30 March 2006

Are we nearly there yet?

Today, Chris, Phil and I went up to an annual conference which was being held in the East Midlands. It isn't far as the crow flies but it seemed to take an unnecessarily long time to get there.

The day was part presentations, part networking and it was useful to catch up with people that we hadn't seen for a while. Better, we got a strong lead for the financial package that we are currently promoting and that alone could make the day very worthwhile indeed.

As a team, we have a pretty high profile in the network since we were very active in promoting a sales pipeline management package last year which meant that we have made presentations to many of the people that we saw today.

On the way back, I showed my age by having a power nap in the back seat while Chris and Phil talked business opportunities with a guy who was travelling with us. I dropped off to sleep as they began to discuss a particular opportunity and when I woke up I was able to rejoin the same conversation (about the same opportunity). Talking about these things as a team is hugely helpful - we tend to interpret situations slightly differently so an idea can get a thorough road test if we take the job seriously. That all meant that the return journey seemed considerably shorter than its morning counterpart.

29 March 2006

A force of nature ...

Last year I met the MD of a business selling speciality papers and craft items to B2B and B2C buyers. The MD spoke at 400 wpm and was easily distracted. The business was under pressure and cash was tight.

The market fundamentals were good and the business seemed to be well-positioned to take advantage of a rapidly growing segment. Our role was to provide a breathing space - some headroom - so that the MD could get on with the key task of developing the product range further.

We identified a source of trade finance to help the business trade out of its cash squeeze and worked with the staff to strengthen the sales performance on outbound and inbound calls.

What became clear after working in the business for a couple of days, was that nearly everything that we had been told in the initial meeting was wrong. There was insufficient analysis of what was happening and causes for some of the problems had been ascribed on the basis of intuition.

Forces of nature are enormously valuable to a business, providing that they can be properly harnessed. Their force of personality and enthusiasm to strike out for the big strategic objective makes them a pleasure to work with. In a smaller business though, there is a risk that they lack people around them who can challenge them effectively.

Why doesn't Marketing deliver results for smaller businesses?

Marketing should focus on the profitable delivery of products or services to customers. Does it manage to do that in practice? In manufacturing they say “you get what you inspect, not what you expect”. On that basis, very few companies get what they expect out of marketing. Why is that? Why do companies advertise, produce brochures or buy stand space at industry trade shows without measuring the payback? I don’t have a good answer – but unless businesses try to measure and test what they are doing, then it is probable that they will spend money which doesn’t give them the market advantages that they hope for.

One of the reasons that marketing doesn’t often deliver a payback is that for many smaller companies, marketing is confused with advertising. Now that wouldn’t be a bad misconception if they had an idea about what kind of advertising would work for them. Too often, a fledgling business takes a look around the market and decides to loosely copy or “improve on” the advertising that is being placed by its competitors. There is no question - copying competitors’ advertising strategies is nearly always guaranteed to end in failure. The competitors aren’t sure what works, they aren’t measuring what they are doing and much of their investment is probably money down the drain, too. For the smaller business, there is little merit in brand advertising, but an advert with a clear call to action can work well, providing it is correctly placed and the offer is presented with compelling copy.

So, how can Marketing be made to deliver? I’ll use direct mailing as an example to illustrate the point. Many businesses carry out direct mailings. They have a brochure, or they print a brochure or promotional offer specially, they send out the mailing to their entire database and they don’t track whether they gain any sales as a result. They aren’t disappointed with the results – how could they be, they aren’t doing any measurement? Businesses like this are often pleased that they are carrying out a marketing activity because they feel that it’s a good thing to be doing something.

These companies need to develop a clear idea of what it is they want to achieve and then start measuring the effectiveness of everything they do. Any direct mail should only be undertaken after they have tested the offer thoroughly and are confident that it will produce an economic return.

The Plan or the process

In an earlier post, I described why I believe that consultants do their clients few favours if they persuade them that a Business Plan is the answer to all their problems. Providing that you don't need to persuade a 3rd party that the business is managed by people who understand the business, then why have a formal plan? In its place, I recommend a thorough and regular planning process which reviews the short term plan.

The things that throw the long term Strategic Plan or Business Plan off balance allow the short-term internal planning process to deliver its real power. A robust planning process is one which looks at real performance on a regular basis and asks difficult questions:
  • given our performance this month, can we hit our budget?
  • with the changed demand at this customer, how can we bring our revenues back on track?
  • now that we have lost this source of supply, what can we do that will protect our financial position?
  • how should we redeploy our resources if we want to beat our budget?
A planning process like this needs to include people from across the business because it requires their cooperation to succeed. The outputs aren’t a formal planning document – they are action points in a loosely structured short-term plan which provides the context for decisions being made over the next few weeks.

28 March 2006

Craftsmanship is alive and well ...

Last year I visited a craftsman - doing a job he loves - rebuilding old, often unique vehicles. These cars are so old that original drawings rarely exist - very often the workshop bases the restoration on photographs or plates in books. It isn't a job, it is a way of life. His idea of fun is racing old cars, so each race is a promotion for his workshop.

His problem is that finding new craft workers to do the job is becoming increasingly difficult. His workshop doesn't get involved in complete restorations, but one of his rolling rebuilds can cost over $50,000 and the happy owner then has to sort out the electrics, engine, power train and brakes. An identikit model of the ideal employee would be someone who is a skilled metalworker and woodworker (the frames of the cars are frequently made of ash - I think in the US you call it hickory) and the metal body is formed over the ash frame using panel beating techniques which depend on a good eye and a careful hand.

His pipeline is about 9 months, which is good for a craft-based workshop and he is profitable - very profitable for a business of his size. Better, his market is almost entirely overseas, so virtually every sales dollar is new money for UK plc. However, without access to apprentices, the business is vulnerable. In the past, businesses like this have grown their own competitors since the best apprentices learned enough to go out and create businesses of their own. All those organisations are now experiencing the same kind of problem.

Those recruitment problems have created an opportunity for recruiters with contacts in Eastern Europe. Skilled workers are actively recruited for contracts of fixed or indefinite duration, but the engagements rarely last long. This looks like being an ongoing problem. Given that the issue is unlikely to go away, perhaps the craft workshops should set up a training school which would act to produce apprentices for all the subscribing businesses. It might be a bit of a stretch target to set up though, since these organisations have fought against each other tooth and nail for years, so cooperation isn't the first thing on their minds.

Banking in the 21st Century

I've just got a message on my phone. Tomorrow morning I've got to meet Chris with my passport so that we can get a banker's draft drawn up. It got me thinking. Roll on reliable biometrics. A passport and a utility bill seem to have become the standardised requirement for banking transactions these days. Has it decreased fraud? Has it trapped illegal movement of funds? Does it deter money launderers? It's a bit like the security check before a flight - that strikes me as activity for activity's sake and I'm deeply unconvinced that it adds much security at all.

One problem for the bank is that the utility bill is going the way of the Dodo. My phone and power bills are online so I don't get a snail mail version sent home. If I produce a hard copy print out of a bill which sits in my email, who is to know that I haven't changed data on there before it is viewed at the bank? With reliable biometrics that wouldn't be an issue - but most of the material I have seen on biometrics seems to suggest that automated interpretation of results (facial shape, iris recognition) isn't sufficiently reliable at acceptable cost to provide instantaneous fool-proof ID without an unacceptable level of false results. That probably means that the cost is unacceptable because the performance isn't acceptable, I digress ...

The bankers draft? We're importing some Champagne. I would like to say that we are celebrating but it's actually a business deal and the banker's draft is to pay for the import duty. Once the duty is pre-paid you can arrange for the import in a couple of weeks.

Blogging and the circular link problem ...

