Back in March, I gave a talk entitled “5 Rules for Marketing in a New Media World” at the Economist Branding Summit in Shanghai. It was how to cope, as a marketer, with all growing choices and complexity of new media. The talk also draws on a venture capitalist perspective in both the US and China from working with entrepreneurs much more plugged in and creative than me.
Since giving the talk I have gotten a number of requests to see it posted. So here it is – download file. Also if you want it in Chinese, click here.
As marketing people we have often emphasized the power of proof. As venture capitalists, one of our jobs is assessing the value of companies that do not have a public market (and hopefully also maximizing that “value” in the final return to our investors). Interestingly it seems these two don’t always mesh. What do I mean?
A collegue of mine who runs a start up (and who is in the business of maximizing the perceived value of his company) pointed out what he called thePickle Theory of Value. It goes like this.
When you first start your company, you generally have NO concrete evidence that it will ever make money. No customers, no product, no revenue and quite the opposite of profits. Yet, if you do a good job of positioning the vision, the market opportunity and the team, you get an incredible amount of credit for the future value the company could create.
Then as you start going, you still get pretty much credit if you actually ship your product/launch your site etc. And it works (regardless of whether this really generates any real money). But you get hammered if it doesn’t.
Then this horrible thing happens. You actually get out there in the market. You start generating the initial evdience. You start to generate money. You actually have financial statements. And guess what, once you have something to look at, people look at it. And with this scrutiny the amount of credit you get for your progress is likely to go down. That’s the bottom part of the pickle.
Here’s the hopeful part. If you keep growing and keep making progress with some consistency, people start giving you credit for it continuing long into the future and the value you can command relative to the evidence you have goes back up again. (Witness Google’s PE).
The trick is to try to keep your company from having a long pickle.
I love SFBags or Waterfield Design. They have the best most versitile laptop computer bags.
I also love some things they do in their site. Especially the build-your-own section. They ask you a bunch of questions to customize your bag, the fun friendly language of these upsells is great:
- 3 Add a Flap for $15: No sir, I don’t like to/Yes indeed
- 4 Add a Shoulder Strap for $12: Not into the strap/Give me the strap
- 5 Add a Piggybak: No I’ll Just Suffer/Got to Have the Piggyback
I wish more sites had this kind of personality.
Really excited to be speaking at the Economist’s Third China Branding Roundtable: Standing out in a crowd. It’s at the Pudong Shangri-La, Shanghai on Tuesday March 28th 2006 – Wednesday March 29th 2006. To find out more, click here.
I am honored to be presenting along with Professor Lydia Price of the China Europe International Business School. We will be talking about new media and how to think about it. Anongst other things, she has written (and will explore here) a case study about China’s Super Voice Girl that makes American Idol look like a Junior Highschool talent show.
Should be fun!
Once again simplicity is shown to be both so powerful and so easy to stray from.
By now many of you have seen the recent spoof video that shows how Microsoft would transform the simple, powerful, elegant packaging of the iPod. It is all very innocent and well thought out but step by step turns into the equivalent of an in flight catalogue.
If you haven’t check it out here. It is one of the funniest things ever onYouTube.
I have to say, this used to be one of my areas back at the big M and I totally know each step that took packaging down this path. And everyone was logical, well thought out and reasonable to the many committees of very smart people that looked at it.
Beyond the box, Engadget highlighted the wonderful array of versions of Windows Vista coming:
- Vista Starter
- Vista Home Basic
- Vista Home Premium
- Vista Business
- Vista Enterprise
- Vista Ultimate
Will be interesting to see the product selector application that ships with them.
Simple products should lead to simple messaging to simple packaging to simple offers to a simple purchase decision.
- “Life is simple, but we insist on making it complicated,” Confusius
- Don’t try to do too much. Less is more (thanks Simplessity, a really nicesite on simplicity)
- Too many cooks ruins the soup (esp. in marketing, thanks Seth)
We just announced a new fund in China. It is called Qiming. It is a partnership with Ignition and some terrific, seasoned China investors: Duane Kuang, Gary Rieshel and Ed Zhou. We could not be more excited, both by the long term opportunities in China, but also by the opportunity to work with such an exceptional team.
