous: always, always go for reach - the largest buyer base you can afford.  This is not just his opinion, but a conclusion reached based on considerable examination of A.C. Nielsen data.  Looked at another way, the data says: continually pounding on the same audience is a smoothly paved road to diminishing returns.

Summary of the Wisdom of Rosser Reeves

As I said in the first blog, if you can find a copy of Reality in Advertising buy it - even at the $150 in today’s dollars for a copy in good condition.  Read it, and then keep it on your bookshelf right beside Execution, by Bossidy & Charan.

Here, in short, are the 10 lessons of advertising from Rosser Reeves:

1. Effective advertising produces sales, but sales is not an adequate proxy for  measuring performance.  Penetration and usage pull are the key factors.
2. If a campaign is performing, maintain it for as long as it continues to perform no matter how bored the CEO becomes.
3. Strive always to convey one memorable message - one moving claim that the buyer can remember - knowing that as penetration into your market goes up, the message penetration for all of your competitors goes down.
4. Find and convey the Ultimate Selling Proposition (USP) in your message: a single, verbalized, unique, credible and powerful claim.
5. Attempting to exaggerate minuscule or cosmetic product advantages by portraying them as significant will alienate buyers and send them to your competitors.
6. Competitive product comparisons can pay off a USP handsomely provided that the attribute being compared is both significant and relevant to buyers, and the comparative brand is a recognized contender.
7. Feelings-based campaigns (brand image) don’t sell nearly as well as compelling and unique product claims (USPs).
8. Stay with one powerful claim, state it simply, and repeat it often.  Cramming in claims or creative inventiveness risks confusing the buyer and diluting your message.
9. Do not confuse ad creativity with ad performance.
10. With the right message in hand, initially opt for the highest market reach first, then frequency second.

Doing Advertising the Right Way - Part 3

Recap: Time-proven lessons of advertising legend, Rosser Reeves, on whom Jon Hamm's character in Mad Men is based.

Lesson 5: The Deceptive Differential

Ever sit in one of those ‘creative sessions’ where someone writes every single positive attribute and competitive differentiator of a product on the whiteboard?  Then this lesson is for you.

Reeves observed that marketers who trump up trivial, picayune and questionable product attributes pay the price in the long term.  Misleading and trumped up claims prove to be a road to ruin.  A research colleague saw this time and time again in the data, leading him to conclude two principles: 

1. Advertising pushes sales of good products up, and bad ones down.  Promoting unsubstantiated claims reinforces their absence in the minds of buyers.
2. Corollary: promoting minuscule differences which buyers cannot observe ends up over time killing the product.

This principle extends into all forms of marketing, and not just advertising.  Any B2B marketer who has chosen to focus on minutiae and accentuate the positive - be it in collateral, on the web, or in field briefing documents - has very likely incurred the wrath of the sales force once they get burned in the marketplace.  There are seldom second chances!

Lesson 6: Product Comparisons

Build a better mousetrap and the world will beat a path to your door - Ralph Waldo Emerson.  Not if they don’t know about it!

Direct competitive comparison is often the most practical way to demonstrate product superiority.  But it is the slipperiest of slopes in marketing.  For starters, it’s illegal in much of Europe, e.g. Germany.  And it can lead to litigation and counter-advertising (e.g. AT&T and Verizon) making the cost of the tactic significant.  Reeves found competitive advertising ultimately highly effective provided that two conditions are observed:

• Comparative differences must be significant (see Deceptive Differential above), important and truthful - borne out by facts, not merely opinion.

• The comparative brand must be a recognized contender - you can’t kick sand in the face of the little guy.

Lesson 7: Standalone Brand Image campaigns do not pay off as well as USP-based campaigns

Reeves is cautious regarding branding.  I wasn’t sure I agreed with his POV at first, until I finished reading everything he had to say on the matter.

He was certainly not big on fads like subliminal advertising - and the simple reason that results in one test could not be duplicated in further tests.  The notion of scientific method, research and painstaking analysis is a cornerstone of Reeves’ belief in how marketers should conduct their affairs. 

It is due to this philosophical viewpoint that Reeves seriously questioned the effectiveness of branding when it is based on psychological and motivational factors alone.  He was a strict believer in the tangibility and measurability of USPs.  He put it succinctly if not bluntly: the USP is the philosophy of a claim; brand image is the philosophy of a feeling.

Here is why he reached that conclusion.  Statistical analysis of the data for a 20-year period showed these end results in these proportions for USP campaigns:

USP Campaigns	Brand Image Campaigns
10 good campaigns	2 good campaigns
6 excellent	2 excellent
2 brilliant	2 brilliant
2 failures	14 failures

On their own, brand image campaigns seldom lead to good results; but when conducted together with value proposition-based USPs, often lead to excellent results.

Lesson 8: The power of monotonous Simplicity and unvarnished Repetition

Reeves tested out everything thoroughly before going to market with a campaign - his practices were not cheap, but they were effective.  His reasoning was simple: unless the message moved from an ad to the buyer’s head it was useless.  Occasionally, something unusual would be observed - as in the case of four variations of a cigarette ad, all with the identical USP spelled out.

Here are the message retention results for the four variants: 6%, 25%, 54% and 91%.  The message is clear as day in the last ad, and almost totally obscured in the first.  Here are some things that can make - or break - a campaign.

• Repetition (frequency): fifteen years of data show that, even among the largest U.S. campaigns, 70% of the population cannot recall seeing widely run ads.  Case study: a small manufacturer kept refining and improving its USP and, after 3 years, gained share against four competitors with combined ad spend of 40X its own.  Lesson: if it’s good, you can’t repeat an ad campaign often enough.
• Secondary claims: secondary claims can distract from, and wash out, the primary USP claim.  Tertiary and further claims, all packaged up on the same campaign, typically end up confusing buyers.  Lesson: it takes extraordinary skill to introduce more than one message and have it stick.
• Stunning graphics, video and models: glossy and overdone campaigns can make for visually stunning and memorable ads.  But not memorable messages.  Who among us does not remember a favorite ad (funny, slick, risque, stunts, stunning visuals) but cannot recall the product?  Lesson: it's the message that has to stick - not the technique.