I've been looking at blogs again. It's generally held that blogging is the new black. I thought that bloggers had a POV which they were keen to share with the world, but it isn't always the case. Sometimes they have a point of view but some of them can have a peculiarly circular way of sharing it with their readers. Let's take an example I have seen this week:

Author "A" writes a post talking about a new trend in marketing segmentation, and within the post he links the word to a post by blogger "B". Following the link to "B", the reader finds that the post actually quotes verbatim and links back to, an earlier post by author "A" which strangely enough is relevant to the post I read first - describing the trend and its implications.

Why do this guys? Both of you already have plenty of links. Wouldn't it have been easier for author "A" to link directly to his earlier post? In this case the links aren't lending authority, they are just bringing the process into disrepute.

26 March 2006

Mixed messages

The client says that she wants to develop UK sales. No problem - that's what we're here for. We offered to act as a UK sales team and distributor. That is somehow tangential to what she wanted - she was really looking for someone to buy out the rights to a UK business which doesn't yet exist and employ her as a consultant in the new business.

The product is a B2C offer which sits in the complementary medicine space. It's a big business and is growing steadily. Our client is well-known in the business and has a reputation with this product. How can it go wrong? Well, if you're starting a business from scratch, it's normally better for everyone to have the same objective and I'm not sure that's the case here.

Many people we encounter are hoping that a big player will fly in and drop loads of money on them so that they can retire. That kind of event is the business equivalent of winning the lottery. You have seen the papers, you know that lottery winners exist, but to plan your life as if you are going to win the lottery is probably a mistake. Success requires steady application to the fundamentals of the business and, strangely enough, visibility to Mr Big depends on that too.

Building the UK business is the least of our worries. It's keeping the client's feet on the ground which looks more difficult.

So what's wrong with a formal plan?

A Business Plan is a document which provides a model of the business and articulates a course of action which, given certain assumptions, may deliver particular outcomes. A Business Plan tends to be strategic in nature and considers the development of the business over the 3 to 5 year term. A Plan like this frequently considers the impact of acquisitions or changed resources. It is often written with a specific audience in mind – it should be; the needs of bankers and equity investors are quite different.

The major problem with Business Plans is that they are forecasts. The only thing that we know about a forecast is that it is almost certainly wrong – it is only the size of the error that is in question. The key to success is often not in having a formal plan, but in having a planning process. Plans, like forecasts, don’t survive long in the real world. The unexpected occurs, and all at once, the Plan doesn’t have a scenario which guides management what to do. Plans like that belong in the bottom drawer and that is where most managers keep them.

A planning process, on the other hand, delivers real value to managers because it helps to re-evaluate what is happening and how things can be brought back on track.

25 March 2006

Blogging and RSS - how much time to invest?

I don't have an answer - people seem to think that I spend a lot of time developing content for this, but it's not the case. Dumping a few thoughts onto a screen and then sub-editing it to make sure that the language is relatively glitch-free doesn't take that long. Some of the material is content which has already been developed in other contexts, I simply drop it into a blog format. It doesn't seem like an onerous task to keep it live, and the number of subscribers continues to increase steadily. I seem to spend more time looking at the stats than I do on creating content which probably says quite a lot about me.

Interestingly, some people are starting to see blogging as a serious marketing channel for people businesses. Steve Rubel's post describes a couple of businesses that are dropping their websites in favour of blogs. That's brave, because people aren't sufficiently familiar with feeds to stay in touch with the content. I can understand why a blog helps to develop a dialogue with the world outside, but I'm not convinced that the time is right to use it as the only channel. So, back to the question - how much time to invest? The answer has to be, not too much. Blogging has yet to prove itself as a serious contender for staying in touch with a target community, and the techno-savvy teens seem even less aware of RSS than their seniors. RSS probably needs a severe make-over. Asa Dotzler's post on the Microsoft announcement about RSS is worth a quick look:
"Something as small as a name or icon choice can make a big difference in how approachable a new feature is. I'm encouraged that we're further distancing browsers from the awful "RSS" as a feature name and icon identifier. We don't call web pages "HTML + CSS + JavaScript Pages" and we don't identify them in the browser using little icons containing "HTML" and "CSS" acronyms; We shouldn't do it for feeds either."

Labels: ,

Planning - it's got benefits, but ...

In planning workshops I often ask the group I am working with why they should have a plan. I get a wide range of answers. For me, a plan provides clarity. A plan delivers into day-to-day operations by someone closing a telephone conversation by saying that “I’m sorry, we don’t / can’t / won’t do that, it isn’t part of our current plan”. That saves the business time, because it doesn’t have to devote resources to review whether the telephone conversation represents a new business opportunity with limitless potential. Those opportunities are always there – there are many more ideas than successful implementations.

Some consultants seem to believe that the answer to every problem is to develop a Business Plan. The Red Splash view is a bit different. If a business needs to convince a 3rd party that it is robust and stable – to provide the confidence that the cashflow is sufficient to repay a commercial loan or that the planned growth will provide a high exit multiple for an equity investor – then a Business Plan is almost certainly essential. When there are no 3rd parties to convince then why go to the bother of having a formal Business Plan?

24 March 2006

What the clients think is important ...

I've been looking at websites today at a high-level, offering knee-jerk criticism on why they work or not as e.commerce sites. In the final analysis, it isn't my opinion that's important, the only truth is whether real punters use the site to buy products and services. I had the advantage of knowing that the figures for these sites were well below the expectations of their owners. Some of those sites were a real trial to look at and navigate - it is difficult to understand why they look and function the way they do. Others were technically close to perfect - fast loading, with a clean appearance and glitch-free copy, but marred by a poor understanding of objectives and a poorly executed sales process.

As part of the exercise we also looked at some highly efficient sites which incorporate excellent lessons for anybody in good copywriting and process design. The champion of them all (with a pretty effective primary and secondary process) had an exit screen which was a masterpiece in capturing information about what users felt about the offer, their concerns and whether they thought they might buy at some point. What's interesting is how long some of these sites can be - 15-20 screens of scrolling on a single page isn't unusual coupled with a conversion rate on visitors and lifetime value of a customer which you would be proud to call your own.

I've just realised that we need to be sharing some of that background with our clients because our concept for a new site may seem slightly odd to them unless they have understood the context for our recommendations. It's part of setting their expectations.


A lot of people get excited about pricing and a significant amount of effort goes into making justifications for the price that should be charged for products and services. In the final analysis, it is your customers and prospects who decide the price by telling you loudly and clearly that they think the price is acceptable or too expensive.

So how is it easy for a customer to know whether or not your price is realistic and so hard for you? Simple, your customer simply asks himself whether or not the product or the service is offering good value. If you put yourself in your customer's situation and you try to think through the costs he is incurring without using your product or service then you begin to see the value your product or service offers and that will lead you to a fair price.

Whether you can be profitable at that price is an entirely different question!

23 March 2006

Building an e.channel

I'm a great believer in starting small. Try and understand what works, experimenting over some time if necessary, and when you have proved to yourself that it really does sell, scale it up, make it robust and automate it. I know that all the techie people in the readership will now say "this bloke doesn't know what he's talking about, he's just advising people to waste money". I'll explain why I think this way.

Some of the clients we see have invested heavily in technology with very robust websites which are capable of handling an enormous volume of sales. That would be fine if they were making sales, but more often they are selling at very low volumes.

Starting small recognises that many businesses don't have enormous amounts of cash around to invest in a website that doesn't sell much product. If the business had started small, the outlay would have been limited and the additional costs would have been incurred only after it was clear that the website was generating new sales. This approach may be more expensive in the long run, but it protects cash, very often the most important number in a smaller business.

The Cullinane database problem

So, you've built a better mousetrap, but you're stuck with a sales process that is somehow broken. You don't have any real money to drive a campaign, so what can you do to generate interest in your product?