Read about it here. And check out some of the recent press including the WSJ.
One thing of note is the name. Those of you who look at this blog, know that we are a bit obsessed with naming. Well, we spent a bunch of time on this. One of the classic branding problems is taking your name into another language. Great bad examples abound, e.g. Microsoft translating as “soft and squishy.” In this case, finding the spirit of a brand and figuring out how to make it logical and relevant to the Chinese market was key. So rather than directly translating “Ignition” into characters that would mean “tiny spark” or “fire starter” we decided to go with Qi Ming which implies enlightenment and inspiration to begin something. Not the same as our name in the U.S. but all the better, this fund is meant to be integrated with us in the U.S. but also it’s own thing for a unique market. Anyway, it was a fun exercise.
Despite all our commentary about how questionable the impact of big ad dollars might be, I have to admit commercials can still be a a heck of a lot of fun to watch. We loved the Big Ad.
We recently met with Flixpo, “The Internet’s largest collection of free iPod and PSP downloads.” They are doing interesting stuff. Worth checking out.
One thing to note is the clips they have lots of ads. Some are hilarious, others are downright obscene (but of course you will check them out anyway – esp. the IKEA one – who said sex doesn’t sell)
(Of course, note, we also recently met with some folks from AOL – and let me tell you their SuperBowl ad sitewas just as important as the SuperBowl game itself – and that’s not just because I’m a bitter Seahawks fan).
“If you can’t describe your job in one sentence, you are either a nuclear physicist or your job shouldn’t exist.”
Recently read a great article in the FT by Lucy Kellaway, entitled “Waffle and waste of money are hallmarks of the non-job” where she goes after some of the incredibly awful job descriptions you can find in the job columns. Here are some examples and her wit in vivisecting them:
- “Liveability Theme Manager” at Oldham council, in the north of England… The council is searching for a “motivational leader with determination and stamina to successfully deliver our key strategic outcomes”. The ideal candidate must have “a good understanding of neighbourhood solutions”, and will earn up to £38,010 a year. (She sees this as an affront to the English language – is Livablity a word? split infinities, half a dozen cliche’s wrapped in hyperbole)
- The British Transport Police: “Due to internal growth we have a rare opportunity for a Positive Action Support Coordinator to join our Leadership and Diversity Team” (the internal growth makes her think of tumors)
- The Westminster Drug and Alcohol Action team looking for an “Information and Performance manager” “Joining our busy and vibrant team, you will facilitate and manage reporting systems that ensure DAATpartnership and DIP teams are fully briefed on all relevant data” (she is confident only that the team is not vibrant and that the Westminster drug problem is not about to get any better)
- An HR head whose duties include “implementing and embedding HR policy and process, ensureing delivery of a value added service” (she sees only three word that do not set off alarms – “and”, “of” and “a”)
- She also highlights several typcial problems: verbs like develop and implement, warning words like effective, systems, strategies, best practice, deliver, meaningful, sustainable.
Read this before you write your resume. And also how about reading it before you put up the “about” copy on your website. Go through any corporate website or browse any VC’s porfolio and you will ikely see a lot of maximizing and leveraging and providing premier solutions to non descript customers with problems so vague that only a psychiatrist could help them. Keeping it simple and straight forward it key to pitching not just for you but for your company, product or offering. Remember your ABCs and XYZs.
(PS: take a look at Jobster – an Ignition portfolio company – for their joblisting. Personally I have to say my favorite is Microsoft MSN’s “Be the Butterfly”)
“NEWS is what someone wants to suppress. Everything else is advertising.” – Reuven Frank, former head of NBC news
The Economist has a very interesting survey of the PR industry. You should take a look.
As all of us in the start up business know, outside of online or DR advertising, the most impactful way to get your brand and message out there with less resources is public relations. Now it seems the rest of the world is taking notice of this as well. Including P&G. Just like everyone else they are increasingly turning to alternatives to big media advertising because they want a measurable return on investment from their campaigns.
“In a recent internal study, P&G concluded that the return was often better from a PR campaign than from traditional forms of advertising, according to Hans Bender, the firm’s manager of external relations. One reason is that in comparison with many other types of marketing, PR is cheap. In P&G’s case, it can represent as little as 1% of a brand’s marketing budget.”