This situation isn't that uncommon. It is made worse in this instance because the solution is radically different and the market is discreet and conservative. Here are a few ideas:
  • Develop a White Paper which doesn't talk about migration of data, but talks about the difficulties of managing and maintaining data on old software and hardware
  • Place a teaser ad in a print journal or an e.zine with an FD readership to encourage people to sign up for the White Paper
  • Send out the White Paper and follow-up gradually with other teasers and case studies
In this model, the major cash costs are for the ad in the e.zine or the print journal. The other costs are essentially time. I'm deliberately painting this as a high level summary - there are a range of things that you can do, but like this approach, they rely on well-written copy which sets out an invitation which people find difficult to ignore. Providing that everything is truthful there should be no disappointments.

I don't want to suggest that White Papers are guaranteed to succeed. Most White Papers couldn't sell their product or service if it was free of charge. There is a careful balance to be struck between content and eulogy. Writing an effective White Paper is as difficult as writing an effective advertisement - but, once again, it is a skill that can be learned.

Why will this approach work when the direct approach fails? One reason is that it is a process which attempts to begin a dialogue with the influencers in the company which raises the issue that people in their organisation may resist the change. It isn't going to change a highly conservative organisation to a knee-jerk response organisation overnight, but it may deflect the efforts of the database and hardware team to derail the idea.

Managing change

One of the assignments I will be involved in later this year is a change project. The idea is to run a pilot programme to test whether the ideas that the steering group has had actually hold up in the real world.

Change projects are often identified with technology, but change can reflect any changes in the 'way we do things around here'. Change projects are awkward - people often resist change, particularly if the current situation is comfortable. Many of the models which are used in describing how people resist change (anger, denial, acceptance and so on) are drawn from surveys of bereavement. When people ask for a tangible example then trainers often draw analogies from redundancy or divorce. It is little wonder that change has an aura of risk associated with it.

The key in introducing change in an organisation is to try to involve people as much as possible so that they feel some ownership of the result. That bottom-up approach though, has to be carefully managed so that it can produce clear recommendations. A bottom-up approach which fails to produce recommendations is simply a consultation phase.

The reason that I tend to favour bottom-up rather than top-down is that although it is frequently slower than a centralised process, the solutions it recommends will be based on a better understanding of local situations and tensions than any top-down process could consistently deliver.

These kinds of projects can create all kinds of fears:
  • a waste of time, individual opinions will be ignored
  • large numbers will remain silent and feel left out
  • key areas will be ignored because of the necessity of producing recommendations within a fixed time-frame
  • people won't understand what is going on because there won't be enough communication
  • knowledge within the organisation won't be accessed and used properly within the pilot
These may all be valid criticisms. It is one of the key tasks of the pilot project to carefully set people's expectations so that there are no surprises at any stage.

22 March 2006

The new opportunity

The opportunity that I mentioned earlier is a website that has a reasonable level of traffic, but which doesn't generate the level of sales that were hoped for. Why is that?

It's nearly a very good website but it is marred in all kinds of ways from a very weak headline and testimonial to a mix of audiences - different products etc. A worse mix of audiences - schools and B2C.

Primary process
The primary process could be improved in terms of urgency, quality of copy in both the initial offer and the lack of information in the cart or any reassurance about security.

Secondary process
Completely absent - and this would probably be the major source of sales.

Looks interesting - I think we can do something with this. Many of the changes here are to do with managing the processes, the copywriting and quality of the offer. This falls right into our sweet spot. Let's see if we can convince the client that we are right for this.


This blog has been running about 2½ weeks so it has generated only just over 100 visits. But I can identify you:
  • you speak English (96%)
  • your system is set to 32 bit colour (98%)
  • 98% of you have Java installed and 63% of you use Version 1.5
  • you use Windows XP (93%)
  • you live within 1000 miles of where I do (70%)
  • you use Firefox or Netscape (65%)
  • Your monitor is set to 1280 x 1024 (63%)
You use relatively up to date equipment and software, you like Firefox and you don't live far from me. You speak English. You sound just like me!

Another market to develop ...

Two guys who live locally to me spent their formative years working with Cullinane-type databases in ICL environments and know entirely too much about how they work. Those databases (IDMS and IDMS/X) are still used in parts of the public sector and in one or two financial institutions although the hardware they are running on is many decades old. Whether that is the appropriate hardware for a mission critical database for a Council or a Building Society, I couldn't say. It doesn't sound sensible, given that the cadre of people who know how to deal with those databases and that hardware is declining steadily.

The point of the story is that there are a number of organisations who offer tools to help users migrate these databases into more modern environments - the trouble is that they don't work very efficiently or effectively. They aren't quick and they can introduce garbage into the data as well. The ex ICL guys however, knew something about the structure of the ICL database that the other organisations didn't know. They knew how to quickly access any record with its entire structure and link it with any parent and any child - they could transfer the data into an Oracle environment and show that all the parent and child relationships still held - and they could do it very fast. They could also port over the enormous bank of report programs and utilities developed for the database over the years and make it work seamlessly in the new environment.

Are they rich? I'm afraid not. Any organisation which is still running Cullinane-style technology today would be classed as conservative on anyone's scoring system. That type of organisation is naturally risk-averse and takes time to make up its mind to make this kind of switch - they rely on their existing internal cadre of ICL or IBM operators to recommend whether the migration is a good idea. Is it a good idea? Obviously, they would save a bundle on licence fees for the hardware and the database and they already have all the Oracle licences they will ever need so the migration would save them huge amounts of cash. An additional benefit is that they wouldn't be held to ransom by their mainframe operators, but that would be like turkeys voting for Christmas. The mainframe operators know the score - this idea gets kicked into touch as quickly as they can sensibly do so.

The next step is probably to buy a share of some of these Building Societies and go along to the AGM and ask the Chairman "Is it true that your XXXX database still runs on hardware which is YY years old?". No, just daydreaming.

Sandhurst Donkey Derby

After the operations meeting last night I dropped in on a meeting for the Donkey Derby. It had started at 8pm so it had been going for a while by the time I arrived.

The Donkey Derby is a big deal in the community. It is an old fashioned local fete with donkey racing and plenty of stalls. It attracts about 7000 visitors during the day and it raises large sums for local charities. It's getting harder to organise it every year and certainly harder to raise the money for charity. Part of the problem is that the legislation for events like this places financial and organisational demands on the organisers which have to be met somehow.

Obviously no-one wants anyone to suffer discomfort or injury as a result of the Donkey Derby, and despite all those visitors over 40 years, the number of real problems have been very minor. It can't have been the intention of the legislation to drive these kind of events out of the calendar, but that's been the effect. As a country, we are carrying out a social experiment in denuding communities of highly enjoyable, basically safe activities. The latest to go was the fireworks display. The loss of an organised firework display is not a major upheaval, but as part of an overall trend it represents a sanitisation of local life.

I think that these kind of things are important - they represent a kind of social glue and it would be a tragedy if they were all to disappear.

Networking or networks?

Some people can go overboard on the value of networking. I have never understood why having met someone during a networking event they should like you, much less trust you enough to do mission critical work for them. Speed networking is even more of a mystery. I'm not saying that these events aren't fun or that you shouldn't do them. It is simply that some people who collect network contacts can be a little like train-spotters and can be so focused on collecting new contacts that it becomes a deflectionary activity which prevents them from actually doing any selling. I'm not alone in this - see Kirsten Osolind.

I once read a long essay by someone who is strong promoter of networks and I honestly could not understand how his business model could work for anyone who was not in the business of promoting networking. Fortunately for him, he is. The question is why anyone could read the essay and believe that his approach could be applied blindly to their own business. His model is clearly to increase the size of his network (base membership is about £10/month) because increasing the size of the network increases the cash stream and eventually someone will become interested enough in what he is doing to take him to market.

But I'm not decrying networks - far from it. Quite a lot of our new business comes from simply reviewing the opportunities that come to us from the networks that we are in. Six or seven leads during the last month alone. Yesterday was a prime example. After our operations meeting last night, Phil went home and noticed that someone in one of his networks had a client with a problem that we could fix. The client was also willing to reward the work on terms that we had already agreed between the three of us. We'll pitch for it today.

21 March 2006

Meeting the public ...

Last night I took part in a public meeting - I sit on the board of Trustees of an educational charity. Independent education is suffering budgetary squeezes across the sector and our school is no different. The declining numbers of Independent schools make grim reading. The meeting was initially planned to last 1 hour - it eventually went on for 3. I didn't have time to eat before I went to the meeting, so I eventually threw some food down a little after 11pm last night.

Being a trustee is an unpaid job. The Trust Deed is written so that Trustees cannot benefit financially from doing the job. That is so that a Trustee cannot put themselves or their firms forward as the prime contractor for any work that needs to be done without proper safeguards.

The school has a lovely atmosphere with excellent academic results but costs continue to rise and fee increases are inevitable unless a benefactor appears from somewhere. Parents feel concerned that the Trustees won't give them guarantees about continuity of education or the stability of future of fee increases, but that is simply not possible. A school is essentially a small business, which is the reason for the post. It employs a group of people to deliver a service. It has to market itself in the local community and continuously challenge whether or not its services meet the needs of its market.

The school is doing some things right. 2 years ago, numbers on the roll were low and during the last 18 months there has been a concerted effort to market the school and raise its local profile. That has made a difference - more prospective pupils have visited the school on Open Days and more of them have signed up to join the school, and the win/loss ratio comes in for the same assessment as the win/loss ratio in any other sales focused business. The result is that numbers in the school have improved dramatically and we have also set up a new baby unit to try and offer a service to working mothers so that they can have child care in the school from 3 months onwards. These changes can be seen as alienating by existing parents who are concerned that the focus of the Trustees is on making the school attractive to new parents (the new market) while ignoring them and their children. That isn't the case, but it is a very natural fear.

What makes this so difficult is that there is no room for controlled experiments, we are dealing with children's educations. I hope that we can all work together to make good decisions.

20 March 2006

Valuing the business

A few weeks ago, Chris and I met someone who had developed some interesting new technology. Although the thinking for the technology comes from the world of high-energy physics, the applications are much more mundane - electric motors and generators used at room temperature.

The point of the story is that the person we met was looking for equity investment - but was unwilling to give much away much in terms of equity. That doesn't make him unusual, since businesses looking for technology funding often overvalue what they have done and what they have achieved at the same time as they underestimate how much work will be required to generate revenues out of their idea.

I would be surprised if he found his funding. With technology like this, it is almost easier to licence the idea to a manufacturer who can apply it within their own range of products. The manufacturer moves the technology from 'proof of concept' and 'laboratory prototyping' to industrial scale. Everyone benefits when the IP is licenced more widely.

Developing a market

Developing a market is one of the hardest things a smaller business can attempt. Many buyers are risk-averse, irrespective of the quality of the offering.

One of our clients has developed a beautiful range of toys and collectibles but has had difficulty in getting significant retail distribution. With limited retail facings, the range needs to generate its market profile from PR and its website. When we first met the client, the site had generated plenty of traffic, but only limited sales.

We have lots of ideas for how we can make the website 'sticky' for visitors in the target segment and, best of all, they won't cost a fortune to implement. That 'stickability' and a radical redesign of the sales processes on the site should convert a reasonable proportion of visitors into buyers. The demand we expect to generate should help to de-risk the line for the retailers and then our client can stop worrying, and get on with designing the rest of the range.

19 March 2006

A simple plan

A novelty. Someone has sent me a plan which looks as if it has legs. The proposition is sound - I'm sure that plenty of companies need this product / service. The channel selection sounds sensible at the price point which is outlined in the plan.

The product is almost a pure e.commerce play. That requires them to develop a site which is effective at turning visitors into buyers. Most sites don't do this very well, unless the visitors plan to be buyers prior to keying the site's URL into the address bar. One of the reasons for that of course is that most people in the world are broadly happy with what they have now. Randomly, the chances of a website visitor actually wanting to buy at the time of their visit to your site are substantially lower than you might want. For most sites, that's where it ends. Most websites that have an e.commerce element simply don't sell very effectively. Search engine optimisation seeks to pile more visitors into the site irrespective of the efficiency with which visitors are turned into buyers. The visitors don't buy and sales are lost. Traffic should be pre-qualified better and e.commerce sales processes should be managed more tightly.

Effective e.commerce needs a back-end sales process to keep the visitors in touch with your product or service long after your site is forgotten. This plan doesn't talk about the sales process and how it is managed, but it is actually pivotal to its success. What interests me about the plan is the strength of the value proposition. I'm convinced that people really do need this product, so I think it's worth talking to the business to see if Red Splash can contribute to the design of the channel model and the 2 key sales processes. Together we might be able to create something very special.

Chicklets for RSS

It's interesting that the small icons for RSS feeds are called chicklets - it sounds as if we are talking about small chickens. I thought that they were named after the US sweet which is small and rectangular which would make the spelling chiclets.

On checking, I find that bubblegum comes in both spellings, so I was both right and wrong.

The reason for the post is that some blogs have an array of chicklets which allow you to subscribe to the content using your favourite reader. That can be confusing, particularly if your favourite reader isn't included in the list. Here's a site which says why standardisation would be helpful.

By the way, although I give 2 links to a feed for this site, they are both XML/RSS feeds through Feedburner. If you have any difficulty in using the feed then please let me know. The icon used is the recommended international standard for feeds.

Labels: ,

Research in the age of AdWords

Talking to a research colleague the other day, he described the use of AdWords to evaluate the attractiveness of products and services at very low cost. The technique sounds useful, but my reservation relates to the difficulty of ensuring that the structure of the AdWord doesn't bias the outcome (see my earlier post on click-through rates). If changing a single word can alter click-through rates by 20%, and the transposition of two lines can change it by 15-25x then this is a research tool that needs to be handled with care.

If the Adword research indicates that there is no strong interest in the product or the service, are you absolutely confident that the Ad itself hasn't got something to do with the result? And, if you are comparing two separate offers, are you confident that the performance of both Ads has been optimised?

I can see how this type of research might be valuable in the sense of a crude go-no go decision on whether or not to proceed, but it lacks the subtlety of a focus group where you can explore the reactions of participants in more depth.

That said, it sounds like a useful additional tool to the marketeer's armoury.

Back to research

In some earlier posts I described how Coke and Sony managed to waste money on research. That often leads smaller companies to think that all research is a waste of money.

Let's consider the 'low cost' options:
  • No testing at all: How can a smaller business hope to carry out research effectively if even large scale multi-nationals can get it wrong? Doesn’t it make more sense to work with the inventor’s intuition? Small businesses can learn from others’ mistakes in planning their research. Intuition can deliver high levels of creativity which bring about entirely new products, service and business models. It can also deliver the Sinclair C5 (the ill-fated battery-powered tricycle)
  • Testing limited to friends and family: People around you can be helpful and they are certainly the nearest when you need to quickly ask for a knee-jerk reaction. They are usually available at no cash cost, but analysis of their responses can be lengthy (“why did they say that?”). Their major disadvantage as a research source is that they are very close to you - are you certain that they can give you impartial feedback?

18 March 2006

It's OK, we've been on a sales course ...

Last year, Chris and I met the senior partner of a company distributing highly specialised components into manufacturers of electrical and electronic products. The business had been successful, but over time the customer demand had contracted as many of his customers had started to outsource more and more of their manufacturing to the far east. That development had been coupled with a significant level of M&A activity which had reduced the number of customers quite sharply.