Spending on PR in America has been growing strongly and reached some $3.7 billion last year. PR spending will grow by almost 9% a year. This is faster than the overall market for advertising and marketing. Wow.
Other commentators on this trend are Laura and Al Ries. Their book, “The Fall of Advertising & the Rise of PR” asserts “PR has credibility… Advertising does not.” Their advice, much like that we give to most of our portfolio companies, is that a marketing campaign should start with publicity (or online marketing) and shift to advertising only after the PR objectives have been achieved.
Good food for thought. But here is a counter
“The advertisement is the most truthful part of a newspaper.” – Thomas Jefferson
Paul Wang really is amazing. Another approach he outlines takes his simple segmentation a step further. In How to Manage Customers he first outlines a segmentation approach based on lifetime value and then marries this with a stunningly simple and powerful ROI based approach to segment your marketing efforts:
- The top quintile, our Gold customers, are where the bulk of our revenue and profits are generated. We must treat these customers with respect. Don’t, necessarily, market to them. Provide them with super services – service so good that you could not possibly afford to provide it to every one of your customers. The marketing dollars should be aimed at the second, third, and fourth quintiles. To the second quintile, you tell them how close they are to qualifying for Gold. You tell them how wonderful it is to be Gold, and how easy it would be for them to move up.
- The bottom quintile may actually be losers – with a negative lifetime value. Why try to retain these people? Why reactivate them? Why spend expensive service dollars on them? On the other hand, we need to manage them properly. Maybe some of these bottom quintile people may be young college graduates just starting out in life. They may have very low incomes and no children now, but they have a great life ahead of them with hundreds of dollars of spending during the next forty years. Why alienate them too early? Find out why they are in the bottom quintile. If they have a legitimate excuse and a reasonable future potential, keep them in.
- Come up with a ROI for [each} segment. The formula looks like this: ROI = (Lifetime Value of Customers in the Segment) / (Investment in the Customer Segment). In doing this, it is useful to look at three activities [as investments in the sectment]: acquisition, retention and reactivation of customers. Each may have different costs and success rates. Using this information, we can determine where to put our marketing dollars.
- What can typically result? That it’s better to retain customers first than acquire new ones. That the sweet spot for marketing spend in not in the top or bottom but in those that can be influenced by spend to go up to higher quartiles.
Very useful way to think about these issues.
Professor Wang also had a bunch of great maxims (from a speach in New Zealand):
- When making promises, we have to be true to ourselves and to what we represent.
- Desperation advertising over promises what the brand can deliver
- Marketing courage is over delivering – making promises we keep
- Effective marketing is hard work – it’s about doing ordinary things extraordinarily well at all times.
- Achieving long-term competitiveness requires capitalizing on investment opportunities, not in ability to reduce cost.
- Marketing approaches begin with either “Who,” “What” or “How.” Traditional marketing starts with “What,” the product. “Who” is the customer; “How” is the process.
- Companies need to concentrate on core competencies. If they are expert at process, their marketing approach should start with “How” and then move to “What” and “Who.”
- If you want to cultivate customers, you must start with “Who.”
- Differentiation is key. The first level is imitation; the second, improvement; and the highest, innovation.
- In “Me Too” marketing, 80% of offerings bring in 60% of revenues and 40% of profits. In “Unique” marketing, 20% of offerings generate 40% of revenues and 60% of profits.
- When facing large competitors, always mislead the enemy, fight on your own ground at your own time, and strike when the moral effect is greatest.
- With small competitors, never refuse battle or show a sign of hesitation. When you get the enemy on the run, keep him there.
- Volume is not necessarily driven by price. If value is eroded as prices are decreased, volume will drop. Similarly, providing value innovation will help increase volume even if prices are increased.
- Value propositions can be emotional, economic or functional. No proposition can fully cover all three. More relevant and unique appeals go all the way on the emotional and functional axes, but only half way on the economic axis.
- Emotional connections make it most difficult for customers to switch brands.
Finally, check out his book: Strategic Database Marketing an excellent guide.