The senior partner was bright and engaging and, despite hoping to retire relatively soon, was still the major sales resource in the business. The organisation had enjoyed a stable team for a number of years and he had encouraged the employees to buy in as partners with his retirement in mind. He hoped to leave the business with his partners and that they would be able to pay him on some form of earn-out.

A couple of weeks later, Chris spoke to one of the other partners. He asked the question, "How will you manage when you are carrying all the costs of the senior partner, but he is playing golf and not selling?"

Her reply was breathtaking. "It's all sorted, we (all the other partners) have now been on a sales course!"

I have been in all kinds of organisations and I have heard plenty of people say that they need sales training. I don't want to decry sales training - some of it is absolutely excellent. But for a team of people who haven't demonstrated much sales aptitude despite being in the business for several years to believe that they will be skilled at sales after a single course is just deluded. Personally, I think it's too early for that senior partner to be planning to reduce his golf handicap.

Why don't salespeople like CRM?

One of the key reasons is that salespeople avoided specifying the system in the first place. CRM was specified by a variety of functional areas including:
  • finance
  • marketing
  • customer service
Because they were involved from the beginning, those functions got something that they wanted, or at least thought they wanted. CRM systems are very powerful tools, but they aren't very effective at supporting professional salespeople with a long pipeline. How could they be? The system is trying to be competent in number of areas for a wide range of functions.

The result is that salespeople don't enjoy working with CRM. They see it as too big, too heavy and too hungry for data. If they have a deal that they want to protect they keep that data out of the system, so that it doesn't become visible to their managers. They believe that visibility too early in the deal cycle may create the kind of interest that could kill the sale. Managers know this and distrust the quality of the data in the system and the pipeline forecasts it produces.

The data issue isn't an enormous problem if the system is forecasting the performance of a reasonable sized business or a division within a holding company since the forecast algorithm can be tweaked to produce a figure which is acceptably accurate. It is at the level of the team or the individual that CRM forecasts fall apart, and because the salespeople believe that the system can't help them - they aren't getting much that is useful today - they don't take the trouble to key in more data. They just don't see the payback.

CRM providers have been telling us for years that it will all come good as soon as the sales team learns to love the system. It hasn't happened yet and unless the systems change radically, it won't happen at all.

Rewriting history

I saw an article in a national newspaper recently about someone I had met when I was doing a cost-reduction exercise at a computer game company. There is no question that he was a big personality and people in the organisation deferred to him. My first impression was that he was difficult and my subsequent dealings with him confirmed that he was destructive to the team around him and a significant drain on the company. If you add in the impact of his salary, benefits, expenses and bonus then he was a HUGE drain.

The article said that he had always been successful and had taken a major part in the revival of my client. I read it twice - surely some mistake? This may not have been hagiography, but it was certainly close to the Hello school of journalism.

I hope that articles about other business personalities are more accurate. I don't want to know that some of the people I admire from a distance have feet of clay.

17 March 2006

Business development for the smaller business

Business Development is often an activity which businesses see as important but non-urgent, and it frequently gets pushed to the bottom of the 'To-Do' list by all the urgent firefighting that can take place day-to-day. That's a problem because Business Development is too important to ignore.

It's strategic, it's fundamental to the future success of the organisation and the people who are doing it need to be effective. Regular readers will know that I'm obsessed with measurement so the question has to be: 'what is being done and what is the payback for each of the activities?'

The other issue is the number of Business Development methods you use. Organisations can fall into a regular pattern of Business Development behaviour and limit the number of techniques that they employ. They often look at what their competitors are doing and try to emulate or improve on that. Try a brainstorm with your friends and colleagues, you might be surprised at how many new ideas you can come up with to develop your business better. I could tell you the contents of my list, but that wouldn't really be helpful to you. If you develop a list of your own, you will understand why you chose those items and you are more likely to follow-through.

Why is it important to use a variety of different approaches? The answer comes back to the old advertising industry measure OTS (opportunities to see). Only part of your audience will see any one of your Business Development efforts, so by using a variety of different approaches you increase the reach of your business in your target market. What is important though, is that once you have set up a channel (and once again, I'm deliberately not inserting a list) to speak to an audience, you keep it live.

Here's an example of what I mean. I came across a business which was involved in providing products and modules for high pressure applications. We talked about his business and one of the customers he had encountered was a garage specialising in repairs and maintenance of a classic sports car. I suggested that he work more closely with his customer to develop a range of kits for different classic models from that manufacturer and then advertise them to DIY repairers through the owners' club and mailshots and telephone sales to garages similar to his client.

He could cheerfully offer a 5 year guarantee on the kits since the mean time between failures on the parts was substantially longer than 10 years and his margin would be high. The garages' margin would be high, too. A genuine win-win. Once he had proved the concept with that manufacturer, he could run the process again with other classic cars. Did he do it? I don't know. I include it as an example to show that Business Development need not be rocket science. This was simply an idea that he hadn't come across because he was too deeply immersed in the day-to-day.

16 March 2006

Managing the issues of growth

In a small service business, problems tend to be bipolar:
  • how will you sell your time?
  • how will you deliver your existing contracts?
As a single practitioner you are either delivering the work or trying to find opportunities to sell. Total focus on a single activity prevents you from doing the other. Can you balance your time effectively, or should you bring someone in to help develop the business? In that sense, growing the business from 1 person to 2 represents a strategic rather than an operational change. You have now acquired the capacity to sell at the same time as you are involved in delivery. As an organisation you can be in 2 places at once. Steadier growth becomes possible.

Working as part of a team, rather than simply as an individual, has all kinds of other benefits - you will perform better at both sales and delivery - you will challenge each other to think harder about the problem at hand. Clients benefit and they tell their friends. You have begun to create a virtuous circle.

The question for the single practitioner is not whether you can afford to bring someone else into the business - it is whether you can afford not to do so.

USPs or UBPs?

I have mentioned Andy Bounds before. Apart from being an entertaining speaker, his content is highly relevant for people making sales pitches and presentations. Everyone has their own favourites, but he strikes a chord for me. One of his tests of content is that you make it clear to your audience that you understand your Unique Buying Point (UBP) - not your Unique Selling Point (USP). To be effective, your material has to answer the question - WIFM (what's in it for me?), and it has to do it through your Buyer's eyes.

Interestingly, although his primary material relates to presentations, pitches and proposals, the core of what he says has high relevance for AdWords, too. Imagine that - all the issues of WIFM and UBPs in only 3 lines and 95 characters.

The psychology and economics of AdWords

I'm sure that you are familiar with the algorithm that Google uses to determine the ranking of an AdWord - it is a composite which involves the click-through-rate and the cost-per-click. Google use this algorithm because it seems logically right to them:
  • a high click-through-rate must mean that the AdWord has high relevance to the people searching on the specific term - to be clear, they are testing the relevance of the Ad to the search term, not the relevance of the site to the search term
  • they assume that people placing AdWords want to drive the maximum amount of traffic to their site
At least one of those assumptions is wrong. Let's explore why.

Click-through-rate is impacted by a series of factors. I've been able to demonstrate to my own satisfaction that an Ad containing the same words can have dramatically different response rates. In fact, the words can be in the same order in a line, but the 2nd and 3rd lines can be transposed and the click-through rates can vary by an order of magnitude. If the click-through-rate is so sensitive to the structure of the Ad, the click-through-rate is at best a weak proxy of relevance (in its normal sense) since it so dependent on the way the Ad is written - 95 characters spread over 3 lines is a challenging copywriting task, all appearances to the contrary. Having said all that, Google is measuring relevance as determined by what the punters think, and the customer is always right. I'm not complaining that this bit of the algorithm is wrong, merely sensitive to cultural and psychological issues. The bit I'm absolutely confident is wrong is the other element - the objectives of the person writing the Ad.

As a marketer, keen to show the impact of my marketing investments I might be interested in high click-through. However, as someone who wants to include AdWords in my overall cost-to-sell analysis, I'm more interested in using AdWords to pre-qualify people before they come to the site. I want them to know they are visiting a commercial site that wants to sell them something of really high value at a fair price, not a site where they can download some free goodies. As a sales manager I am very happy to accept a lower click-through-rate, providing that it delivers the right kind of traffic to the site. That seems counter-intuitive to the boffins at Google, so the cost per click has to go up.

This post isn't to complain about the algorithm - there wouldn't be any point. I am simply highlighting that there are a number of tensions in writing an AdWord. Experimentation is key, and like so much of marketing and sales, you have to be obsessed with the overall efficiency of the process. You need to have a clear understanding of the cost per visitor against sales and the lifetime value. Spending money to drive traffic to a site is wasteful if the site is not structured in a way which efficiently converts visitors into value. You should also consider whether your AdWords should work harder at pre-qualifying the traffic they point to your site.

14 March 2006

Handling the sale

One of the simplest approaches to the sale is simply to ask your clients / customers the right questions. They learn more about you from the questions that you ask them, than from any scripted contribution that you might make. Your questions tell your clients the depth of your understanding of your products and services, as well as the level of your understanding of their situation. More importantly, it tells them how much you understand them as people. Asking questions requires confidence and creativity.

Some salespeople believe that questions are intrusive, so they stop themselves from asking ‘too much’. In business this is how we discover where, when, how and to what extent we can help a client. If you do not ask the right questions, then rest assured that someone else will. If your client is comfortable with your questions, then keep asking! As people develop trust in you, they will become increasingly willing to accept intrusive questions. That willingness signals that you are developing the relationship, based on trust and a growing knowledge of each other.

Here are three great questioning approaches:
  • ask for numbers. It is one thing for the client to say that their problem is serious. It’s a lot more valuable if you can get them to quantify the specifics of their situation and it shows that they have a great understanding of their position. More important, you cannot assess the value proposition without the client’s input to the numbers
  • ask why something is important. When a client says something significant, ask him/her why it is important to them. You will learn more about root causes and personal motivators by getting the client to help you to see beyond the obvious facts
  • Ask questions that make your client think out aloud. When a client says, “I’ve never thought about that”, or “I don’t know the answer to that” then you are starting to get somewhere valuable to both of you!


Where research can go wrong

In this post, I described how Research is full of examples which have given poor results even to large, well-financed research teams. One of the examples that I used was Sony.

Sony’s initial research into the Walkman concluded that the product would never sell. Potential consumers were asked whether they would ever buy a tape player which didn’t have a record facility. The answer was a resounding no. The research was asking consumers questions related to the features of the product idea. Features that were driven by specific technical issues related to weight and battery life. Consumers, educated over many years to new products delivering increased functionality couldn't come to terms with the concept of a new product with fewer features. It was then difficult for them to imagine how the product might be used.

When later research asked questions related to the benefits which the idea might bring about – a lightweight delivery system for music which could be worn while walking or jogging and the response from potential consumers was significantly more positive. Market response was huge and Sony reaped the benefits for several years. The Walkman concept stretched into combined tape player radios and eventually to CD and minidisk players.

The point of the post is that while research is important, its high level conclusions may need to be challenged by going back to the objectives, the sample, the questions and even transcripts to make sure that consumers were asked the right kind of questions and didn't find them confusing. Don't accept the results simply because they coincide with your worldview.

13 March 2006

Research isn't always right

Red Splash is keen to promote the use of research to reduce the risk of launching a new product or service. That isn’t to say that research will always produce a sensible answer. History shows that research can let down the largest and most sophisticated organisations. You may remember that a few years ago Coke introduced New Coke after very careful, and secretive, market testing:

New Coke was a response to the steady erosion of Coke’s market share by Pepsi over a number of years, supported by TV advertising which showed that in blind taste tests, consumers really did prefer Pepsi.

In response, Coke developed an alternative recipe which outperformed Pepsi in blind tasting and launched New Coke on an unsuspecting market. This was close to a marketing disaster.

The key problem was that Coke had been telling the world for years that “Coke is the real thing” and overnight they attempted to say “We didn’t mean that at all, we have another product to launch”. Eventually New Coke was allowed to disappear and Classic Coke became Coke again.

Amazingly, consumers now viewed “Coke is the real thing” with a sense of nostalgia. Blind taste tests or no, Pepsi was holed below the waterline and their market share fell steadily.

Testing ideas thoroughly

Testing the attractiveness of your idea before doing anything sounds self-evident but many ideas get launched without significant testing. There are a number of levels to testing:
  • no testing at all, just the intuition of the creator of the idea
  • testing limited to friends and family
  • research with potential customers
  • research with potential sales and distribution channels
That isn’t to say that research will always produce a sensible answer. Very often tests ask the wrong questions, often because the offer hasn’t been fully thought through so the questions to the group of people being tested haven’t been properly developed.

A good example of this is the research that was conducted by Sony into the Walkman, one of the best selling personal electronic categories during the 1990s. Sony was wise enough to realise that the initial research was defective and re-designed it quickly to test whether their assumptions were correct.

12 March 2006

Let's try something new!

Business start-ups are exciting. Every day represents a new set of problems and issues to resolve. You may have a new idea which you are keen to develop and commercialise but lack of opportunity is seldom a major problem for smaller businesses. There are many more ideas than there are successful product or service launches. More often, the question is one of maintaining focus – keeping the resources of the business concentrated where they will do most good.

Many small businesses seem to enjoy the process of reinventing themselves periodically by changing their product and service offering – they remain optimistic that “this time it will all come right”.

However, if they don’t look at why their last product or service offering was less successful than they expected, it is very unlikely that the current hot idea will prove any better. These businesses need to learn from their experience and be single-minded about allocating their resources. Cynically, if Plan A doesn't work because of lack of focus, perhaps Plan B should be Plan A without the distractions.

11 March 2006

Using the right language for the copy

Extending the idea of an earlier post about not making assumptions, I thought that I would draw your attention to this article on readability.

I became interested in this issue after a comment by one of my clients. I had written about 2000 words to be put into a newsletter and after reading it, he said, "You need to modify the language a bit. The average reading age of the people who read this newsletter is 10."

So the issue of readability has to be a key element in copywriting. The copy has to speak to its audience without being either patronising or opaque. It's no wonder that copywriting is a dying art. It's hard. Fortunately it's a skill that can be learned, and in the 21st century we have access to timely statistics that help us to understand what people read and where they get bored. Experimentation has always been possible, but what the internet provides is an immediacy that copywriters working with advertisements, brochures and mailshots pre-internet could never imagine.

Now, you simply have to choose a sample size and assess what the statistics tell you when the sample size is reached. Providing that you didn't try to confuse yourself by changing too many variables simultaneously, you have the basis for understanding which piece of copy works better. What is more, the cost is relatively trivial.

10 March 2006

Wasn't he supposed to be here?

I was due to make a presentation yesterday evening. No problem - I had plenty of time to get there. I was the second speaker, after the sandwiches and the drinks. My autopilot wasn't working too well. My excuse, and I'll concede that it isn't a very good one, is that I had taken my wife to Gatwick airport very early in the morning and I had been up since before 5:00am.

I went bowling past the location for the evening meeting and realised that I had driven too far just after I was on the London side of the M25. I turned around and drove back. Worse, I managed to leave the main road earlier than I should have done so that I finished up taking another detour through the countryside. I eventually got to the room and made my "sorry I'm so late" speech and grabbed a seat. It was then that the Chairman explained that my arrival meant that I could now take the first speaking slot since the main speaker was a no-show.

That meant that I was talking immediately before the sandwich break. Now, there is a strategy to managing a sandwich break and I forgot all the rules. I immersed myself in follow-up conversations with several people and by the time the break was coming to an end I looked around to discover that all the food had gone.

The value of a testimonial ...

As a consultant, the standing advice is to build a base of happy clients and make sure that you collect glowing testimonials which you can use to ease the ground with other businesses that you encounter.

Last summer, while I was away on holiday, I got a brilliant testimonial. Deep in the body of a long email from one of my clients to a 3rd party, that was on my own target list, there it was. My client said that I had been instrumental in bringing about a specific result. Better, this testimonial was unsolicited. It wasn't perfect, but it was very good. When I got back from holiday I read it and relaxed - post holiday, life was looking good.

A few months on, with my client's business in administration, I think that I would have valued the money rather than the testimonial.

Choose your clients carefully ...

Last year we met the owner of a successful business who had very ambitious plans for the future. He wanted to take his existing B2C business model and replicate it across the south-east. He had a clear point of difference against his competitors and he had thought hard about his positioning. Better, he also had a good grasp of the pinch points in the business and had a strategy for allowing the growth to develop as resources became available.

He sounds like a perfect client but we sacked him. He was just too tiring to deal with. At every meeting he wanted to review the underlying terms of reference and the fairness of the agreement. That was coupled with a highly individual interpretation of history. On the way over to what was to be our last meeting with him, Chris and I developed some tactics for the negotiation. If he held to a specific position then we were just going to shake hands and walk away.

It happened. During the meeting he took the stance we had expected. He believed that his negotiating style was fair and honest dealing. We told him that we were happy to walk away and he must have thought that it was just another negotiating ploy. He restated his argument. We said goodbye. He didn't believe us. "I can reopen this next year, can't I?". We said no, collected our cheque and moved on.

09 March 2006

A success

A couple of weeks ago I made a presentation about Cinfosuite, an exciting application which provides excellent functionality in performance management, forecasting and budgeting for businesses with turnovers of >£10 million. The presentation was to a mixed group of accountants and non-accountants and, prior to the meeting, I hoped that one-third of the participants would be interested enough to want to learn more about the product.

I didn't ask for a response on the day, but told everyone that I would follow up with them a couple of days later. The response was stupendous. On follow-up, two-thirds said that they were immediately interested in learning more about the product and the remaining third was hugely complimentary about what they had seen and half of those were interested in learning more about the product after a gap of three or 4 months.

We thought long and hard about the structure of the meeting and just how much content we should include. In the end, we decided to limit the time allowed for the demonstration because we weren't sure that it would be very helpful. The single moan from most people that I spoke to during the follow-up was that the demo was too short. In a sense that vindicates what we did, because we have left them wanting more rather than scared them away by drowning them in material straight away.

We're planning to run a similar session in the Midlands in a couple of weeks. I'm optimistic that this is shaping up nicely.

Writing the copy

The experiment that I mentioned earlier is moving on. We have worked out that there are 3 basic types of buyers for the product and have built a simple model of which features would be regarded as benefits by them.

Writing copy is an old art - done well, the story builds in a compelling way and draws the reader in. Copywriting is so old-fashioned that many sites have forgotten it completely. The reason that good copy works is that it speaks to very basic human psychology. Why these skills have been allowed to fall away is a mystery to me.

Yesterday, Phil visited a client who had put together a simple site which was in need of serious revision. The owner of the business admitted that the ideas for the site had come from an assessment of what the competitors were doing. That might be a good strategy sometimes, but if the competitors are clueless about what is required for success then it unlikely to provide any useful pointers. The owner asked Phil what he thought of the site and Phil had his critique ready prepared - content, content and content. The next question was, "What do you think of the design?".

Phil was able to answer, quite truthfully, "We didn't look at the design - we develop our reviews on the basis of whether or not a site is effective."

08 March 2006

Using Research to help your business

Research is important, but depending on how you want to use the results, the cost needn't be astronomic. If it is simply a test of the attractiveness of the product or service then a focus group may well be an appropriate solution. If you need to create a formal model to correctly scale your manufacturing, service and distribution resources then get your statisticians lined up now.
  • Testing potential customers. This sounds expensive, but it is rarely as expensive as getting it wrong. Customer testing can be high cost if it is carried out on statistically valid samples using formal statistical analysis. The reality is that commercial truths can emerge at much smaller sample sizes - focus groups can provide excellent insights into the attractiveness of a new product or service.
  • Testing potential sales and distribution channels. Once again, this sounds expensive – but the quality of the information can be invaluable in terms of understanding pricing and positioning against alternative products. This kind of testing has plenty to offer software developers, manufacturers and service providers.
We believe that research is important and the question is not whether you can afford it, but how much can you afford? The budget will determine the kind of research you undertake and that will impact on the statistical validity of the findings. Don’t let those things hold you back. Research is nearly always a good idea, providing you have done some homework first to make sure that you are asking the right questions of the right group of people.

07 March 2006

The Dell IQ test

In January my wife saw a Dell in the paper that looked like a good price. She reviewed it with the in-house computer experts - our younger son and his girl-friend - and they agreed that the spec looked OK for the money (grudgingly, they aren't Dell fans). She went onto the Dell website and tried to buy the deal she had seen in the paper.

After several attempts she got bored and asked me to do it for her - and guess what, I failed the IQ test. I couldn't buy a computer from the Dell site which had the same spec and price as the deal in the paper. This is a company which has built its reputation on its ease of buying yet everyone I have spoken to about Dell in the last few weeks has commented on what an awkward site it is to navigate for the casual visitor. We bought the computer, but not through the site - we contacted a nice lady in Indonesia or wherever the call centre is and placed the order through her.

Don't make assumptions about what everyone knows.

Watching TV with my younger son a few weeks ago, there was an ad for eBay.

"A waste of money," says he, "everyone has heard of eBay."

Surprisingly for him, the answer is no. eBay is the world's largest auction site and not everyone has heard of it, although it is well-known within his circle. Even if people have heard of eBay, they may not be aware of the range of auctions that take place. If we assume that everyone knows what we know, and thinks what we think, then we are making assumptions which aren't necessarily accurate.

We recommend that all our clients undertake some research to test the validity of their assumptions. It's important and it can prevent expensive mistakes, providing it's undertaken early enough. Research is an important area and I'll go into it in another post, but the only thing that the budget should determine is the amount of research and the techniques used. It is very often possible to get close to a commercial truth without doing large scale testing.

Only the value proposition was missing!

At the end of last month I went to a meeting which launched a new networking organisation in the region. The objective was to bring together people who work with new ideas and micro businesses to bring them to market. The organisers claimed that 200 were there, and I wouldn't dispute that figure. All kinds of organisations were represented from lawyers to industrial designers and lenders.

There were several speakers but the one thing that I couldn't understand is what the organisation is trying to achieve. The stated objective was to improve networking, but accessing people with the right kind of skills is rarely a problem. If I need a Patent Agent or other skills that I don't have, then I either know someone or I know who to ask. Maybe there is a pile of cash to support these kinds of meetings but it didn't come from the people who attended.

For a product or service to win a following, it has to eliminate or reduce the impact of a problem that people or businesses experience and which costs them something to avoid or minimise. That's the Value Proposition. It is one of the simplest ways of establishing the value of your offer to your buyer. As far as I can see, this meeting was trying to solve a problem that I don't have. I'll watch from the sidelines for the moment and see how it develops.

Salespeople - a breed apart?

At a dinner the other evening, the conversation somehow got around to salespeople and commissions. The core of the conversation was that salespeople don't perform unless they are paid commission.

I had to disagree. I was thinking about a sales engineer I met not long ago. He put together a team and pulled in a contract worth £97 million in revenues. He wasn't paid a commission but he worked his socks off to close that deal. Perhaps more startling, within 3 weeks of closing the business he was asking for an account manager to take the account away from him. He enjoyed making the deal happen and account maintenance just looked like a chore to him. He knew instinctively that when you have an account like that it will eventually go away and he didn't want to be associated with failure.

06 March 2006

That's a strapline?

The other day Phil got an email from a someone in one of his networks. Deep in the signature was a highly complex strapline which contained a series of 3-syllable words which looked like English but which frankly didn't make much sense. It contrived to suggest that the writer had the vision of Leonardo coupled with the intensity of Newton and there was little on planet Earth he felt ill-equipped to undertake.

If you get an email from any of our team it has a strapline under our names which says Red Splash - Commercialising ideas, products and services. Now that isn't just a strapline, it's a brief summary of what we do. We thought about it hard and we use it as a high-level description of our strategy whenever we meet anyone. We will get involved in other things if clients ask us, but it's the service we proactively promote and we use the phrase over and over so that people will remember. Our simple idea, and it's advice we give to our clients again and again, is that it is better to have a clear focus than pretend you can be all things to all people.

Please don't change the status quo!

Last year Chris and I met a talented business owner who had developed an interesting software package with applications throughout a client organisation. The problem was that the business didn't have an effective way of getting the product to market. In discussions with the owner, we all agreed that the current sales channel model was broken and that a new sales approach was needed to take the business forward and reduce its dependence on its existing client base.

We went back to the office and thought about it - and tested our ideas on Phil. We developed a radical proposal but we were confident that not only could it work, it would work. Better, it wouldn't cost the business owner a penny and it would put cash into the business. The proposal failed. The channel model was too different from the broken model that the business was currently using. The owner's counter proposal was that we should help the business to strengthen the existing channels by recruiting more people to sell the product. We declined.

We know that the customer is always right, but in this case we didn't see how recruiting more people into the existing channel would do much except waste money and time. It has to be better to walk away rather than sign up to do a project that you don't believe in.

The perils of planning

We were recently asked to review a plan for a business importing a manufactured product for a leisure application. The company had spent some time on developing the plan and had been disappointed that it had not generated any interest from lenders or equity investors.

As soon as we started to read it, we could understand why it hadn't generated a response. The plan had a number of issues which provide a neat illustration of the problems that can be encountered in writing one:
  • there was only a single plan although it was being sent out to two different audiences – indeed, it wasn’t clear which audience it had been written for since it didn’t appear to meet the needs of either a banker or an equity investor
  • the document had been produced by more than 1 person and the different sections didn’t relate easily to one another
  • although the business model appeared sound (buy at £x and sell at £y), the sales plan relied on a sales channel with a high degree of risk

Learning from our mistakes ...

Phil and I have been meeting potential UK partners for a client with some genuinely sophisticated middleware which has a good market share in the Netherlands and Germany. We have made pitches to potential partners by phone and also in person, but it hasn't changed the outcome. While we now have contacts with a group of companies who would be interested to work as value added resellers if we took a live contract to them, none of them is willing to sign up to promote the product actively at this stage.

It is different from the situation I described in the last post - the proposition fits with their business model but they want to make sure that they minimise their risk in signing on. Taking them live business helps to reassure them that they have made a sensible decision and they will commit resources as soon as it is clear that they can make money from the relationship.

Does the business model fit?

Last week I had a presentation from someone who is looking for a number of organisations to sell his service. It was a sensible proposition and the earning potential was high. I didn't want to dismiss it out of hand so I said that I would need to discuss it with my colleagues.

The following day I went through the presentation with Chris - the proposition still looked good and the earning potential still looked high but Chris shared my reservations. The point is - we add value in business development for our clients and we enjoy what we do. To accept this new offer would be a major step in terms of redirection and neither of us felt entirely comfortable that it was the right thing to do.

The higher level issue is that if you make an offer to a potential partner, it is important to check that your proposal either aligns or can be aligned with their strategy. If it is radically different then don't be surprised if the proposal isn't accepted.

05 March 2006

What did he say?

I love newsletters - and quite a few of those I receive are on marketing topics. One of authors has clearly been bitten by the mp3 bug and has started to send out links which deliver mp3 audio seminars. I have no objection to audio - it can be a brilliant way of conveying real passion about a topic. The problem that I have with this particular speaker is that he has fallen in love with the technology ... without really understanding how it is received by his listeners.

If you use audio on your site then please make sure that the original recording is clear and crisp - there is nothing worse than a clip which sounds as if it has been made in a bathroom. For that type of recording, I would rather be given the choice of listening to the seminar or reading the same material. But that might be a bit customer focused for a marketing newsletter!

Lean Marketing

I'm not big on actually producing a plan, but I like a continuous planning process.

Take a look at "Dangerous" Debbie Jenkins' site - her primary links are Lean Marketing and Debbie Jenkins. Her distilled argument is that too much marketing activity is wasted. She suggests that you classify your activity into 4 main buckets:
  • does it increase profit?
  • does it decrease cost?
  • is it mandatory for legal operation?
  • hold and test against more detailed criteria
The point being that if it falls in the first 3 categories you should just do it anyway - the problem being for most businesses that they probably don't have much marketing activity in those categories.

She then provides a series of tools to help you classify the ideas and planned activities in the miscellany bucket so that you can more rationally decide to junk them or prioritise them.

The guts of her position is essentially free in a 10 lesson plan which Debbie will send you if you register. She also has a book "Gorillas want Bananas" which covers some of the same ground.

She may not be right for you, but she struck a chord with me.

Finding a room for a meeting

Chris Lowe, Phil Harland and I often have the problem of booking meeting rooms all over the country, frequently at short notice. It can be a tedious exercise. We now make our bookings through a team called Findmeaconference who take all the pain away.

It is probably best to call them initially and then confirm if necessary by email.

Not only are they good at finding rooms, they get you a price which is normally well below the rack rate.

Infotel House, Boston Road, Gosberton, Spalding, Lincolnshire. PE11 4NU

Tel. 0870 7522240
Fax. 0870 7522236
Conference & Event Venues across the UK & Ireland

What are the afters?

A few months ago I sat through a 25 minute presentation, dashed out at the end and took an immediate brain dump of what I could remember. The speaker was Andy Bounds.

It was such good material that Chris Lowe and I began to think through how we might incorporate its ideas in our Red Splash presentations.

If you get a chance to see him speak then do so, otherwise you will get some of his content from his site and his book. He knows whereof he speaks - a bank, guided by him, won 18 out of 18 bids. Now that sounds like practical Business Development!

Working with people

In February we came up with a business development idea which we thought would be interesting to a number of colleagues working in the south-east. We created an offer for their clients which would be almost risk-free for them - we have got limited capacity to do this type of work so we will pre-qualify hard to make sure that what we take on will work well.

We put together a training session to set out some of our thinking and describe the promotion so that we would leave attendees with something, even if we didn't have the capacity to go ahead with their clients straight away. We were sure that by positioning the session as training, we would develop a group of eager advocates who would refer us to their friends. We sent out a promotional email which produced a good number of cheques in the post.

Not everyone read the email in the same way - it's that psychology word again. It just shows how important it is to put yourself in the readers' eyes every time you develop a piece of copy.

Working with AdWords

One of our clients has spent thousands in promoting their site using AdWords. They have got an interesting product that is almost ideal for e.commerce and which has made some sales, but they:
  • found that writing an effective ad containing no more than 95 characters over 3 lines was challenging
  • developed plenty of traffic to their site but couldn't convert very many of them into buyers
Red Splash believe that the reason that many clients have problems with selling from a website is that they don't take enough notice of the psychology of the people visiting it. If the site doesn't look as though it will sell, it probably won't. We are producing a site which will operate in parallel to theirs and we will be doing live testing - which site and copy is better at converting visitors into buyers. We have a strong vested interest in getting this right - we are putting up the cash for the site!